Prediction Market Returns Calculator: How Much Can You Make on Each Trade?

Every trade in a prediction market hinges on a simple expected value computation. Mastering this calculation ensures you approach each position with full clarity — you'll know precisely what success rate you require, at what odds, and the minimum probability threshold needed to avoid losses.

Basic Return Calculation

When you purchase a YES share at price P:

• Win return: (1 - P) / P × 100% = your percentage gain should YES resolve affirmatively
• Loss: 100% of your initial capital if NO resolves instead
• Break-even probability: P (the quoted market price equals your break-even threshold)

Illustrations:

• YES at $0.20: win = +400%, break-even = 20%
• YES at $0.50: win = +100%, break-even = 50%
• YES at $0.75: win = +33%, break-even = 75%
• YES at $0.90: win = +11%, break-even = 90%

Expected Value Formula

EV = (Your probability × Win amount) - ((1 - Your probability) × Stake)

Suppose you commit $100 to YES at $0.40, and you assess the true probability at 55%:

• Payout if YES occurs: $150 (you receive $250 total, having wagered $100)
• Outcome if NO occurs: -$100
• EV = (0.55 × $150) - (0.45 × $100) = $82.50 - $45 = +$37.50 expected value

How to Use This in Practice

1. Establish your own probability estimate BEFORE examining any trade
2. Determine the break-even probability (which mirrors the market price)
3. When your estimate exceeds break-even by more than the bid-ask spread: compelling buy opportunity
4. When your estimate falls below break-even: explore NO shares as an alternative
5. When your estimate approximates break-even: pass — insufficient advantage exists

Position Size Calculator

Applying half-Kelly: f = 0.5 × (bp - q) / b

• For a scenario where your p = 0.65, market = 0.40: b = 1.5, q = 0.35
• Full Kelly: (1.5 × 0.65 - 0.35) / 1.5 = 0.42 (42% of total capital)
• Half Kelly: 21% of total capital — nevertheless apply a maximum of 5% per individual position

FAQ

Is there an automated calculator for prediction market trades?

PolyGram displays projected execution price, quantity of shares, and maximum return directly within the trading interface prior to order submission. Performing your own EV assessment beforehand remains a prudent analytical practice.

How do spreads affect the return calculation?

Incorporate the spread into your effective entry cost by adding half its width. Should YES trade with bid=0.38 and ask=0.42, your realistic entry point approximates 0.42 rather than 0.40.