TL;DR

  • Trader @distinct-baguette uses biased market making to profit from 15-minute binary markets
  • Strategy: Accumulate shares on the winning side while market making (not staying neutral)
  • Two profit engines: Spread PnL (trading) + Position PnL (holding winners)
  • Will accept losses on spreads to accumulate winning inventory
  • Exploits retail "paper hands" panicking in volatile 15-minute markets

The House Always Wins

Most people look at 15-minute binary markets and see a coin flip. They bet on Red or Black. But there's a different kind of player in the arena. We'll call them The House.

While you're sweating over whether Bitcoin will go Up or Down, The House is quietly:

  • Taking your bets
  • Collecting the spread
  • Statistically tilting the board in their favor

They don't need a risk-free arbitrage opportunity. They don't need YES + NO < $1.00. They play a more sophisticated game: Biased Market Making.

Key Insight: The House calculates the trend, becomes the liquidity provider for the winning side, and forces the market to pay them to hold the winning ticket.

Biased Market Making vs. Traditional Market Making

Aspect Traditional Market Maker The House (Biased MM)
Goal Stay neutral, capture spread Accumulate winning side, capture spread + position
Inventory Hold zero shares (balanced) Hold winning shares (directional)
Spread PnL Always positive Sometimes negative (pays for position)
Risk Market risk minimized Directional bet disguised as liquidity

The Two-Engine Profit System

Most traders only have one engine: Direction. They pick a side and hope it wins.

The House has two engines running simultaneously:

Total Profit = Spread PnL + Position PnL

Engine #1: Spread PnL (The Churn)

This is the money made by flipping shares back and forth - traditional market making.

Spread PnL = Min(Buy_Vol, Sell_Vol) × (Avg_Sell_Price - Avg_Buy_Price)

If you buy 100 YES shares at 60 cents and sell 100 YES shares at 62 cents, you made $2.

Engine #2: Position PnL (The Hold)

This is the money made by holding the winning bag at settlement.

Position PnL = (Net_Winning_Shares × $1.00) - Cost_Basis

If you hold 358 YES shares and the market resolves YES, those shares become $358 cash.

The Crazy Part

The House is often willing to lose money on Engine #1 just to fuel Engine #2.

They will overpay to acquire the winning side, knowing that the settlement payout ($1.00) will cover their "bad" trading.

Real Example: The Solana Squeeze

Let's look at @distinct-baguette's Solana session (4:01 AM to 4:14 AM). Most people would think they failed at market making:

Trading Metrics

  • Avg Buy Price (YES): 61.4 cents
  • Avg Sell Price (YES): 59.3 cents
  • Spread PnL: -$5.69 (buying high, selling low!)

At first glance, this looks like terrible execution. But look at the inventory:

Inventory Movement

  • Bought: 600 YES shares
  • Sold: 241 YES shares
  • Net Position: 358 YES shares

The Outcome

Market resolved: YES

Position PnL: 358 shares × $1.00 = $358

Total Profit: $358 - $5.69 (spread loss) = $352.31

They paid a "fee" of $5.69 to the market (via bad spreads) to acquire a position worth $358. When the market resolved YES, that inventory turned into pure cash.

How the Strategy Works: The 4-Step Loop

Step 1: Calculate Fair Value (The Anchor)

Don't guess. Use a simple 30-second moving average of trade prices:

Fair_Value = Average(Last 10 trades)

Step 2: Set Your Bias (The Tilt)

Determine the direction. Is Current_Price > Fair_Value?

  • If YES (Trend Up): You are a YES Accumulator
  • If NO (Trend Down): You are a NO Accumulator

Step 3: Skew Your Orders (The Secret Sauce)

Do NOT place symmetric orders. This is the key difference from traditional market making.

If Accumulating YES:

  • Buy Order: Place it close to the market price (Aggressive). You want to be hit.
  • Sell Order: Place it far above the market price (Passive). You only sell if you get a great price.

Result: You will naturally buy more than you sell. Your inventory will grow on the winning side.

If Accumulating NO:

  • Dump YES shares cheaply to get rid of them
  • Hoard NO shares by placing aggressive NO bids

Step 4: The Kill Switch (Don't Be the Bag Holder)

Critical: You must set an Inventory Limit.

Stop-Loss Rule

If Losing_Side_Inventory > 100 shares: PANIC DUMP

If the trend flips against you, do not average down. Sell at market price immediately.

The House only holds winners. It ruthlessly cuts losers.

Why This Works: The "Paper Hands" Phenomenon

In 15-minute markets, retail traders panic:

  • When Bitcoin ticks up, NO holders panic-sell
  • When Bitcoin ticks down, YES holders panic-sell

The House algorithm is designed to be the calmest buyer in the room:

  1. It detects momentum (e.g., Bitcoin is moving Up)
  2. It sets a "Buy Wall" just below the current price for YES
  3. Panic sellers hit the wall, giving cheap inventory
  4. It refuses to sell that inventory unless someone pays a massive premium

Visual Proof: The Inventory Chart

Imagine a chart with two lines representing your inventory:

Green Line (Winner): Should climb steadily like a staircase
Red Line (Loser): Should hug zero

If both lines are climbing: You're gambling

If Green climbs and Red stays flat: You're The House

You aren't hoping for a win. You are mathematically accumulating the rights to the settlement dollar.

How to Replicate This Strategy

You don't need an institutional setup. You need a bot that follows the 4-step logic loop above.

Required Components

  1. Price Feed: Real-time trade data from Polymarket
  2. Fair Value Calculator: Moving average of last 10-20 trades
  3. Order Management: Asymmetric bid/ask placement based on bias
  4. Risk Management: Inventory limits and stop-loss logic

Key Parameters to Tune

  • Spread Skew: How far apart to place buy vs sell orders
  • Inventory Limit: Maximum shares to accumulate before dumping losers
  • Trend Detection: Moving average period (30-60 seconds typical)
  • Kill Switch Threshold: At what point to panic sell losing side

Risk Factors

  • False Trends: Market reverses after you accumulate
  • Liquidity Risk: Can't exit losing position fast enough
  • Capital Requirements: Need $5,000+ to make meaningful profits
  • Execution Speed: Must react faster than retail panic sellers

Key Takeaways

  1. Two profit engines are better than one - Combine spread capture with directional positioning
  2. Asymmetric orders create accumulation - Aggressive bids + passive offers = inventory growth
  3. Losing on spreads is OK if you win on position - Paying $5 to accumulate $350 of winners is good business
  4. Cut losers ruthlessly - The House only holds winners, never averages down
  5. Exploit retail panic - 15-minute markets are emotional, be the calm counterparty

Follow the Smart Money

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Track @distinct-baguette: polymarket.com/@distinct-baguette