Degenerate Gambling on Polymarket.com: Picking Up Pennies in Front of a Steamroller... for a 12.09% Yield?

Recently, I placed a bet on Polymarket.com, speculating that Kamala Harris and JD Vance will not debate before the upcoming election. With just 60 days left, the odds looked favorable, and this trade seemed like an easy win. But as any seasoned investor knows, the real question is: Is it worth picking up pennies in front of a steamroller?

My Trade Breakdown

Here’s how my position stands:

Outcome: No (Harris and Vance will not debate)
Quantity: 5,740 shares
Average Price: 98.2¢ per share
Total Cost: $5,637.09
Potential Payout: $5,740
Potential Profit: $102.91

The potential profit might seem modest, but when you consider the short time horizon, it’s important to look deeper into the numbers.

Return on Investment (ROI) and Yield

Let’s calculate the return:

Total Payout: $5,740
Total Cost: $5,637.09
Profit: $102.91
Return on Investment (ROI):

$\text{ROI} = \frac{\text{Profit}}{\text{Total Cost}} \times 100$

$\text{ROI} = \frac{102.91}{5637.09} \times 100 = 1.83\%$

Although a 1.83% return over 60 days might not sound like much, the annualized yield adds a different perspective. Using the formula for annualized returns:

$\text{Annual Yield} = \left(1 + \frac{1.83}{100}\right)^{\frac{365}{60}} - 1$

$\text{Annual Yield} \approx 12.09\%$

That’s a 12.09% annualized yield, which suddenly makes this trade more appealing. But there’s more to consider.

The Risk of the Steamroller

This trade feels safe—after all, the odds of Harris and Vance debating seem extremely low. Yet, there’s always the slim possibility that something unexpected happens in the political world.

In the words of Nassim Nicholas Taleb:

“I was convinced that I was totally incompetent in predicting market prices – but that others were generally incompetent also but did not know it, or did not know they were taking massive risks. Most traders were just ‘picking pennies in front of a steamroller,’ exposing themselves to the high-impact rare event yet sleeping like babies, unaware of it.”

Taleb’s quote resonates with this situation perfectly. It highlights the danger of taking what looks like an easy bet, without fully appreciating the rare but devastating risks lurking in the background. In my case, that steamroller is the unexpected possibility of a debate between Harris and Vance, which could be triggered by an unforeseen political event.

Conclusion

The 1.83% return over 60 days isn’t life-changing, but with an annualized yield of 12.09%, this trade seems tempting. However, like Taleb warns, many traders sleep soundly while unknowingly exposing themselves to rare, high-impact risks. While I remain confident in the outcome, I can’t entirely ignore the chance of an unexpected political twist that flattens this seemingly “safe” trade.