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 view is that the outcome has a 65% likelihood of occurring. Grasping this fundamental relationship between price and probability forms the cornerstone of successful market participation.
Those transitioning from traditional sports betting will notice that prediction market odds operate quite differently. You won't encounter fractional odds (5/1), American odds (+400), or decimal odds (5.0). Instead, prediction markets employ a straightforward mechanism: share prices function as direct probability indicators.
Price = Probability
All prediction market contracts feature two opposing positions: YES and NO. The combined prices consistently approximate $1.00 (accounting for a modest spread retained by the market maker). The interpretation works as follows:
- YES at $0.72 = Participants assess a 72% likelihood the event materialises
- NO at $0.28 = Participants assess a 28% likelihood the event fails to materialise
- YES at $0.50 = Balanced uncertainty — the market shows no clear bias
- YES at $0.95 = Overwhelming consensus — merely a 5% probability of non-occurrence
Calculating Your Expected Value
Expected value (EV) establishes whether a position generates consistent profits across multiple trades. The calculation follows this pattern:
EV = (Your probability x Potential profit) - ((1 - Your probability) x Potential loss)
Illustration: Suppose "Event X" trades at $0.40 (40%), yet your analysis suggests the genuine probability stands at 55%. Purchasing YES at $0.40 yields:
- Profit if YES resolves: $1.00 - $0.40 = $0.60
- Loss 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 generates expected profits. Accumulating hundreds of such positive-EV positions multiplies gains substantially.
The Spread
The gap separating the highest purchase offer (best bid) from the lowest sale offer (best ask) constitutes the spread. Polymarket's active markets typically exhibit spreads ranging from 1 to 3 cents. This parallels the "vig" found in sports betting, though considerably narrower:
- 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 prices totalling near $1.00. Sports betting typically shows implied probabilities summing to 110-115%
Reading the Order Book
The PolyGram order book depth display reveals all outstanding purchase and sale orders across price tiers. This reveals:
- Liquidity: Volume available for trading without substantially shifting market price
- Support/resistance: Price zones containing concentrated orders, forming "walls" that impede price shifts
- Market sentiment: Whether demand or supply dominates at prevailing valuations
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 an indicator of trade quality: A $0.90 position carries no inherent disadvantage versus a $0.10 position — only whether the price accurately captures the true probability matters
- Neglecting the spread: Thinly-traded markets may feature spreads of 5-10 cents, which substantially erodes your profit margin
- Excessive certainty in contrarian views: Before betting against the consensus, consider why thousands of market participants hold a different assessment
Browse real-time odds spanning 1,500+ contracts via PolyGram. Start trading on PolyGram →