i had a thesis that prediction markets were becoming the next financial primitive
current prediction markets allow you to trade yes/no shares on basically anything as polymarket proved the demand with billions in volume.
but binary outcomes are just the base layer.
what happens when you add options on top?
look at this:
> someone holds 67,908 shares on "will lecce be relegated from serie a?" at 79.5¢
> if current prices drop to 71.5¢, they'll sit on -$5,433 in unrealized loss
without options, their only choices are: hold and pray, or sell at a loss.
with options:
> sell a covered call against the position to generate income while they wait
> buy a protective put to cap their downside at a defined level
and much more.
this is what tradfi has had for decades and prediction markets are just now getting it.
and the implications are massive:
1/ hedging: any fund, any fintech, any institution with exposure to real-world outcomes can now hedge that exposure onchain.
2/ yield generation: options on prediction market positions turn idle capital into productive capital.
3/ capital efficiency: options let you express the same view with less capital. instead of buying 67k shares at 79¢, you buy calls for a fraction and get leveraged upside.
4/ risk management: defined-risk strategies mean you know your max loss before you enter. (that's what separates gambling from trading)
5/ price discovery: options markets generate implied volatility. that means the market is now pricing not just WHAT will happen but HOW CERTAIN it is. that's a new information layer that doesn't exist anywhere else.
the full financial stack:
spot → options → structured products → indices (for normies)
the smart money sees a new asset class being born in real time.
really like the work @polyoptions have put into this.
Options have implied vol because of two things:
- Market prices
- A pricing model that has volatility as a parameter
The former requires a market.
The latter requires a stochastic model for the underlying.
@kushal_mungee No, our illustrative pricing is definitely dumber than what the paper lays out (but there are actually some similarities in how we deal with IV).
👏
"A derivative layer would (i) let market makers hedge adverse selection byoffloading belief volatility and jump exposure; (ii) allow calendar hedges (between ma-turities or checkpoints before resolution); (iii) enable cross-event hedges that neutralizecorrelation and co-jumps; and (iv) concentrate liquidity around a small set of quoted riskfactors, as implied volatility did for options. In mature option markets, variance/volatilityswaps, correlation swaps, and related instruments serve exactly these functions for pricevolatility. Prediction markets need the analogous instruments for belief dynamics."
Next week @factsdottrade will officially go public and be open to everyone.
A lot has changed since our private beta (Nov/Dec):
– Major wallet infra + security upgrades
– Integrated AI + real-time news
– An entirely new take on Prediction Market Funds
– Completely new UI and Trading Interface
- Many more surprises / features
More details soon.
This is just the beginning.
PolyTraderPro co-founded Doug Campbell gives a full podcast here: https://t.co/ygAxIjqX7c
Episode includes epic personal stories, polymarket's business plan, and various topics relating to prediction markets.
@jaredjjohnson
The math that made Wall Street billions pricing options just got ported to prediction markets
This paper builds the first Black-Scholes equivalent for platforms like Polymarket
Treating belief volatility as a quotable risk factor, with proper tools for hedging jump risk around elections and macro events.
The paper is dense but worth it:
happy to announce humanplane is partnering with @polyoptions to bring native options strategies to the platform
this will roll out soon for select polymarket markets—giving users more ways to structure positions and manage risk beyond simple directional bets
Polyoptions 🤝 HumanPlane
Very excited to announce our @Polymarket options contracts will be tradeable directly through @humanplaneco, one of the most innovative prediction market terminals, building the true OS for pro traders.
Join us at https://t.co/AySiGJHx81.
You've heard about the Pizza Pentagon Report, but have you heard of the Kremlin Escort Report?
from our livestream with @pizzintwatch last week.
Watch the FULL Stream:
Delighted to announce we received a grant from @PolymarketBuild to bring options trading to prediction markets.
Our partnership w @Polymarket is an amazing opportunity to level up the entire asset class alongside the world's premiere platform.
Join us.
https://t.co/KceQoBgOCv