$500k Lesson: Right Prediction, Wrong Position

刘凯文

2025-11-18 16:34

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Star Trader Missed One Line

Last week, the most globally trending topic was the "End of the U.S. Government Shutdown." After all, the entire global capital market was watching the U.S.'s actions, and when the government would reopen, it would signify potential policy changes.

In the largest prediction market, Polymarket, the market related to "When will the government reopen" had a trading volume of over $100 million, highlighting the market's attention. However, interestingly, many people predicted the outcome correctly but still ended up losing money.

Let's rewind time back to November 12th. On this day, there was a continuous stream of positive news: first, the White House press briefing conveyed an optimistic signal, indicating that "there is a good chance that the government shutdown will end on Wednesday (November 12th) evening." Later, on the evening of the 12th, President Trump officially signed the bill to end the shutdown, live on television.

This ultimate certainty event, like other political events, immediately triggered a strong market reaction: the price of "Government reopens on November 12th" Yes shares on Polymarket surged all the way up to $0.97, reaching a peak. In the logic of prediction markets, this meant that the market consensus believed there was a 97% certainty of it happening. Since the maximum can only reach $1, which is a 100% probability, buying at $0.97 could only earn the final 3%. However, this 3% was a risk-free guaranteed win because the event had already been confirmed to occur.

In this frenzy of buying, the largest investor was a trader named YagsiTtocS (formerly known as Halfapound). He was a star figure in Polymarket's politics section, and from August to November 12th, through participation in over 1000 different markets, he accumulated nearly $400,000 in profits, with a steadily rising profit curve and almost no losses.

(According to Polymarket's user profile, as of 6 PM on November 12th, his historical trading profit curve was outstanding, with no significant drawdowns.)

Upon reviewing his previous trading logic, it becomes apparent that besides arbitrage, he was very adept at rapidly making large purchases during significant, high-certainty news events.

To YagsiTtocS, the event on the 12th confirming the government's reopening time perfectly aligned with his trading logic. So, at an average price of about $0.6, he invested over $500,000, heavily betting on Yes. When Trump signed the bill, the price of Yes rose to $0.97. In his view, the gamble was already over, and all that was left was to wait for the system to automatically settle the profit to him. He even continued to buy at a high price at this point, believing that this was no longer a subjective trade with risk but rather "risk-free short-term high-interest rate financial management."

Approaching Midnight: The Incomprehensible Reversal

However, the story took a sharp turn from this point.

After 10 p.m. that evening, following Trump's signing of the bill and all news coverage announcing the end of the shutdown, a bizarre event unfolded in the market: the price of Yes did not rise but instead fell. This meant that some believed that the market's outcome on the 12th day would be settled as No!

This left many people perplexed: with the president having signed the bill and the news reporting the end of the shutdown, why would some still believe that the shutdown on the 12th day would "not end"?

The answer lies in a "market rule" that many traders tend to overlook.

For each Polymarket market's settlement, it does not rely on what we commonly perceive as "fact" but instead depends on a pre-defined, singular official information source. For the "Government Shutdown End Date" market, the rules explicitly state: the ultimate arbiter is not the president's signing pen, nor any news headline, but the U.S. Office of Personnel Management (OPM) and its official "Government Operating Status" announcement on their website.

The above image is a snapshot of the execution rule for this Polymarket market: the date of the first OPM announcement declaring the "Federal Government Shutdown End" is considered the official date (in EST). Specifically:

The date of the OPM statement is considered, not the actual date of resumption (e.g., if announced on November 10th for a resumption on November 11th, this market would determine the resumption date as November 10th);

Partial shutdowns also count as shutdowns;

All status determinations are based on the OPM website's operating status page (https://www.opm.gov/policy-data-oversight/snow-dismissal-procedures/current-status/)

In simple terms: only when the OPM website states "the government has reopened," will the market have a settlement outcome; if it doesn't state so, even if the president says it, it would be invalid under Polymarket's rules.

And due to the lag in the government system's processes, the OPM website's status was not updated immediately after Trump signed the bill.

The Constraint of Rules and the Collapse of Emotions

At this moment, the most excruciating experience is being endured by YagsiTtocS. With only one hour remaining until midnight, his $500,000 hangs by a thread on this thin line of a rule.

As the date transitioned from the 12th to the 13th, the OPM website remained unchanged. At this time, the corresponding market on Polymarket saw the collapse of the Yes price for the 12th from 0.97 to below $0.05. However, YagsiTtocS seemed unable to accept this reality: in the early hours of the 13th, he continued to buy the doomed Yes for the 12th incessantly, at prices ranging from $0.05 to $0.3. This was no longer a strategy but rather a "gambler-style" operation driven by anger, unwillingness to accept, and a sense of luck, attempting to defy the cold rule by continuously "averaging down," further expanding his ultimate loss.

When the final market settlement concluded, YagsiTtocS's loss in this market exceeded $500,000, making him the trader with the largest loss in this market. This trade not only wiped out all of his historical profits but also led to a total loss of over $150,000 on his books, plummeting him from the forefront of the platform's profit leaderboard to beyond a millionth place.

Victory Through Understanding the Rule

On the other side of this tragedy stands a trader named sargallot. Compared to YagsiTtocS's stardom, he was previously inconspicuous, with an average transaction amount of only around $200. By November 12th, his total earnings were less than $100. However, this seemingly ordinary trader became the biggest winner in this market by employing a completely different trading method from YagsiTtocS, earning over a hundred thousand dollars.

The key to sargallot's success was simple: carefully reading the rule.

He realized that this market was not betting on "when the actual closure would occur" but rather "when the OPM official website would update its status," and he foresaw the possibility of administrative delays. So, on the night of the 12th, when everyone else was driving the price of no down to $0.07 in euphoria, he calmly made large purchases. When the OPM website failed to update in the early hours of the 13th, at 12:02 a.m., he exited his position at $0.99, reaping astonishing returns with minimal cost.

A gambling match with two different outcomes. A star trader went bust because of being "right on the prediction," while an unknown player ended up with overflowing riches because of "understanding the rules." Perhaps what this $500,000 bought was the most brutal and fundamental lesson of this market.