Prediction markets
What a price on a prediction market means
A contract settles at a dollar or at nothing. The price in between is the market's estimate of which.
Every market here is one question with a yes and a no. When the question resolves, one side is worth $1.00 per contract and the other is worth nothing. There is no partial credit and no settlement in between.
So the price is a probability wearing a dollar sign. A contract trading at 62¢ is the market saying it happens about 62% of the time. Buy it and you are risking 62¢ to make 38¢ — which is a good trade only if you think the real chance is higher than 62%.
The same trade, priced three ways
| Price | Implied chance | You risk | You win if it happens |
|---|---|---|---|
| 5¢ | 5% | 5¢ | 95¢ |
| 10¢ | 10% | 10¢ | 90¢ |
| 25¢ | 25% | 25¢ | 75¢ |
| 50¢ | 50% | 50¢ | 50¢ |
| 75¢ | 75% | 75¢ | 25¢ |
| 90¢ | 90% | 90¢ | 10¢ |
| 95¢ | 95% | 95¢ | 5¢ |
That last pair is the whole game. Nothing about a cheap contract makes it a good buy: a 5¢ contract that wins one time in twenty is a losing trade, and a 90¢ contract that wins nineteen times in twenty is a winning one. You are not looking for low prices, you are looking for prices that are wrong.
You are never locked in until resolution. A contract can be sold back to the market at any time the book will take it, so a position bought at 40¢ and sold at 55¢ is a 15¢ profit whether or not the event ever happens.
Prices are only half the arithmetic. The spread and the fee are the other half.
Next: what a trade actually costsEvery figure on this page is read from our live plan catalog and from the engine’s own fee function at the moment the page loads. Accounts are simulated; the rules described here are the ones the engine enforces automatically.