How to arbitrage on prediction markets like Polymarket? (Luo Mao Studio is taking a break for now; the market hype is picking up, and I’ve learned from a few teams)

The logic is simple: Polymarket bets on yes or no.
The total is $1 USD (for example, yes at 0.7, no at 0.3).

Equality: Price(Yes) + Price(No) = 1.00

Due to information asymmetry or user FOMO sentiment, Yes might be bought at 0.7, while No remains at 0.33.

So, 0.70 + 0.33 = 1.03

The profit margin becomes 0.03.

Mint & Sell: This is an opportunity for many manual traders to participate because this premium usually lasts for several minutes or even hours (especially during elections or sports finals).

Bots can call contract interfaces to directly “split” 100,000 USDC into 100,000 Yes and 100,000 No.

This step incurs no price loss, just an asset format conversion (1 USDC = 1 Yes + 1 No).

Then, the bot places bid orders on the market: selling Yes at 0.70, selling No at 0.33.

Finally, with 10W USDC principal, earning 3,000 USDC.

If the total price < 1, it’s the same.

Because some prediction events on Polymarket have shallow depth, they are prone to panic dumps or liquidity exhaustion.

For example, if Yes is 0.25 and No is 0.70,

0.25 + 0.70 = 0.95, which is less than 1, and the profit margin becomes 5%.

The bot detects a price gap in the order book, instantly executes two trades: buying Yes at 0.25, buying No at 0.70.

But the actual cost is 0.95 USDC.
At this point, holding: 1 Yes + 1 No.

The bot calls the merge function of the contract, destroying the 1 Yes + 1 No, and the contract refunds 1.00 USDC.

Secure profit, regardless of who wins in the end—the money is already in hand, netting 5%.

This arbitrage tool, in theory, only requires the team to run a 24/7 bot to monitor; as long as the total price deviates from $1, it can execute.