Quantitative#031

Kelly-Optimal Sizing

Size each bet using the Kelly criterion, a formula that turns your estimated edge and the market's odds into the wager fraction that grows your bankroll fastest over the long run (in practice you use a fraction of full Kelly to soften swings). The point isn't picking winners but bet sizing: bigger when your edge is large, smaller when it's thin, so you compound efficiently without risking ruin.

What you need to run it

  • Honest estimate of win probability for each bet
  • Script that converts edge + odds into a Kelly fraction
  • Bankroll tracking and drawdown limits

Where this applies

Markets on Polymarket where kelly-optimal sizing is the natural play:

  • Will Bitcoin close above $150k on December 31, 2026?
  • Will the [favorite] win [Super Bowl in early 2027]?
  • Will the Fed cut rates at the next FOMC meeting?

Capabilities this demands

Model / quantRisk managementManual research

At a glance

CategoryQuantitative
Requirements3
CapabilitiesModel / quant, Risk management, Manual research
VenuePolymarket (CLOB, Polygon)

Build it

Related quantitative 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 (147 strategies) or the data resources directory.
Join Discord