Comment by Majromax
12 hours ago
> picking up pennies in front of a steamroller.
This or any other statistical play is only 'in front of a steamroller' if you do it with leverage, especially if notionally uncorollated bets suddenly move together. Bets on Polymarket have limited downside by design, and bets in different categories are obviously unrelated to each other.
Without having looked into this in detail, however, I suspect the problem would be limited capacity; markets that are both deep and so trivially irrational are probably fairly infrequent. You might pick up pennies but only pennies.
Leverage is not the steamroller here.
It’s the 90% chance of making 1$ vs 10% chance of losing 100$.
The exact numbers vary, the expectations even out with high volume stocks but prediction markets do not because of rounding that favors the house.
That's just the binary nature of the bet. You address that in a real trading strategy with (fractional) Kelly position sizes. Anyone doing this for actual money would also be well served by implementing continuous monitoring and active risk management over top, in order to limit maximum drawdowns if the trend evaporates.