This is less true for election markets but I tend to be under-confident in the 95-98 price range. Weird resolution drama, hard to price tail risk, adverse selection if you're market making make me more risk averse.
Bonding is not one of my strategies for those reasons, but I noticed a few of the most profitable Polymarket traders seem to specialize in these trades. I guess I would be their counterparty, like if I'm winning and the fair value updates to >95 but not 100, I would be happy to sell at 95 or 94. Conversely, when I'm losing I am less willing to fully close. Also as another commenter mentioned, there's opportunity cost when there are more promising markets to move capital to.
I think each trader has their comfort zone. Now that I think of it, I rarely open at 95+ but don't overthink about placing bids at 2 or 3. My thesis is that niche markets outside of sports and elections are too chaotic (for lack of a better word) to warrant a super high degree of confidence. Last week the Coinbase CEO literally trolled the mention market by saying a few words at the END of the call which he would have never said otherwise!
Yea in general my approach is not to sell tails unless very confident, and opportunity cost / platform risk should be accounted for.
People I respect have a range of opinions on the Coinbase thing - my take is even though it's small in $ it's not a great look for PM in terms of market integrity.
I may have been one of your counterparties. I did close both the winners and the losers after the election (the losers first - so I was doing the same trade as you did).
The reason I closed some at 99c (for some negative 0.5 and maybe more edge) is that there was a higher edge opportunity on kalshi at that point (Romanian election) and it was the fastest way to get money down to put on it. I think that’s reasonable given it takes some time to get money deposited and the edge may go away.
I think that’s a fair reason for 99c offers to exist. It may also be that the “losers” sold their contracts at 1-2c earlier (right after the election) - at least that’s what I did -as it had positive edge. so later in November the market was just for people who wanted to cash out their winnings because of the opportunity cost of the money sitting there and they were willing to pay the price.
Correct - this stuff has just been drilled into my brain and I can't think of any other way to frame it. Trying to write at the level that non-traders can follow too.
I blew up my manifold account bonding the democratic nomination. Started getting big fills in late may and looked up my counterparty, Flip Pidot. That was the point where I should have taken it off, but didn't.
vol makes it levitate above the zero lower bound. If it went to 1c too soon sharps would buy at 1c in the expectation that they could get a fill at 2c, even though they know it's going to 0 eventually. Also the time value of money to sharps is probably in the ballpark of 12%.
This is less true for election markets but I tend to be under-confident in the 95-98 price range. Weird resolution drama, hard to price tail risk, adverse selection if you're market making make me more risk averse.
Bonding is not one of my strategies for those reasons, but I noticed a few of the most profitable Polymarket traders seem to specialize in these trades. I guess I would be their counterparty, like if I'm winning and the fair value updates to >95 but not 100, I would be happy to sell at 95 or 94. Conversely, when I'm losing I am less willing to fully close. Also as another commenter mentioned, there's opportunity cost when there are more promising markets to move capital to.
I think each trader has their comfort zone. Now that I think of it, I rarely open at 95+ but don't overthink about placing bids at 2 or 3. My thesis is that niche markets outside of sports and elections are too chaotic (for lack of a better word) to warrant a super high degree of confidence. Last week the Coinbase CEO literally trolled the mention market by saying a few words at the END of the call which he would have never said otherwise!
Yea in general my approach is not to sell tails unless very confident, and opportunity cost / platform risk should be accounted for.
People I respect have a range of opinions on the Coinbase thing - my take is even though it's small in $ it's not a great look for PM in terms of market integrity.
I may have been one of your counterparties. I did close both the winners and the losers after the election (the losers first - so I was doing the same trade as you did).
The reason I closed some at 99c (for some negative 0.5 and maybe more edge) is that there was a higher edge opportunity on kalshi at that point (Romanian election) and it was the fastest way to get money down to put on it. I think that’s reasonable given it takes some time to get money deposited and the edge may go away.
I think that’s a fair reason for 99c offers to exist. It may also be that the “losers” sold their contracts at 1-2c earlier (right after the election) - at least that’s what I did -as it had positive edge. so later in November the market was just for people who wanted to cash out their winnings because of the opportunity cost of the money sitting there and they were willing to pay the price.
That's completely reasonable and positive utility for both sides of the transaction.
I was not looking at the Romanian election at the time.
By the way I wasn’t implying that you should have looked at it/known about it. Also the edge may have been just in my head anyway.
I appreciate your content!
I know SIG blood when I read it 🫡
Correct - this stuff has just been drilled into my brain and I can't think of any other way to frame it. Trying to write at the level that non-traders can follow too.
wonderful how embedded self awareness is in trading
I blew up my manifold account bonding the democratic nomination. Started getting big fills in late may and looked up my counterparty, Flip Pidot. That was the point where I should have taken it off, but didn't.
vol makes it levitate above the zero lower bound. If it went to 1c too soon sharps would buy at 1c in the expectation that they could get a fill at 2c, even though they know it's going to 0 eventually. Also the time value of money to sharps is probably in the ballpark of 12%.