Political Market Cross-Market Arbitrage with Fractional Kelly Sizing

How It Works The bot identifies logical inconsistencies between related political markets — for example, a candidate's probability of winning specific states implying a different overall win probability than the market prices for the national outcome. These violations represent arbitrage opportunities because the outcomes are mathematically linked.

Entry Conditions Trades are only entered if three conditions are met: (1) a no-arbitrage violation is detected across related markets, (2) the strategy has a verified backtested out-of-sample edge for this market type, and (3) position sizing passes the fractional Kelly criterion. The 'process-first' philosophy explicitly refuses trades without all three gates.

Exit Conditions Not explicitly described, but given political markets are long-duration binary events, positions are likely held to resolution. The fractional Kelly sizing implies a portfolio-level approach where multiple positions are managed simultaneously.

Verified Results No live trading results provided; paper-trading is the default mode. The explicit requirement for backtested out-of-sample edge is methodologically sound but unverified externally.

Implementation Notes & Risks This is one of the more methodologically rigorous strategies in the report, with explicit risk management (fractional Kelly), a backtesting requirement, and a conservative default mode. Key risks include political markets having correlated resolution risk (all positions lose simultaneously in unexpected outcomes), long capital lock-up periods, and the difficulty of defining 'related' markets without introducing spurious correlations. The survival-over-profit philosophy is a positive signal of risk awareness.