In this guide
Key takeaway: Within prediction markets, a share's market value directly corresponds to the probability of that outcome. When a YES share trades at $0.65, market participants are collectively pricing in a 65% likelihood of the event occurring. Grasping this relationship between valuation and likelihood forms the cornerstone of successful market participation.
For those transitioning from traditional sports wagering, prediction market odds operate on fundamentally different principles. You will not encounter fractional odds (5/1), American moneyline odds (+400), or decimal odds (5.0). Instead, prediction markets employ a transparent framework: the contract price itself embodies the estimated probability.
Price = Probability
All prediction market contracts bifurcate into two opposing positions: YES and NO. These prices converge toward $1.00 in aggregate (accounting for a modest spread maintained by liquidity providers). The interpretation follows this pattern:
- YES at $0.72 = Collective market assessment: 72% likelihood of occurrence
- NO at $0.28 = Collective market assessment: 28% likelihood of non-occurrence
- YES at $0.50 = Equiprobable outcome — market exhibits no consensus bias
- YES at $0.95 = Overwhelming consensus — merely 5% probability of failure
Calculating Your Expected Value
Expected value (EV) governs whether a position generates sustainable profitability across repeated transactions. The calculation follows this framework:
EV = (Your probability x Potential profit) - ((1 - Your probability) x Potential loss)
Scenario: A contract for "Event X" settles at $0.40 (40% implied), though your analysis suggests genuine probability reaches 55%. Acquiring YES at $0.40 yields:
- Profit upon YES resolution: $1.00 - $0.40 = $0.60
- Loss upon NO resolution: $0.40
- EV = (0.55 x $0.60) - (0.45 x $0.40) = $0.33 - $0.18 = +$0.15 per share
Positive EV signals an edge-favourable transaction. Across numerous positions, cumulative positive EV compounds into measurable wealth accumulation.
The Spread
The gap separating the highest purchase quotation (best bid) from the lowest sale quotation (best ask) constitutes the spread. Polymarket's actively-traded contracts typically exhibit spreads ranging from 1 to 3 cents. This parallels the "vig" mechanism in traditional sports wagering but operates at substantially reduced cost:
- Prediction market spread: 1-3% (functionally equivalent to vig)
- Sports betting vig: 5-15% embedded within displayed odds
- Implied overround: Prediction market YES + NO quotations approximate $1.00. Sports betting implied probabilities frequently aggregate to 110-115%
Reading the Order Book
The PolyGram order book visualisation displays all outstanding purchase and sale orders stratified by price tier. This information illuminates:
- Liquidity: Transaction volume achievable without substantial price slippage
- Support/resistance: Price tiers hosting concentrated order volume, generating barriers to directional movement
- Market sentiment: Preponderance of buy versus sell interest at prevailing valuations
Converting to Traditional Odds
Should you prefer conventional odds nomenclature:
| 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
- Mistaking valuation for trade quality: A $0.90 contract does not inherently represent inferior opportunity versus a $0.10 contract — only whether the quotation accurately reflects genuine probability matters
- Neglecting transaction costs: Illiquid venues frequently impose 5-10 cent spreads, substantially eroding your probabilistic advantage
- Excessive conviction: Before dismissing collective market wisdom, consider why thousands of participants hold divergent views from yours
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