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Last Friday (Nov 29th) I checked out Polymarket to see contracts related to Syria. Most of Aleppo (one of Syria’s biggest cities) fell to the rebels in just two days (Nov 27-29. This is a city Assad would not give up without a fight and was the scene of intense battles going back to 2012.
When I saw how quickly the rebels captured the city I was curious what betting markets put the odds of Assad being ousted at. I checked and a contract for Assad to be in power as President (or dictator) of Syria at the end of 2024 was only trading at 5 cents.
This seemed oddly low to me – I have studied a lot of history and when there is a civil war and one side gains massive momentum many times it snowballs into success very quickly.
Bagration and Hezbollah
For example, in 1941 Hitler steamrolled nearly the entire Red Army in days, and in a few months his panzers could see the spires of the Kremlin in Moscow. The Soviet Union for years tried to dislodge the Germany army from their territory and made progress but very slowly. However, on June 22nd 1944, Stalin launched Operation Bagration which captured all of Belarus in a few days. The success was so stunning that the USSR decided to press on further and made it all the way to the gates of Warsaw by August 1st (and many argue Stalin could have pressed further, but did not so to have the Polish uprising crushed by the Germans first). The success was so stunning that foreign press and even Stalin himself could not believe that his army had reached the gulf of Riga, and ordered a commander to send him bottled water to verify. But back to Syria.
The battle of Aleppo showed the strength of the rebels and the weakness of Assad. This came on the back of Israel delivering a crushing blow to Assad’s most important militia, Hezbollah, in Lebanon and as part of a recent ceasefire Hezbollah could not bring in arms to Syria nor cross the border.
Israel and Hezbollah
The ceasefire de facto allowed Israel to attack Hezbollah over these movements and the ceasefire only bound Israel to a ceasefire in Lebanon (not Syria) – this meant the second Hezbollah crossed fighters or weapons into Syria Israel (per the Lebanon ceasefire) could attack, and Israel had done so before this. Additionally, Iran was in a bad state and Israel was trying to stop all arms shipments from Iran (or their militias) to Hezbollah. In fact, on at least two occasions Israel threatened to attack a plane carrying weapons which Iran was flying into Syria (and headed for Hezbollah in Lebanon) and Iran turned the planes around.
The contract
But the stranger part is that the contract had barely budged since the fall of Aleppo. The contract for “No” (meaning Assad would be ousted before 2025) was trading at 4.8 cents, just a drop above the 3.5 cents before Aleppo fell. This made no sense logically as if the contract was priced efficiently it should have at least seen a big jump after what had happened over the past few days.
I thought the end of the year is soon and Assad “Will Assad remain President of Syria through 2024?” was vague in how a Yes or No would be described but the contract was too low. I did not have a model for pricing but I thought it should be at least 20-30 cents, as it was not likely but very possible Assad would be ousted as momentum can lead to further momentum. The risk reward was great for a short bet, since even if Assad was not totally ousted the contract would shoot up over the next week or two.
On Friday morning Nov 29th I tweeted the idea. On Saturday afternoon the rebels made huge gains and the contract shot up to 34 cents – that was a 7X potential return. Then it went back down, but as the rebels made more progress it kept shooting up until it finally closed as a “No” on Sunday (December 8th). Even if you sold after the first big move you had a very nice return in less than 24 hours. And if you held on longer there were plenty of opportunities to sell at higher ranges of 40-60 etc then the contract shot up to the 80s this past Saturday.
Even this past Saturday you could have bought the contract for around 70 cents while Damascus was falling. The contract was at 90+ a few hours later and then was settled at $1.
Total return and bias
This was a 20x return in a week, something that is out of this world. Obviously luck was involved and no one expected such rapid advances but the risk reward and inefficiencies of this idea made it a pretty good investment for a small sum of cash.
Note: Assad was horrible but what comes next might be even worse. I thought both sides were horrible and I was not hoping for Assad to fall (although I do not mourn his ouster). I am not making a moral judgement – in fact, I try not to make investments where I am too emotionally invested in the outcome as I believe that will skew my judgement. IE if I really want X to win an election if I am betting "Yes" X will win, I am not sure is that because I actually believe X WILL win, or because I WANT X to win. I care far more about peace than being right so I hope Assad's ouster leads to a better outcome for everyone.
PS It’s important to note liquidity picked up as this contract went higher which made buying more shares or selling easier. I believe hedge funds will get into prediction markets over the next few years as legal restrictions on predictions are loosened and the ineffeciencies will disappear over time.
Link to Polymarket order book
Link to PolyMarket
Twitter thread on the prediction
Disclosure: This is not investment advice, see our full disclaimer for further details.
