How PolySpread Works

Strategy Overview

PolySpread is a pure spread-capture bot for Polymarket's BTC Up/Down prediction markets. It simultaneously buys one Up share and one Down share whenever their combined price is below $0.90, locks in the difference, and holds both to settlement. At settlement, exactly one side pays $1.00, yielding a guaranteed profit of $1.00 - (up_price + down_price) per pair.

This is not a directional trading strategy. The bot does not predict whether BTC will go up or down. It simply exploits temporary pricing inefficiencies in the order book.

Entry Condition

The only condition for entering a trade is that the combined price of Up and Down is below $0.90:

if up_price + down_price < 0.90:
    # Enter trade — at least 10¢ guaranteed profit
    enter_pair()

There is no per-side price cap. A pair at 55¢ + 30¢ = 85¢ is just as valid as 48¢ + 40¢ = 88¢. Only the combined sum matters because profit = $1.00 - (up + down) regardless of per-side allocation.

Share Calculation

Polymarket's CLOB enforces a $1 minimum per order. To stay close to the $1 target while meeting this requirement, the bot uses ceiling division:

shares = math.ceil(1.0 / price)

At 48¢: ceil(1.0 / 0.48) = 3 shares → costs $1.44 (above $1 min)
At 5¢: ceil(1.0 / 0.05) = 20 shares → costs $1.00 (at $1 min)
At 50¢: ceil(1.0 / 0.50) = 2 shares → costs $1.00 (at $1 min)

Execution Order

Execution order matters for preventing orphaned positions:

1. Buy Up (FAK limit)  # Harder to fill (pricier)
2. if Up filled:
        Buy Down (FAK limit)  # Easier to fill (cheaper)
    else:
        Skip pair entirely

Up is typically more expensive (68¢-94¢ range) and harder to fill. By buying it first, we ensure we never hold a Down position without its Up pair. If Up doesn't fill, the entire pair is abandoned.

Order Type: FAK Limit

All orders use Fill-or-Kill (FAK) limit orders:

• Fill-or-Kill: The order either fills immediately at the target price or is cancelled. No resting orders linger in the book.
• Limit price: We specify the exact price we're willing to pay. If no seller exists at that price, the order fails — no overpaying.
• No market orders: Market buys were filling at 100¢. FAK ensures we only trade at our calculated price.

Risk Controls

Control	Value	Why
Deadline protection	90s before window end	No trades in final 90 seconds — too close to resolution
Per-side max spend	$5 per side per window	Limits exposure to $10 total per window
Hard price floor	$0.05	Ignore shares priced below 5¢ — no edge
Cooldown between trades	2 seconds	Prevents rapid-fire entries

Hold to Settlement

The bot never sells. Every purchased share is held until the window resolves. At settlement, the winning side automatically pays $1.00 per share. No exit management needed.

Example: Simulated Window Run

Here's what one 5-minute window looked like in simulation mode (no real money):

Metric	Value
Total trades	12
Complete pairs	6
Total spend	$9.93
Theoretical profit	$1.07 (~11%)
Settlement value	$11.00 (if Down won)

Key Design Decisions

Decision	Why
Combined < 0.90, no per-side cap	Per-side 50¢ cap made combined < 0.90 impossible. Only combined price matters for profit.
Up-first execution	Down fills at 5-11¢ (easy). Without Up pair it's orphaned. Up-first avoids this.
FAK over GTC limit orders	FAK = immediate fill-or-kill. GTC needs order management and cancellation on window end.
ceil(1.0/price) over int(1.0/price)	CLOB enforces $1 minimum. int gives $0.50-$0.90 → rejected. ceil ensures ≥$1.00.
No SELLs	Hold to settlement. Platform pays $1 for winning shares automatically.