Strategy 07 · Event Contracts
Cross-Venue Relative Value
The same outcome, two prices, if it really is the same outcome.
The same event is frequently listed on more than one venue at different prices, because each venue has its own participants and its own liquidity. Buying the outcome where it is cheap and selling it where it is rich locks in the difference regardless of how the event resolves, provided the two contracts resolve the same way on every possible outcome. Whether they do is the entire trade.
Definition risk
Two contracts on what looks like the same event can differ in the resolution source, the resolution time, how revisions or delays are handled, what happens if the event is canceled or postponed, and what counts as the outcome occurring. Any difference creates a set of outcomes on which one contract pays and the other does not, and the position is outright on that set. Both rules documents are read in full and compared, clause by clause, before a position is opened.
Execution and capital
The two legs are on different venues with different margin rules. A regulated venue may require the full stake as collateral; an on-chain venue holds stablecoins in a contract. Both are locked to resolution. The differential must exceed the cost of that locked capital, both venues’ fees and the spread crossed on each side. Legs are entered as close to simultaneously as the venues allow, and an unfilled leg is treated as an outright position and managed as one.
Resolution and settlement
The position only realizes its differential if both contracts settle. Settlement timing can differ by days. One venue can dispute, delay or void a resolution the other has already paid. Withdrawal from one venue may lag another. The position is not closed until both legs have settled and funds are back in custody.
Practice
How Wesvel approaches it
- 01Contract rules on both venues are compared clause by clause and the comparison recorded before any position is opened; contracts with any unreconciled difference are not paired.
- 02The differential is evaluated net of both venues’ fees, spreads and the cost of capital locked to resolution.
- 03Each leg is sized within its venue’s limit; an unfilled leg is managed as an outright position.
- 04Positions remain open in the risk system until both legs have settled and funds are in custody.
More in Event Contracts
- What Is TradedThe categories of event contract the mandate trades, and the test every contract must pass before it is eligible.
- Venues and RegulationRegulated designated contract markets versus on-chain prediction markets, and how an unsettled regulatory position shapes what the fund can do.
- Probability PricingHow a contract price implies a probability, how the mandate forms its own estimate, and why the gap has to be wide.
- AI and Mispriced ProbabilitiesHow machine learning and language models screen hundreds of event contracts for prices that disagree with a calibrated estimate, and how that gap becomes a position with positive expected value.
- Portfolio Event HedgingUsing event contracts to offset exposure elsewhere in the book to outcomes that price instruments cannot hedge.
- Resolution Risk and Position LimitsHow contracts resolve, what goes wrong when they do, and the caps that keep the mandate small.