Polymarket: My mistake of ignoring the long tail on resolution risk
Been trading some of the Polymarket political markets, and one lesson that keeps getting reinforced is the often-overlooked long-tail risk in resolution. I got burned on the Trump indictments market by underestimating the sheer number of procedural delays that could push the 'first indictment' date out indefinitely, even when the outcome seemed statistically probable. My sizing reflected an assumption of a more immediate resolution timeframe based on early news, but the real-world legal system, especially with high-profile cases, has an uncanny ability to drag things out. I should have factored in the 'time decay' aspect more rigorously or sought better hedges, rather than just focusing on the primary event probability.
That's a common trap with these markets. The probability of an event happening eventually isn't the same as it happening by a specific resolution date, especially when legal processes are involved.