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 is pricing in a 65% likelihood that the event will occur. Grasping this fundamental relationship between price and probability underpins all successful market participation.
Coming from traditional sports wagering, prediction market odds operate quite differently. You won't encounter fractional odds (5/1), American-style odds (+400), or decimal odds (5.0). Instead, prediction markets employ a more intuitive framework: share prices serve as direct proxies for implied probability.
Price = Probability
Each prediction market contract splits into two opposing positions: YES and NO. Their prices consistently total roughly $1.00 (accounting for a modest spread retained by the market maker). Here's the interpretation:
- YES at $0.72 = Market assigns 72% likelihood to occurrence
- NO at $0.28 = Market assigns 28% likelihood to non-occurrence
- YES at $0.50 = Perfect uncertainty — market shows no preference either direction
- YES at $0.95 = Overwhelming consensus — only 5% probability of the opposite outcome
Calculating Your Expected Value
Expected value (EV) reveals whether a given trade generates profits over time. The calculation follows this framework:
EV = (Your probability x Potential profit) - ((1 - Your probability) x Potential loss)
Consider this scenario: "Event X" trades at $0.40 (40% implied), yet your analysis suggests 55% is more accurate. Purchasing 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 a mathematically sound trade. Across numerous transactions, positive EV accumulates into tangible wealth growth.
The Spread
The gap separating the highest purchase offer from the lowest sale offer constitutes the spread. Polymarket's actively traded contracts typically feature 1-3 cent spreads. This mirrors sports betting's "vig" but operates at substantially lower cost:
- Prediction market spread: 1-3% (functionally equivalent to vig)
- Sports betting vig: 5-15% embedded within the quoted odds
- Probability overround: Prediction markets see YES + NO sum near $1.00. Sports betting typically inflates this to 110-115%
Reading the Order Book
The PolyGram order book depth display reveals all outstanding bids and asks across price tiers. This information communicates:
- Liquidity: The volume available for purchase or sale without materially shifting the price
- Support/resistance: Price zones where substantial orders accumulate, generating "walls" that inhibit price swings
- Market sentiment: Whether buying or selling pressure dominates 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 an indicator of bet quality: A $0.90 contract isn't automatically inferior to a $0.10 contract — only whether the price accurately reflects true likelihood matters
- Overlooking the spread: Thinly traded markets may exhibit 5-10 cent spreads, substantially eroding your mathematical advantage
- Excessive conviction: Before assuming the market has mispriced an outcome, consider why thousands of competing traders hold a different view
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