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Russia-Ukraine Ceasefire Markets: Term Structure Overpricing and Battlefield Reality Check
Executive Summary
Position. BUY NO on ceasefire by June 30 at 24%. BUY NO on ceasefire by Dec 31 at 43%, lower conviction.
- Ceasefire by June 30: market 24%, fair value 16-20%, edge +4-8pp. Five independent signals converge on overpricing: decomposition math, conjunction inconsistency with capture markets, mediation base rates, Russia's revealed battlefield preference, and the Korean War analogy on principle-based sticking points.
- Ceasefire by Dec 31: market 43%, fair value 30-38%, edge +5-13pp. The same signals apply but weaken over an 11-month horizon, where scenario uncertainty (Trump policy shift, battlefield reversal, back-channel deal) widens the fair value range and reduces conviction relative to the June contract.
Cross-Market Signal. Kostyantynivka capture priced at 90% by year-end reveals what the ceasefire market is masking: Russia has no incentive to stop.
Risk Management. The Sanctioning Russia Act (S.1241), a bipartisan bill that would impose 500% tariffs on countries buying Russian oil, is the single most identifiable catalyst that could invalidate this thesis. If it becomes law, Russia's cost-benefit calculus on continued fighting changes fundamentally. Kalshi prices passage at 52%. A floor vote in either chamber is the signal to reassess the BUY NO ceasefire position and reduce exposure.
Thesis. The market is pricing diplomatic momentum (Abu Dhabi talks, 20-point framework, Trump's June deadline) without adequately weighing Russia's revealed preference for continued fighting. A decomposition of the June ceasefire into its component conditions, in which Russian acceptance of the terms is the bottleneck at 20-30%, yields a fair value well below the current market price. The battlefield capture markets confirm the signal. Traders betting on Russian territorial gains are pricing a war that continues through 2026, with no ceasefire in sight.
The Market
Multiple contracts on Polymarket ask variants of the same question: will Russia and Ukraine reach a ceasefire agreement by a specified date? The contracts span resolution dates from February 28 through December 31, 2026, forming a term structure.
Ceasefire Term Structure
The current pricing as of February 12, 2026:
| Contract | YES Price | Implied Probability |
|---|---|---|
| Ceasefire by Feb 28 | 2c | 2% |
| Ceasefire by March 31 | 7c | 7% |
| Ceasefire by June 30 | 24c | 24% |
| Ceasefire by Dec 31 | 43c | 43% |
The structure implies the market assigns roughly 5 points of incremental probability to March (from 2% to 7%), 17 points to April through June (from 7% to 24%), and another 19 points to July through December (from 24% to 43%). The heavy loading on the April-to-June window reflects the market's absorption of Zelenskyy's public statement that the US wants a deal "before June."
Battlefield Capture Markets
A parallel set of contracts on Polymarket prices Russian territorial gains:
| Contract | YES Price | Implied Probability |
|---|---|---|
| Pokrovsk captured by March 31 | 71c | 71% |
| Kostyantynivka captured by Dec 31 | 90c | 90% |
| Stepnohirsk by March 31 | 39c | 39% |
| Full Donetsk Oblast by June 30 | 5c | 5% |
These markets are critical because they embed assumptions about battlefield momentum that directly contradict a near-term ceasefire. Kostyantynivka sits roughly 30 kilometers behind the current front lines. Pricing its capture at 90% implies either sustained Russian offensive operations through 2026 or a negotiated settlement that hands Russia territory it has not yet captured on the battlefield.
The Pokrovsk contract at 71% by March 31 signals that the crowd expects Russian forces to consolidate control of the city within weeks, which would free offensive capacity for the push toward Kostyantynivka. The Institute for the Study of War (ISW), however, assesses that Russia currently lacks the offensive capacity to mount a broader push toward Slovyansk. Moscow's strength lies in a war of attrition: small assaults, heavy artillery, drone saturation, and limited territorial return.
Related Markets
| Contract | YES Price |
|---|---|
| Zelenskyy removed from power by end of 2026 | 26% |
| Ukraine agrees to cede territory before 2027 | 28% |
| Ukraine holds elections by Dec 31, 2026 | 33% |
These markets collectively point to roughly one-in-four odds of a fundamental shift in Ukraine's political stance. The elections market at 33% is notable because Ukraine's martial law prohibits elections; pricing above 30% implies the market sees a meaningful chance that martial law is lifted, which would require either a ceasefire or a dramatic domestic political shift.
The Consensus
The ceasefire markets are priced on a narrative of accelerating diplomatic momentum. Two rounds of Abu Dhabi trilateral talks have concluded (January 23 and February 4-5, 2026). US-Russia military hotlines were restored on February 6 after a four-year suspension. A prisoner swap of 157 Russian and 150 Ukrainian servicemen was executed on February 5. A 20-point peace framework exists with reported Ukrainian buy-in, down from a 28-point draft. A "Coalition of the Willing" summit in Paris on January 6 produced commitments from 35 countries, with the UK and France pledging ground troops for security guarantees.
This is a compelling diplomatic calendar. The consensus narrative is straightforward: Trump wants a deal, the framework exists, both sides are engaging, and the infrastructure for implementation is being built in parallel with negotiations.
The crowd narrative makes two implicit assumptions that deserve scrutiny. First, that the existence of a framework and diplomatic process translates into a meaningful probability of agreement within a defined timeframe. Second, that Russia's willingness to engage in talks signals willingness to accept terms that would constitute a ceasefire.
The Alpha
The ceasefire term structure is overpriced relative to the probability that Russia accepts a deal while advancing militarily. The battlefield capture markets reveal a contradiction: traders pricing a 90% Kostyantynivka capture and a 43% year-end ceasefire are implicitly assuming Russia will gain territory in a deal it has not yet taken by force.
Decomposition Analysis
A ceasefire by June 30 requires three conditions to be met simultaneously:
Framework finalization (estimated probability: 75-80%). The 20-point plan already exists. Ukraine has accepted it in principle. The European counterproposal has been tabled. The Peace Council architecture has been sketched. The remaining gap is the disposition of Donbas and the precise terms of Ukraine's security relationship with the West. This component is high-probability because the machinery is built; the question is whether both parties find the final terms acceptable.
Russia accepts terms (estimated probability: 20-30%). This is the bottleneck. Russia is currently advancing on the battlefield. Myrnohrad was captured on February 4. The Pokrovsk offensive continues with fighting in the city's northern districts. ISW assessments describe Russian advances as grinding but persistent.
Putin has stated publicly that if Ukrainian troops leave Donbas, hostilities cease, and if not, Russia will achieve it militarily. Russia's stated war aims extend beyond territory: Putin views the invasion as an effort to reverse the post-Soviet settlement and reassert control over Ukraine's strategic orientation.
Moscow has softened from its 2022 maximalism, dropping demands for the full conquest of Zaporizhzhia and Kherson and accepting a large Ukrainian military (versus the 85,000-troop cap in the 2022 Istanbul draft). But the core demand for the remaining approximately 20% of Donetsk Oblast that Ukraine controls has not moved. The Kremlin has insisted that no ceasefire will occur until a comprehensive settlement is agreed, rejecting the Western preference for a ceasefire-first approach.
The enforcement framework under discussion makes Russian acceptance even less likely. Ukraine reached a preliminary understanding with the US and European allies on a multi-tier response plan: diplomatic warning and immediate Ukrainian military measures within 24 hours of a violation, deployment of "coalition of the willing" intervention forces if violations continue, and coordinated Western-backed military response including US forces within 72 hours of a broader attack. Russia gave no indication during the Abu Dhabi talks that it was prepared to accept such a framework.
Russia's incentive structure also favors continued fighting over the uncertainties of peace. The Kremlin may prefer to keep fighting rather than confront the burdens of a post-war reality, including integrating large numbers of veterans, sustaining salaries and long-term benefits, and folding conquered territory into Russia's political and social ecosystem. Reports of cuts to troop bonuses and delays in death benefits indicate these costs are already straining the economy. Life in Moscow has remained relatively unchanged while everyday Ukrainians absorb the hardest costs, which reduces domestic pressure on Putin to settle.
The Witkoff leak adds an important data point. Bloomberg reported that in an October 2025 call, US envoy Witkoff told Putin aide Yuri Ushakov: "I know what it's going to take: Donetsk and maybe a land swap." This reveals that the US mediator has mentally conceded on the territorial question. But Russia has not reciprocated with flexibility on implementation.
Implementation timeline (estimated probability: 75-85%, conditional on agreement). Historical comparables suggest that once parties reach agreement in principle, signing can happen rapidly. The Dayton Accords moved from framework to signed agreement in roughly 2.5 months. Minsk II was hammered out in a single 16-hour overnight session. The Korean War armistice, by contrast, took over two years from first talks to signing, primarily because a principle-based sticking point (POW repatriation) persisted through 158 meetings. The Russia-Ukraine territorial question more closely resembles the Korean POW problem than the Dayton territorial swap.
Aggregate probability: 0.78 x 0.25 x 0.80 = approximately 16%. The current market price of 24% implies the crowd is either overweighting the diplomatic calendar, underweighting Russia's revealed preference for continued fighting, or pricing in a coercive scenario where Trump applies pressure that changes Russia's calculus. That coercive scenario is possible but not yet visible in policy actions.
The Conjunction Problem
The strongest analytical signal in this market cluster is the internal inconsistency between ceasefire pricing and battlefield capture pricing. The market simultaneously holds two positions: a 43% probability that Russia and Ukraine reach a ceasefire by year-end, and a 90% probability that Russia captures Kostyantynivka (30km behind current lines) by year-end.
These are substantially mutually exclusive under the most natural interpretation. If a ceasefire occurs, military operations freeze along the line of contact. Kostyantynivka is not on the current line of contact; it requires sustained offensive operations to reach.
For both prices to be internally consistent, the market must be implicitly assuming one of two things: either the ceasefire occurs very late in the year (after Russia has already taken Kostyantynivka), or the ceasefire settlement grants Russia territory it has not yet acquired militarily.
The first interpretation requires that essentially all of the year-end ceasefire probability (43%) is concentrated in the final months of 2026, after Kostyantynivka falls. But the term structure already assigns 24% to the period before June 30, which contradicts this interpretation.
The second interpretation implies the market believes Ukraine would concede territory beyond the current front line in exchange for a deal. This contradicts both Ukraine's stated negotiating position ("neither de jure nor de facto will we recognize Donbas as Russian," per Zelenskyy) and the practical reality that some 190,000 civilians still live in the Ukrainian-held portion of Donetsk alone.
The simpler explanation: traders in the ceasefire market and traders in the capture market are not the same individuals, and neither group is pricing the contingent relationship between their contracts. This is a classic conjunction fallacy.
Russia's Revealed Preference
The battlefield-capture markets are arguably better calibrated than the ceasefire markets, because they are anchored to observable military facts rather than narrative-driven diplomatic expectations.
Russian forces are advancing. The rate of advance is slow by historical standards (CSIS described the Pokrovsk offensive as "slower than the Battle of the Somme" in a January 2026 assessment), but it is persistent and directionally clear. Pokrovsk at 71% by March 31 and Kostyantynivka at 90% by year-end paint a picture of a Russian military that expects to be fighting through 2026.
Moscow has softened on peripheral issues (military force size limits, Zaporizhzhia nuclear plant governance, Western security guarantee architecture) while holding firm on the core territorial demand. This pattern is consistent with a negotiating strategy designed to appear flexible while yielding nothing on the fundamental objective. The diplomatic engagement is real, but engagement is not agreement.
Risk Factors
US policy shift toward coercive pressure. If Trump threatens secondary sanctions on Russian oil exports, escalates arms supplies to Ukraine, or credibly threatens direct military involvement, Russia's calculus changes rapidly and the ceasefire probability jumps. The current analysis assumes the US continues its mediator posture without coercive escalation.
Russian battlefield reversal. If Ukrainian counterattacks stall the Pokrovsk offensive or recapture significant territory, Russia's incentive to lock in current gains through a ceasefire increases.
Back-channel breakthrough. The Witkoff leak demonstrated that significant diplomatic activity occurs outside public channels. A Trump-Putin direct deal, announced without warning, would instantly reprice the entire cluster.
Catalysts to Watch
Next Abu Dhabi round (late February/early March). The third round of trilateral talks is expected, possibly in Washington. Substantive progress on territorial terms would be the most bullish possible catalyst. A procedural round focused on process rather than substance would confirm the thesis.
Pokrovsk offensive resolution (March-June). If Russian forces consolidate control and begin advancing toward Kostyantynivka, the capture markets reprice upward and the ceasefire term structure should compress. If the offensive stalls, the opposite dynamic applies.
SCOTUS tariff ruling (imminent). The Supreme Court's pending decision on IEEPA tariffs has a direct connection to the ceasefire timeline. If the Court strikes down IEEPA tariffs, the administration loses both a revenue stream and a coercive tool, which could either pressure Zelenskyy toward faster concessions or reduce US leverage over Russia's trading partners. The net direction is ambiguous, but the magnitude of the catalyst is significant.
Sanctioning Russia Act (S.1241). The single most identifiable catalyst that could invalidate the BUY NO thesis. A bipartisan bill with 84 Senate cosponsors that would impose 500% tariffs on countries purchasing Russian oil, gas, and uranium. Trump publicly endorsed the legislation on January 7, 2026. Kalshi prices passage at 52%. The 84 Senate cosponsors exceed the two-thirds threshold required to override a veto, but the bill has been repeatedly delayed. A floor vote in either chamber would be a significant warning signal for the BUY NO ceasefire position.
The transmission mechanism to the ceasefire is direct. If the Sanctioning Russia Act becomes law, it transforms the US from a mediator into a coercive actor. Russia's cost-benefit calculus on continued fighting changes fundamentally if its oil revenue is threatened by secondary sanctions on Chinese and Indian purchasers. The bill includes a presidential waiver, meaning Trump could sign it as leverage without immediately enforcing it. Passage does not automatically mean enforcement, and enforcement does not automatically produce a ceasefire. But the shift from "mediator without coercive tools" to "mediator holding a loaded sanctions weapon" materially increases the probability of Russian engagement.
Bottom Line
The decomposition analysis and the conjunction problem point in the same direction: the June ceasefire contract at 24% is overpriced by 4-8 points, with Russian acceptance of terms as the bottleneck. The battlefield capture markets confirm this independently. Traders pricing 90% Kostyantynivka capture and 43% year-end ceasefire are implicitly constructing a world-state in which Russia either gains territory through negotiation that it has not taken by force, or in which essentially all ceasefire probability is concentrated in the final months of the year. The two assumptions contradict each other, but the market is pricing both.
The actionable trade is buying NO on the June ceasefire contract at 24%, with a risk management framework that monitors the four identified catalysts for signs that the thesis is invalidating. The year-end contract is a weaker BUY NO given the wider fair value range and greater scenario uncertainty.
Risk Management. The Sanctioning Russia Act (S.1241) is the single most identifiable catalyst that could invalidate this thesis. Kalshi prices passage at 52%. A floor vote in either chamber is the signal to reassess the BUY NO ceasefire position and reduce exposure.
Market Summary
Polymarket -- Ceasefire Term Structure
- Russia-Ukraine ceasefire by Feb 28: YES 2% -- likely fairly priced
- Russia-Ukraine ceasefire by March 31: YES 7% -- likely fairly priced
- Russia-Ukraine ceasefire by June 30: YES 24% -- BUY NO (fair value 16-20%)
- Russia-Ukraine ceasefire by Dec 31: YES 43% -- BUY NO, lower conviction (fair value 30-38%)
Polymarket -- Battlefield Capture
- Pokrovsk captured by March 31: YES 71% -- likely fairly priced
- Kostyantynivka captured by Dec 31: YES 90% -- lean BUY NO (capture timelines likely aggressive per ISW)
- Stepnohirsk by March 31: YES 39% -- likely fairly priced
- Full Donetsk Oblast by June 30: YES 5% -- likely fairly priced
Polymarket -- Related Markets
- Zelenskyy removed from power by end of 2026: YES 26% -- lean BUY NO
- Ukraine agrees to cede territory before 2027: YES 28% -- lean BUY NO
- Ukraine holds elections by Dec 31, 2026: YES 33% -- lean BUY NO
Kalshi
- Sanctioning Russia Act becomes law: YES 52% -- monitor as risk management signal
Read more analysis on the flowframe platform
View on flowframe →flowframe.xyz · est 2025
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