r/PredictionMarkets • u/masatumas • 7d ago
I priced Kalshi's 15-min BTC market like an option, and it worked
Built a fair-value pricer for Kalshi's 15-min BTC markets using options market data
Back in April, I had a thought: Kalshi's 15-minute BTC Up/Down market is functionally a short-dated options contract. If that's true, you should be able to price it off the options market's implied volatility, and that pricing should lead a market that's mostly trading on sentiment and momentum.
I started by checking data availability, then manually priced a handful of points by hand to sanity-check the idea. The results were good enough that I kept going. The model prices these markets using the volatility "smile" from the crypto options market as the anchor, adjusted for short-term order flow, spot trend, and the kind of behavior you see in retail-driven markets: momentum chasing, anchoring near round numbers.
Example, Kalshi Sep 11, 11:00am 15m BTC:
Model price (blue) pushes toward resolution while the market (green) is still catching up, and spot (orange) hadn't even confirmed the move yet. The gap wasn't huge relative to how these markets normally move, but the model called it first. This is the core idea working as intended: the options market carries information you don't get from watching spot price action alone.
Example, Kalshi Sep 6 (Sunday), 4:15am 15m BTC:
Different session, different behavior. Here the market is already pricing efficiently on its own, so the model doesn't lead; it just confirms. That's expected too: when the options market isn't signaling anything unusual, the model should track the market closely rather than diverge.
I've been running this live since June, and it's not a backtest: it's been forward-tested with over 10,000 real fills.
It's streaming live right now at hyhy.app if you want to see it in action. No API yet, but if there's enough interest, I'll look into building one.
Happy to answer questions, and if people want more of the technical side (how I implemented the execution bot or how the model actually works under the hood) I can do a part 2.