In this guide
Key takeaway: Within prediction markets, a share's market price functions as the probability estimate. When a YES share trades at $0.65, the collective market is pricing in a 65% likelihood that the outcome will occur. Grasping this fundamental relationship between market 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. Fractional odds (5/1), American-style odds (+400), and decimal odds (5.0) do not apply here. Instead, prediction markets employ a more transparent mechanism: share prices function as direct probability indicators.
Price = Probability
Each prediction market contract splits into two opposing positions: YES and NO. The combined prices typically total approximately $1.00 (accounting for a modest spread retained by liquidity providers). The interpretation works as follows:
- YES at $0.72 = Market consensus suggests a 72% probability of occurrence
- NO at $0.28 = Market consensus suggests a 28% probability the event will not occur
- YES at $0.50 = Equiprobable outcome — the market holds no clear bias either direction
- YES at $0.95 = Overwhelming likelihood — merely a 5% chance of non-occurrence
Calculating Your Expected Value
Expected value (EV) serves as the metric for determining whether a position generates long-term profitability. The calculation follows this straightforward formula:
EV = (Your probability x Potential profit) - ((1 - Your probability) x Potential loss)
Suppose a market quotes "Event X" at $0.40 (implying 40%), yet your analysis suggests the genuine probability stands at 55%. Should you purchase YES at $0.40:
- Gain 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 carries expected profitability. Across numerous trades, consistently positive EV accumulates into tangible wealth accumulation.
The Spread
The gap separating the highest purchase offer (bid) from the lowest sale offer (ask) constitutes the spread. On Polymarket, actively traded contracts typically feature spreads ranging from 1-3 cents. This parallels the "vig" found in sports betting yet proves substantially narrower:
- Prediction market spread: 1-3% (functionally equivalent to vig)
- Sports betting vig: 5-15% embedded within quoted odds
- Implied overround: Prediction market YES and NO prices approximate $1.00 total. Sports betting implied probabilities frequently aggregate to 110-115%
Reading the Order Book
The PolyGram order book depth display reveals all outstanding purchase and sale orders across price tiers. This visibility provides:
- Liquidity: The quantity available for purchase or sale whilst maintaining stable pricing
- Support/resistance: Price points where substantial orders accumulate, generating "walls" that impede price shifts
- Market sentiment: Whether current activity skews toward accumulation or distribution 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 advantage or disadvantage versus a $0.10 position — only whether the quoted price accurately reflects genuine probability matters
- Overlooking the spread: Thinly traded markets may exhibit spreads of 5-10 cents, substantially eroding your profit margin
- Excessive conviction: Before betting against market consensus, carefully examine why thousands of participants hold the opposite view
Access live quotations spanning 1,500+ contracts on PolyGram →