Lessons learned from one of Kalshi’s top markets.
Introduction: In this series, the Kalshi contracts team analyzes past interesting markets. Here, Will and Xavier break down key trading takeaways from INFRALW-21NOV08, a volatile and high-volume politics market.
INFRALW-21NOV08 traded on whether the bipartisan infrastructure bill would become law by November 8, 2021: if the bill officially became law by November 8, those holding the Yes side of the contract would gain $1 per contract held. If it failed to become law by November 8, those holding the No side of the contract would gain $1 per contract held.
INFRALW-21NOV08 was one of the most popular markets on Kalshi in 2021. Market prices spiked wildly as first progressives expressed objections to the bill, then it appeared as if an agreement had struck (causing market prices to surge past 50%). However, it soon became clear that even though the bipartisan infrastructure bill had passed the House of Representatives late on the night of November 6, Biden would not sign the bill by November 8, thus rendering the contract to No.
Key takeaways
What are the major takeaways from this contract? How can traders use the lessons learned from this contract to trade better in the future?
Follow the news. While some contracts rely on discrete data drops, others (often politics contracts) rely on a steady drip of rumors, leaks and announcements. Traders should have a stable of sources that they trust to be reliable and who post in an expeditious fashion to give them the edge to trade confidently and accurately.
Always think about the full terms of the contract. Contracts have precise terms and conditions. Market prices briefly hit 88 cents upon news that the House of Representatives was going to pass the bill on the night of November 6th. But the contract is not “Will the bipartisan infrastructure bill pass the House of Representatives?” but will it become law, which requires the President’s signature (or a further vote by Congress to override his veto). Traders should familiarize themselves with the entire legislative process and think critically about whether the news headlines (“Infrastructure bill passes”) actually fulfills the terms of the contract. Those thinking about signing delay risk made out like bandits on this contract. Always think about the details!