Kalshi Politics — Mispricing Audit

2026-06-22 · horizon ≤ 45 days (markets closing before ~Aug 6, 2026) · capital $1,000 · methodology v3 (conviction-weighted, EV-agnostic sizing)

Bottom line. The Politics slate this week is dominated by one fast-moving event — the US–Iran war and the June 17 Strait-of-Hormuz reopening deal — whose price-moving news broke in the last five days, eating most of the obvious edge. After diligence, only 3 contracts clear the v3 screens. I deploy $201 (20%) and hold $799 (80%) in cash. That is the correct answer for an event-dominated, largely efficient category, not a failure to find trades. All three picks are NO bets on favorites; nine surviving candidates are logged as rejects, including two cut purely by the entry-band screen.

1 · How this was researched

Mode: category-match. trading_events.category = 'Politics' returned 382 active markets closing within 45 days — plenty — so no theme/keyword fallback was needed.

Filter (Stage 1). Joined markets to their latest market_snapshots row and cut: 24h volume < 1,500; bid-ask spread > 5¢; already fully priced (YES bid ≥ 95¢ or ask ≤ 5¢); mention/"what will X say" noise; and every ticker already live in the feed ($EXISTING_PICKS). That left 37 candidates.
Diligence (Stage 2). For each survivor I pulled the exact resolution rules text, a 14-day intraday price history, the live Kalshi orderbook (depth on the side I'd buy), and primary-source news. The single most important finding: the Hormuz markets resolve on IMF PortWatch data, which is AIS-based and currently degraded — so headline "55 ships transited" claims from CENTCOM do not necessarily appear in the resolving series. The resolution source, not the headline, is the trade.
Reject-first (Stage 3) + entry-band screen (Stage 3.5). Every candidate was scored for rules-ambiguity, public-info-only, 48h price-staleness, slippage, then assigned a conviction tier and an effective entry band. Coin-flips (35–60¢) survive only at HIGH conviction with ≥15¢ edge; sub-35¢ tails are default rejects. Most of the slate was cut here on purpose.
Sizing (Stage 4). Size is set by conviction tier + entry band only — never by EV. Per-pick caps: HIGH 15% / MEDIUM 7% / LOW 3% of $1,000. Per-cluster cap 15%. EV cents / EV% are recorded for calibration but did not drive any contract count.

Data: read-only Kalshi DB mirror (schema verified live) + Kalshi public orderbook API + web search/fetch of primary sources. Prices in cents; a NO buy at 76¢ pays 100¢ if it resolves NO.

2 · Markets reviewed

Ticker	Market	YES bid/ask	Vol 24h	Verdict
KXHEGSETHOUT-26APR-AUG01	Hegseth out as SecDef before Aug 1	8 / 10	2,089	PICK · NO
KXHORMUZNORM-…-B260715	Hormuz 7-day MA >60 before Jul 15	24 / 25	100,421	PICK · NO
KXKASHOUT-26APR-AUG01	Kash Patel out as FBI Director before Aug 1	17 / 19	2,834	PICK · NO
KXHORMUZNORM-…-B260801	Hormuz 7-day MA >60 before Aug 1	47 / 48	54,533	REJECT · coin-flip
KXMAXSHIPSHORMUZ-…-AL40	Highest daily Hormuz calls ≥40 in June	50 / 53	5,105	REJECT · coin-flip
KXHORMUZWEEKLY-…-T100	>100 Hormuz calls Jun 15–21	7 / 9	16,031	REJECT · resolves tmrw
KXUSAIRANAGREEMENT-27-26AUG	US–Iran nuclear deal before Aug 1	5 / 7	20,142	REJECT · near-dup/thin
KX14AMENDCASE-26-AUG	Birthright-citizenship order in effect before Aug 1	6 / 7	9,950	REJECT · no edge
KXTRUMPUFC-26JUL-DJT	Trump attends UFC 329	17 / 18	5,473	REJECT · tail
KXEOWEEK-26JUN27-0	≥1 executive order Jun 21–27	92 / 93	1,928	REJECT · fair
KXAPRPOTUS-26JUN26-39.6	RCP approval <39.6% on Jun 26	10 / 11	10,607	REJECT · efficient
KXBURNHAMPM-27JAN01-0718	Andy Burnham UK PM before Jul 18	54 / 58	5,982	REJECT · anomalous

Plus ~25 lower-volume / wide-spread / mention-noise markets cut mechanically at Stage 1 (EO-count rungs, Truth-Social post-count ladders, Getty-photo-day ladders, approval rungs, max-ship ladders). Picks below are ordered highest-conviction first.

3 · Picks

Pick 1 — KXHEGSETHOUT-26APR-AUG01 · BUY NO @ 0.92

HIGH CONVICTION

Will Pete Hegseth be out as Secretary of Defense before Aug 1, 2026? — I take NO (he stays).

Conviction / band: HIGH · deep favorite (NO entry 92¢)
My prob (NO true): 95%
Market implied (NO): ~91% (YES 8–10¢)
Edge: +3¢ / +3% (record only — did not set size)
Cluster: trump-appointee-tenure

Thesis. A sitting Defense Secretary is not removed in the middle of an active shooting war. The US is conducting strikes on Iran and implementing a 60-day ceasefire; Hegseth is operationally central to both. Removal before Jul 31 is close to mechanically excluded.

Evidence.

The US–Iran conflict is live: strikes began Feb 28, 2026; a June 17 memorandum opened a fragile 60-day ceasefire window now being implemented (2026 Strait of Hormuz crisis; TIME, "The 60-Day Test," Jun 19 2026).
Price history shows the YES (out) probability spiked to ~22¢ intraday around Jun 16–18 then reverted to 8–12¢ — the removal chatter was priced and faded.

Cleanest tail risk: a fresh, acute scandal forces an abrupt resignation despite the war — the only realistic path to YES inside five weeks.

Numbers: 75 contracts × 92¢ = $69.00 cost · max payout $75.00 · max profit +$6.00 · EV +3¢/contract
Liquidity (entry): YES bid 8 / ask 10 · NO ask 92 · ~$500 of YES-bid depth ≥8¢ (≫ my size; <1¢ slippage) · 24h vol 2,089 · OI 46,756
Price history: YES 7–9¢ early June → spike ~22¢ Jun 18 → back to 8–12¢ Jun 21–22 (stable last 48h)

Pick 2 — KXHORMUZNORM-26MAR17-B260715 · BUY NO @ 0.77

MEDIUM CONVICTION

Will the 7-day moving average of Strait-of-Hormuz transit calls (IMF PortWatch) be above 60 before July 15, 2026? — I take NO.

Conviction / band: MEDIUM · favorite (NO entry 76¢)
My prob (NO true): 88%
Market implied (NO): ~75% (YES 24–25¢)
Edge: +12¢ / +16% (record only — did not set size)
Cluster: hormuz-strait-recovery

Thesis. The resolving series — IMF PortWatch, not news headlines — shows traffic near zero with a failed reopening. For the 7-day average to exceed 60 (≈64% of the ~94/day pre-crisis baseline) before Jul 15 would require near-complete normalization in about three weeks. The resolution source's own readings and analyst estimates say that won't happen on this timeline.

Evidence.

PortWatch logged 0 commercial transits on Jun 14 vs ~94/day pre-crisis; a brief reopening produced only ~12 tankers on Jun 18, and verified AIS tracking showed a failed recovery Jun 20–22 (IMF PortWatch chokepoint6; straits.live live status, Jun 22).
Roughly 550 vessels remain stranded and analysts estimate ~4 months to full normalization even with the deal holding (HSToday, Hormuz reopens after MoU).
AIS data is explicitly degraded (GPS jamming, spoofing, dark vessels), which suppresses — not inflates — the PortWatch count, working in NO's favor.

Cleanest tail risk: the ceasefire holds firmly and the 550 stranded ships flood through in a sustained convoy surge, pushing the 7-day average above 60 faster than the 4-month estimate implies. A single big day isn't enough — it takes a sustained week — which is why this is MEDIUM, not a coin-flip reject.

Numbers: 90 contracts × 77¢ limit (fills at 76¢ = $69.30 cost) · max payout $90.00 · max profit +$20.70 · EV +12¢/contract
Liquidity (entry): YES bid 24 / ask 25 · NO ask 76 · ~$10k / >40,000 contracts of YES-bid depth ≥23¢ (deepest book in the slate; ~1¢ slippage) · 24h vol 100,421 · OI 304,045
Price history: YES ~34¢ Jun 16–18 → drifted to ~19–21¢ Jun 19–22 as the recovery failed; stable last 48h, so the move is not freshly running

Pick 3 — KXKASHOUT-26APR-AUG01 · BUY NO @ 0.84

MEDIUM CONVICTION

Will Kash Patel be out as FBI Director before Aug 1, 2026? — I take NO (he stays).

Conviction / band: MEDIUM · favorite (NO entry 83¢)
My prob (NO true): 90%
Market implied (NO): ~82% (YES 17–19¢)
Edge: +7¢ / +8% (record only — did not set size)
Cluster: trump-appointee-tenure

Thesis. Patel is under heavy public pressure but Trump backs him, and Patel is purging internal opponents rather than packing up. Trump rarely yields to opposition demands; a forced exit within five weeks is the low-probability outcome.

Evidence.

Senate Democrats have repeatedly demanded he resign — Schumer (floor remarks), Durbin (Judiciary release), Rep. Ted Lieu (C-SPAN) — yet he remains in office as of Jun 2026.
His tenure has been defined by retaliatory FBI personnel purges, signaling entrenchment, not departure (Kash Patel — Wikipedia).

Cleanest tail risk: a new revelation escalates fast enough that Trump cuts him loose before Aug 1. This is exactly the actor where v1/v2 took correlated losses — so it is sized as MEDIUM and capped inside a single cluster (see below), never doubled.

Numbers: 75 contracts × 84¢ limit (fills at 83¢ = $63.00 cost) · max payout $75.00 · max profit +$12.00 · EV +7¢/contract
Liquidity (entry): YES bid 17 / ask 19 · NO ask 83 · ~$2.1k / >13,000 contracts of YES-bid depth ≥16¢ (≫ my size; ~1¢ slippage) · 24h vol 2,834 · OI 152,907
Price history: YES range-bound 14–24¢; brief intraday spike to ~35¢ Jun 18–20, reverted to 16–20¢ Jun 21–22

4 · Recommended $1,000 portfolio

Pick	Side	Conv.	Band	Limit	Cur	Ctrs	Cost	Max payout	EV¢	EV%
KXHEGSETHOUT	NO	HIGH	deep-fav	92	92	75	$69.00	$75.00	+3	+3%
KXHORMUZNORM-B260715	NO	MEDIUM	favorite	77	76	90	$69.30	$90.00	+12	+16%
KXKASHOUT	NO	MEDIUM	favorite	84	83	75	$63.00	$75.00	+7	+8%
TOTAL	—	—	—	—	—	240	$201.30	$240.00	—	~+9%

Deployed $201.30 (20.1%) · cash held $798.70 (79.9%). Max payout if all three win $240.00 (max profit +$38.70). Blended dollar edge ≈ +$18.30 (~+9.1% on capital at risk). EV figures are shown for the calibration record only and did not set any contract count.

Cluster exposure (cap 15% / $150 per cluster)

Cluster	Picks	Cost	% capital	vs 15% cap
trump-appointee-tenure	Hegseth NO + Kash NO	$132.00	13.2%	OK
hormuz-strait-recovery	Hormuz B260715 NO	$69.30	6.9%	OK

Hegseth and Kash are deliberately grouped into one cluster: both are "a senior Trump appointee departs" bets and win/lose together on administration stability. Capping their combined cost at 13.2% (under the 15% line) is the direct fix for the v1/v2 correlated-Kash-Patel blow-up — no single underlying event can flip the run's sign.

Conviction exposure (per-pick caps: HIGH 15% / MED 7% / LOW 3%)

Tier	Picks	Cost	% capital
HIGH	1	$69.00	6.9%
MEDIUM	2	$132.30	13.2%
LOW	0	$0.00	0.0%

Each individual MEDIUM pick ($69.30, $63.00) sits at or under its 7% cap; the single HIGH pick is held modest because it is a thin-edge deep favorite (the "don't over-allocate chasing a few cents" rule). No coin-flip or sub-35¢ tail received capital.

Risk profile

Worst case (all three resolve against me): −$201.30, i.e. −20.1% of capital; the $798.70 cash reserve is untouched.
Best case (all three NO favorites hold): +$38.70 (+3.9% on capital, ~+19% on capital at risk).
Most likely: all three favorites resolve NO → roughly +$39, with the binding correlated risk being the trump-appointee cluster (a simultaneous purge of both Patel and Hegseth).
Concentration: largest single underlying = trump-appointee-tenure at 13.2% of capital; the Hormuz pick is independent of it. No leg exceeds 6.9%.

Execution notes

Limit orders only, at the limits shown (Hegseth 92, Hormuz 77, Kash 84). All three books carry far more depth than my size, so slippage is <~1¢; do not chase past the limit.
Hormuz watchlist trigger: if PortWatch's 7-day MA climbs above ~35–40 (sustained, not a one-day spike) or the daily count holds >50 for several days, the thesis is weakening — stop adding and consider trimming. A single big convoy day is not a trigger.
Kash / Hegseth invalidation: any credible reporting of an imminent resignation/firing, or Trump publicly distancing himself, invalidates the NO and should prompt an exit regardless of price.
No hedges needed at this size; the 80% cash position is itself the hedge and the dry powder for opportunistic adds if the ceasefire collapses and Hormuz markets gap.

5 · What I rejected and why

Every item below survived Stage-2 diligence but failed a later screen. These are machine-logged and shadow-tracked to settlement — if the rejects perform as well as the picks, the selection screen is adding nothing, and that is a finding worth knowing.

Ticker	Side	Price	My prob	Why rejected
KXHORMUZNORM-…-B260801	NO	53	70%	Entry-band screen: NO entry ~53¢ = coin-flip band, conviction only MEDIUM. Two extra weeks vs the Jul-15 pick give normalization real runway.
KXMAXSHIPSHORMUZ-…-AL40	NO	50	62%	Entry-band screen: coin-flip (~50¢) and not HIGH conviction — 550 stranded ships under a toll-free deal could yield one 40+ convoy day. Live way to be wrong.
KXHORMUZWEEKLY-…-T100	NO	91	93%	Resolves tomorrow and AIS data is degraded; ~2¢ deep-favorite edge likely already priced. Watchlist, not capital.
KXUSAIRANAGREEMENT-27-26AUG	NO	95	94%	Near-duplicate of an already-published pick (Jul-1 version) and a thin deep favorite; the June 17 MoU is a ceasefire framework, not a nuclear deal.
KX14AMENDCASE-26-AUG	NO	94	93%	Fairly priced; no deployable edge. The pending SCOTUS ruling (expected late June/early July) is a live binary tail that could briefly flip it YES.
KXTRUMPUFC-26JUL-DJT	YES	18	20%	Sub-35¢ tail: no public confirmation Trump attends UFC 329 (Jul 11, Vegas); no lottery slot spent on an unconfirmed appearance.
KXEOWEEK-26JUN27-0	YES	93	90%	Count market roughly fairly priced (or slightly rich): ~40 EOs YTD ≈ 1.6/week and bursty, so ≥1 in a given week sits near 90%.
KXAPRPOTUS-26JUN26-39.6	YES	11	12%	Efficient precise-number polling ladder resolving in 4 days off RealClearPolitics; no informational edge over the consensus.
KXBURNHAMPM-27JAN01-0718	NO	46	~85%	Anomalous/illiquid UK-PM pricing inconsistent with Burnham not being an MP and Starmer in office; can't defend the resolution interpretation, so no deployable edge.

The two entry-band cuts (B260801, MAXSHIPS-AL40) are the discipline working: both have positive modeled edge but sit in the coin-flip band at less-than-HIGH conviction, which is exactly the band that lost money in the resolved v1/v2 record.

6 · Sources

Data sources: read-only Kalshi DB mirror (markets, events, 5-min snapshots; schema verified live), Kalshi public orderbook API, and the primary web sources above. Generated 2026-06-22 under audit methodology v3 (conviction-weighted, EV-agnostic sizing; 15% per-cluster cap; entry-band screen).

Disclaimer: All probabilities are subjective estimates, not guarantees. Prediction-market contracts can resolve to zero and you can lose 100% of capital deployed on any position. This is research output for a public archive, not financial advice. Nothing here relies on non-public information.