How to play Polymarket? Annualized thinking + Arbitrage alchemy + Enjoying Airdrop.

Written by: Luke, Mars Finance

When most people (or rather, the newcomers in the space) open Polymarket, what they see is a clean interface that looks harmless, a “event prediction” platform. Will the US government shut down? Will a certain crypto bill pass? People bet on their opinions and then… wait.

However, in the eyes of the sharpest predators in the crypto world, this scene is just the tip of the iceberg. Behind the simple “yes/no” options lies a vibrant yet still rough financial market that is growing wildly—filled with pricing discrepancies, behavioral loopholes, and structural arbitrage opportunities.

What you see as “U.S. government shutdown” or “China lifting the ban on Bitcoin trading in 2025” is, for real players, no longer a forecasting tool, but a clever instrument that transforms “certainty” into “returns.”

This article will peel back the gentle veil of prediction on Polymarket and take you straight to the core of its financial alchemy. We will explore three distinctly different “playstyles” that together constitute the deep logic of this platform: how to turn high-certainty events into a stablecoin “yield farm”; how to exploit market failures to achieve risk-free arbitrage; and how to carry out the most meticulous strategic layout in this anticipated airdrop “meta-game” worth tens of billions.

Real winners never predict the future; they only harvest the present.

Game rules: Price is probability, structure is opportunity

Before delving into advanced strategies, we must first understand the basic rules of this “game.” The cornerstone of Polymarket is an extremely simple yet incredibly powerful equation: Share Price = The market's real-time probability of an event occurring.

In this binary market, the total value of the “YES” (YES) shares and “NO” (NO) shares for any event is always equal to $1.00. That is: 1 YES + 1 NO = $1.00. If the price of “YES” is $0.18, the market believes that the event has an 18% probability of occurring. When the outcome is determined, the shares of the correct side can be redeemed for $1.00, while the incorrect side becomes worthless. This core equation is the theoretical cornerstone of all arbitrage strategies within the market.

What's more interesting is its underlying architecture. Polymarket uses a hybrid centralized limit order book (CLOB). In simple terms, it trades off centralized matching with “off-chain matching” for permissionless on-chain settlement and a massive “Web 2” smooth experience. Users' trading orders are matched at high speed on off-chain servers without gas fees; the final asset settlement is completed on the Polygon chain, ensuring non-custodial and transparency.

This design is a well-thought-out strategic choice. It successfully attracts a massive number of retail users. The trading behavior of these users is often driven by emotions, information lag, or a desire for immediate liquidity. They might sell shares that are almost guaranteed to succeed at a price of $0.997$ in order to cash out immediately. It is this “irrational” liquidity that provides a continuous fuel for the strategies of advanced players.

Annualized thinking turns certainty into a money printer.

This is the easiest and most popular advanced strategy on Polymarket - “Endgame Sweep”. It requires participants to completely change their mindset: you are not predicting, you are purchasing a short-term, high-yield fixed-income-like product priced in USDC.

When the outcome of an event is almost certain (for example, a bill has passed, a game has ended), but the market has not officially settled yet, the share price will approach $1.00 infinitely, usually hovering between $0.95 and $0.999. At this point, entering to buy is essentially exchanging “time” for “certain returns.”

Why does this opportunity exist? In addition to the fact that a large number of retail investors lack patience and prefer to exchange at a discount for liquidity, a huge source of Alpha is the “information gap across borders” or “cognitive arbitrage.”

This itself is a perfect case of “cognitive arbitrage.” For players who are well aware of the domestic policy environment, “no” is an event with nearly 100% certainty, but in the global market, there are always those willing to pay for a 5% miracle. This is where your profit comes from. The price for buying “no” is $0.955 (i.e., 95.5¢), with a settlement in 72 days. The absolute profit margin for this transaction is (1 / 0.955) - 1 ≈ 4.71%.

Substituting the Annual Percentage Rate (APR) formula:

APR = ((1 / Purchase Price ) - 1) * (365 / Days to Settlement ) * 100%

We can conclude that its annualized yield is as high as 4.71% * (365 / 72) ≈ 23.9%. This closely matches the 26% calculated by the user in the screenshot (he may have estimated at a price of 0.95), proving the universality of this “cognitive monetization” thinking within the community.

To visually demonstrate its power, please see the table below:

Table 1: “Final Sweep” APR Calculator

The table clearly indicates that even seemingly insignificant profit margins can yield astonishing returns far exceeding traditional stablecoin investments in a short period. Of course, this is not foolproof. The main threats come from “black swan events” and “whale manipulation.” Therefore, strict position control is crucial.

Arbitrageur's Handbook, exploiting market failures for risk-free profits

If “annualized thinking” is about achieving “almost certain” returns, then arbitrage is mathematically pursuing “100% profit.” Arbitrageurs are the “actuaries” of this casino; they are not concerned with predictions, only with the mathematical concept of “free riding,” exploiting temporary pricing mechanism loopholes to achieve risk-free returns.

The most classic form is called “arbitrage within the market” (Dutch gamble). It stems from the core rule we mentioned: 1 YES + 1 NO = 1.00 USD. However, when market liquidity is insufficient or the order book is unbalanced, it can lead to Price ( Yes ) + Price ( No ) < 1.00 USD, creating arbitrage opportunities.

A more advanced strategy is “cross-market combination arbitrage.” It takes advantage of the pricing differences between different but logically interconnected markets. For example, there may be two markets about elections existing on the platform at the same time:

Market 1 (Election Winner): Democratic Party Wins = 0.48 USD; Republican Party Wins = 0.52 USD

Market 2 (Winning Advantage): Republican wins with a 0-5% advantage = $0.20; Republican wins with a 5-10% advantage = $0.10; Republican wins with a 10%+ advantage = $0.10 …

Logically, the probability of “Republican Victory” in market 1 should equal the sum of the probabilities of all “Republican Victory Advantage” options in market 2. However, in the example above, the pricing in market 1 is $0.52, while the total price of all Republican victory options in market 2 is only $0.40. An arbitrageur can simply buy “Democrat” in market 1 (costing $0.48) while simultaneously buying all Republican options in market 2 (costing $0.40), totaling $0.88. Regardless of the outcome, they can redeem $1.00, locking in a 13.6% risk-free profit.

For serious players, manually searching for these opportunities is akin to finding a needle in a haystack. Their real weapon is automation - using the Gamma API provided by Polymarket to build scanning bots that continuously monitor all markets and automatically execute trades once pricing discrepancies are detected.

Airdrop Finale, Strategic Cultivation of the $POLY Token

Above all public trading strategies, there exists a grander strategic opportunity - to strategically position for the $POLY airdrop that everyone is coveting. At the beginning of October, the official team hinted again at its $POLY token plan. This is no longer a secret, but a countdown.

The airdrop trend in the cryptocurrency industry has shifted from rewarding “trading volume” to rewarding “high-quality users.” Project teams are trying to identify those “organic” users who truly contribute to the ecosystem and are difficult to be imitated by bots through multidimensional indicators.

Forget about simply increasing the volume; we no longer need to guess blindly. The on-chain data mined by @DidiTrading has already painted an accurate portrait of “elite users” for us:

Profit and Loss (PnL) is the gold standard: as long as you achieve a profit exceeding $1,000, you are already in the TOP 0.51% of wallets. Didi's chart shows that among 1.35 million traders, the vast majority (over 800,000) of wallets are in a state of loss. This means that project teams can easily filter out all the “invalid trading volume” noise.

Trading volume (Volume) remains a threshold: a trading volume exceeding $50,000 can place you in the top 1.74%. While important, its rarity is far lower than PnL.

Activity (Trades) is fundamental: with over 50 trades, you can rank in the TOP 22.87%. This is just a basic proof of activity.

These data reveal a harsh truth: among Polymarket's 1.35 million users, the vast majority are “tourists” and loss-making volume manipulators. The project's airdrop design will almost inevitably be heavily skewed towards those who truly achieve profits (PnL) and prove the platform's “information market” value.

As a result, the strategies of advanced players have also evolved. It is no longer just about simple multi-account volume boosting, but rather about sophisticated “role-playing” and “PnL management.” They will assign unique trading roles for each wallet or wallet cluster, but the core objective is to ensure that at least a portion of the wallets enters the $1,000+ PnL TOP 0.51% club, complemented by diversified market interactions and continuous active cycles. This is the strongest defense against witch detection.

Unignorable Battlefield Risks: From Oracles to Regulation

Any high-yield arena comes with high risks, and Polymarket is no exception. In addition to the aforementioned black swan events and whale manipulation, the core risks lie in the platform's technology and regulation.

Technically, Polymarket's “Achilles' heel” lies in the oracle. It relies on a third-party “optimistic oracle” named UMA to provide final real-world data. If this oracle itself is attacked, deceived, or provides incorrect data, the market may settle with incorrect results.

In terms of regulation, Polymarket has been operating in a gray area. In 2022, it was fined $1.4 million by the CFTC for “operating an unregistered trading facility” and expelled from the U.S. market. However, recently, Polymarket is paving the way for its legal return to the U.S. by acquiring an exchange that holds a CFTC license. This strategic shift from “regulatory evasion” to “embracing compliance” is significant. At the same time, institutions including Chaos Labs have publicly pointed out that the platform has been involved in large-scale “wash trading,” which has raised alarms for those airdrop hunters who focus on trading volume as a key metric—combined with Didi's data, PnL is the real king.

Conclusion: The Last “Alpha” Before Maturity

Polymarket's image has evolved from a prediction tool into a multi-layered financial arena. For robust yield hunters, it is an annual yield farm; for savvy arbitrageurs, it is an inefficient market filled with pricing errors; for far-sighted strategists, it is the ultimate battleground for future large-scale airdrops.

We must clearly recognize that all the “money-making” opportunities we are dissecting today stem from the immaturity of the market, the asymmetry of information, and the diversity of participants.

With the upcoming issuance of the $POLY 代 M token and the platform's return to the high liquidity U.S. market, two major catalysts will fundamentally change the existing landscape. The token issuance will attract more professional market makers and quantitative funds, while legal entry into the United States will bring a massive influx of mature capital. The convergence of these two forces will almost certainly lead to a devastating improvement in “efficiency,” completely eliminating the apparent arbitrage and high annual yield opportunities that exist today.

Therefore, the final conclusion is: the window for action may be shorter than expected. The best time to learn and implement these strategies is now—on the eve of this unique, opportunity-filled, and maturing phase.