# Kalshi Politics — Mispricing Audit (2026-06-22)

Date: 2026-06-22
Source: https://kalshi-audits.pages.dev/2026-06-22-kalshi-politics-mispricing-audit

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# 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 

### 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 / bandHIGH · 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)
Clustertrump-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](https://en.wikipedia.org/wiki/2026_Strait_of_Hormuz_crisis); [TIME, "The 60-Day Test," Jun 19 2026](https://time.com/article/2026/06/19/iran-united-states-agreement-nuclear-program-war-israel-lebanon/)).
- 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.

Numbers75 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 historyYES 7–9¢ early June → spike ~22¢ Jun 18 → back to 8–12¢ Jun 21–22 (stable last 48h)

 PICK 2 

### 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 / bandMEDIUM · 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)
Clusterhormuz-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](https://portwatch.imf.org/pages/chokepoint6); [straits.live live status, Jun 22](https://straits.live/is-the-strait-of-hormuz-open)).
- Roughly **550 vessels remain stranded** and analysts estimate **~4 months to full normalization** even with the deal holding ([HSToday, Hormuz reopens after MoU](https://www.hstoday.us/subject-matter-areas/maritime-security/iran-tightens-grip-on-strait-of-hormuz-as-shipping-forced-into-controlled-routes/)).
- 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.

Numbers90 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 historyYES ~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 

### 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 / bandMEDIUM · 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)
Clustertrump-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](https://www.democrats.senate.gov/news/press-releases/leader-schumer-floor-remarks-demanding-kash-patel-resign-as-fbi-director)), Durbin ([Judiciary release](https://www.judiciary.senate.gov/press/dem/releases/durbin-speaks-on-latest-kash-patel-revelations-urges-replacement)), Rep. Ted Lieu ([C-SPAN](https://www.c-span.org/clip/news-conference/rep-ted-lieu-calls-on-fbi-director-kash-patel-to-resign-after-allegations-of-excessive-drinking/5199353)) — 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](https://en.wikipedia.org/wiki/Kash_Patel)).

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.

Numbers75 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 historyYES 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

- [IMF PortWatch — Strait of Hormuz (chokepoint6)](https://portwatch.imf.org/pages/chokepoint6) — resolution source for the Hormuz markets.
- [straits.live — Strait of Hormuz live status (Jun 22, 2026)](https://straits.live/is-the-strait-of-hormuz-open)
- [HSToday — Hormuz reopens after MoU signing](https://www.hstoday.us/subject-matter-areas/maritime-security/iran-tightens-grip-on-strait-of-hormuz-as-shipping-forced-into-controlled-routes/)
- [Wikipedia — 2026 Strait of Hormuz crisis](https://en.wikipedia.org/wiki/2026_Strait_of_Hormuz_crisis)
- [NPR — US and Iran agree to a "road map" for a final deal (Jun 21, 2026)](https://www.npr.org/2026/06/21/g-s1-129222/us-iran-deal-lebanon-israel-strait-hormuz-jd-vance)
- [TIME — The 60-Day Test (Jun 19, 2026)](https://time.com/article/2026/06/19/iran-united-states-agreement-nuclear-program-war-israel-lebanon/)
- [Sen. Schumer — floor remarks demanding Kash Patel resign](https://www.democrats.senate.gov/news/press-releases/leader-schumer-floor-remarks-demanding-kash-patel-resign-as-fbi-director)
- [Sen. Durbin — Judiciary Committee release on Patel](https://www.judiciary.senate.gov/press/dem/releases/durbin-speaks-on-latest-kash-patel-revelations-urges-replacement)
- [C-SPAN — Rep. Ted Lieu calls on Patel to resign](https://www.c-span.org/clip/news-conference/rep-ted-lieu-calls-on-fbi-director-kash-patel-to-resign-after-allegations-of-excessive-drinking/5199353)
- [Wikipedia — Kash Patel](https://en.wikipedia.org/wiki/Kash_Patel)
- [SCOTUSblog — birthright citizenship argument (Apr 2026)](https://www.scotusblog.com/2026/04/supreme-court-appears-likely-to-side-against-trump-on-birthright-citizenship/)
- [Federal Register — 2026 Trump executive orders](https://www.federalregister.gov/presidential-documents/executive-orders/donald-trump/2026)
- [Wikipedia — UFC 329 (Jul 11, 2026)](https://en.wikipedia.org/wiki/UFC_329)

**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.