Arbitrage#053

Split/Merge Redemption Arbitrage (CTF)

Every YES and NO pair on Polymarket can be created or redeemed for exactly $1 on-chain (the Conditional Token Framework, or CTF). When the YES and NO sell prices add up to LESS than $1, you mint a fresh $1 pair for collateral and sell both halves on the order book for more than $1. When they add up to MORE than $1, you buy both cheap and redeem the pair for a clean $1. The edge is the gap between the fixed $1 on-chain value and the live order-book prices, after gas.

What you need to run it

CTF splitPosition/mergePositions contract calls
Live YES+NO best-ask/bid feed per market
Polygon gas + USDC approval automation
Latency budget under quote refresh interval

Where this applies

Markets on Polymarket where split/merge redemption arbitrage (ctf) is the natural play:

Will the Fed cut rates at the September 2026 FOMC meeting?
Will Bitcoin close above $130k on Dec 31, 2026?
Will Manchester City win the 2026-27 Premier League?

Capabilities this demands

Custom code / APIOn-chain / walletLow latencyRisk management

At a glance

CategoryArbitrage

Requirements4

CapabilitiesCustom code / API, On-chain / wallet, Low latency, Risk management

VenuePolymarket (CLOB, Polygon)

Build it

Related arbitrage strategies

This is documentation, not advice. Poly Research & Robotics publishes how these strategies work because the method should be checkable — not as a recommendation to trade them. See the full strategy database (297 strategies) or the data feeds directory.