Levandor

hormuz-bet — Liquidity and Capacity

3 min read

For Agents

Honest liquidity and capacity reality for the Hormuz markets. The count markets are THIN (weekly bucket events ~71k total liquidity; per-bucket single-digit thousands). Realistic capacity is roughly 2,000 per clip. The deep money (~$14.7M) is in the binary “traffic returns to normal” (MA>=60). Both the binary and the count buckets settle on the same PortWatch series, which creates a cross-market consistency/arb constraint. Do not size strategy assuming the count markets can absorb real capital.

A clear-eyed account of how much can actually be traded, and where.

The Count Markets Are Thin

  • Weekly bucket events carry roughly 71k of total liquidity.
  • Per-bucket depth is single-digit thousands of dollars.
  • The threshold legs let you sell a few thousand near ~0.30, but you cannot buy size cheaply — the book is one-sided and shallow.
  • Realistic capacity: ~2,000 per clip. This is a small-size game on the count markets; model fills accordingly and assume meaningful slippage (see hormuz-bet-backtesting).

Do not design for capital the book cannot hold

Any backtested edge on the count markets must be discounted by the fact that you can deploy only hundreds to low-thousands per market. A great percentage edge on $500 is a hobby, not a strategy. The capacity ceiling is a first-class design constraint, not a footnote.

Where the Deep Money Is

The binary “Strait of Hormuz traffic returns to normal” (resolves YES if PortWatch 7-day MA >= 60) carries ~$14.7M volume — orders of magnitude more than the count markets. If the strategy needs real capacity, this is the instrument that can hold it.

The capacity-friendly edge is cross-market, not in the buckets

Because the deep binary (MA>=60) and the thin count buckets settle on the same PortWatch series, they must price a coherent joint distribution. Inconsistent joint pricing between the $14.7M binary and the thin buckets is the most capacity-friendly mispricing: you can express it primarily through the deep binary. See The Four Market Structures.

Cross-Market Consistency Constraint

Both the deep binary and the count buckets are functions of the same daily PortWatch series:

  • Binary YES = (7-day MA >= 60).
  • Average buckets = which bracket the 7-day MA falls in.
  • Total buckets = which bracket the weekly sum falls in.
  • Threshold legs = whether single-day max crosses 20/40/60/80.

These are not independent. A coherent model of the daily series implies a joint distribution over all of them; any pricing that violates that joint (e.g. the binary implies MA>=60 is likely while the average buckets put almost no mass at/above the 60-equivalent bracket) is an arbitrage. This constraint is both an edge source and a sanity check on any standalone bucket bet.

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