In this guide
Key takeaway: Within prediction markets, a share's price functions as the probability itself. When a YES share trades at $0.65, the collective market assessment is that the outcome has a 65% likelihood of occurring. Grasping this fundamental relationship between price and probability underpins all successful market participation.
Those transitioning from traditional sports betting will notice that prediction market odds operate on an entirely different basis. You won't encounter fractional odds (5/1), American odds (+400), or decimal odds (5.0). Instead, prediction markets employ a transparent mechanism: share prices serve as direct probability indicators.
Price = Probability
All prediction market contracts split into two opposing positions: YES and NO. Their prices consistently total approximately $1.00 (accounting for a modest spread retained by the market operator). Interpretation works as follows:
- YES at $0.72 = Consensus view suggests 72% likelihood the event materialises
- NO at $0.28 = Consensus view suggests 28% likelihood the event fails to occur
- YES at $0.50 = Complete uncertainty — the market holds no clear bias either direction
- YES at $0.95 = Overwhelming consensus — merely a 5% possibility of non-occurrence
Calculating Your Expected Value
Expected value (EV) determines whether a position generates profit across repeated trades. The calculation follows this framework:
EV = (Your probability x Potential profit) - ((1 - Your probability) x Potential loss)
Illustration: Suppose "Event X" trades at $0.40 (40%), yet you assess genuine probability at 55%. Purchasing YES at $0.40 yields:
- Upside if YES resolves: $1.00 - $0.40 = $0.60
- Downside if NO resolves: $0.40
- EV = (0.55 x $0.60) - (0.45 x $0.40) = $0.33 - $0.18 = +$0.15 per share
Positive EV indicates the position holds mathematical edge. Through numerous transactions, positive EV accumulates into tangible wealth creation.
The Spread
The gap separating the highest purchase offer (bid) from the lowest sale offer (ask) constitutes the spread. Polymarket's active markets typically exhibit spreads between 1–3 cents. This mirrors the "vig" charged in sports betting, though substantially tighter:
- Prediction market spread: 1-3% (functionally equivalent to vig)
- Sports betting vig: 5-15% embedded within displayed odds
- Implied overround: Prediction markets see YES + NO sum near $1.00. Sports betting typically generates implied probability sums of 110-115%
Reading the Order Book
The PolyGram order book depth display reveals all outstanding buy and sell requests across price tiers. This information communicates:
- Liquidity: Volume available for purchase or sale without triggering substantial price shifts
- Support/resistance: Price zones featuring concentrated orders, forming "walls" that constrain price movement
- Market sentiment: Whether buyers or sellers dominate at prevailing price levels
Converting to Traditional Odds
Should you prefer conventional odds representations:
| Market Price | Implied Prob. | Decimal Odds | American Odds |
| $0.80 | 80% | 1.25 | -400 |
| $0.65 | 65% | 1.54 | -186 |
| $0.50 | 50% | 2.00 | +100 |
| $0.25 | 25% | 4.00 | +300 |
| $0.10 | 10% | 10.00 | +900 |
Common Mistakes
- Treating price as quality indicator: A $0.90 position carries no inherent disadvantage versus a $0.10 position — only whether the quoted price accurately reflects reality matters
- Overlooking the spread: Thinner markets may charge 5-10 cent spreads, substantially reducing your profit margin
- Excessive certainty: Before assuming the market errs, consider why thousands of participants hold opposing views
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