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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsA binary prediction-market contract that trades at $0.63 implies a market-implied probability of about 63% before fees and execution effects. That interpretation is only a starting point: the displayed figure may be a bid-ask midpoint or a stale last trade, while the price you can actually buy or sell depends on the order book, available size, fees, contract wording and settlement rules.
This guide explains the arithmetic, how bids and asks create the displayed number, why prices are informative but imperfect forecasts, and how to compare markets without treating an apparent percentage as a guarantee.
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What a prediction-market price represents
Most event contracts are binary. A Yes contract pays $1 if the named event occurs and $0 if it does not. The corresponding No contract pays $1 when the event does not occur and $0 when it does. If a Yes contract changes hands for p dollars, the simple implied probability is p expressed as a percentage.
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The $1 payoff scale
Contracts are usually quoted from $0.01 to $0.99. CME Group describes that scale as matching the market’s view of likelihood: a $0.45 contract represents about 45% on the market’s scale, and the winning side receives $1 at settlement. A buyer who pays $0.45 and wins has a gross gain of $0.55 before fees; a losing contract pays nothing.
Price is a forecast, not a guarantee
Prices aggregate money-backed beliefs from traders who react to news and to one another’s orders. They can still differ from eventual frequencies because participants have different risk preferences, trading costs and information, and because liquidity may be limited. Contract definitions and settlement procedures can also matter more than a small difference in the quoted percentage.
How trades create the number on screen
Traders submit orders to an order book. A bid is the highest price a participant currently offers to pay. An ask is the lowest price at which someone is willing to sell. When compatible orders meet, the venue matches a trade and records its price.
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- Bid: the price you can generally receive when selling immediately, subject to available size.
- Ask: the price you generally pay when buying immediately, subject to available size.
- Midpoint: halfway between the best bid and best ask. It is useful for display but is not normally an executable order.
- Last trade: the price of the most recently matched transaction, which may be old or based on a small trade.
If the best Yes bid is $0.34 and the best ask is $0.40, the midpoint is $0.37, or 37%. A new buyer normally pays $0.40 rather than $0.37, and a new seller normally receives $0.34. The six-cent spread is an immediate execution cost and makes the midpoint a less precise estimate of what a trader can obtain.
Displayed-price rules differ by venue
Polymarket’s Help Center (March 13, 2026) says its displayed probability is normally the midpoint of the bid-ask spread. When that spread is wider than $0.10, it uses the last traded price instead. Consequently, the percentage shown in the interface can switch from a midpoint to a historical trade when liquidity is especially thin.
Kalshi’s binary explanation uses the direct price conversion: a Yes price of p cents implies about p% that the event will happen and about 100−p% that it will not. The University College Dublin School of Economics (2025) describes an additional practical detail: a trader can take the best available Yes or No offer, or post a cheaper limit order that may never fill. Depending on which side is quoted, the interface can show two potential Yes prices—one inferred from a Yes offer and one inferred from a No offer.
Calculating the probability from an executable order
Use the price you can actually trade, not an unlabeled headline number.
- Identify the exact contract and read its resolution rule.
- Record whether the quoted figure is a bid, ask, midpoint or last trade, along with the timestamp.
- For a binary contract, convert dollars to percentage points: $0.63 becomes approximately 63%.
- Account for the spread, order size and fees. A large order may fill across several price levels rather than at the best quote.
- Check the settlement date and the source that determines whether the event occurred.
If you buy Yes at a $0.63 ask and the contract settles Yes, the gross payout is $1 and the gross trading gain is $0.37. If it settles No, the payout is $0 and the $0.63 entry amount is lost, before fees. Selling or buying No requires the same arithmetic from the opposite outcome.
Expected value and the effect of fees
Suppose your own probability estimate is q, the executable Yes price is p, and the all-in fee is f. A simplified expected net return per contract is:
expected net = q × $1 − p − f
This omits taxes and any later trading, but it shows why a screen price alone cannot tell you whether a trade is attractive. If your estimate equals the market-implied probability, the gross expected value is approximately zero before fees; the fee then makes the expected result negative.
A 2025 University College Dublin study records a Kalshi fee formula of $0.07p(1−p) per contract, with the total rounded up to the nearest cent, where p is the price expressed as a decimal probability in the study’s notation. At p=0.63, the unrounded calculation is about $0.0163, which rounds up to $0.02 under that description. Fee schedules can change, so verify the applicable schedule for the venue, account and transaction type before trading.
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Why the midpoint can mislead
Spread and liquidity
A narrow spread usually means buyers and sellers are close together; a wide spread signals uncertainty, thin participation or difficulty exiting. The midpoint of a $0.49 bid and $0.51 ask is a reasonable 50% display, while the midpoint of a $0.20 bid and $0.80 ask is mathematically 50% but not a practical 50% trading opportunity. In the second case, the first immediately executable prices are far from the midpoint.
Order-book depth
The best bid and ask describe only the first available price level. If you want more contracts than are posted there, the remainder may execute at progressively worse prices. Evaluate the quantity available at each level and calculate a volume-weighted average execution price rather than assuming the top quote applies to the whole order.
Stale last trades
A last-trade price can remain unchanged while new information arrives if no one has traded. It is especially weak as a probability proxy when the market has a wide spread or little depth. Always distinguish a live quote from a historical transaction.
Multi-outcome markets require a different check
In a market with mutually exclusive outcomes—such as several candidates, teams or ranges—each outcome has its own contract and price. Read each price as an implied probability, then test whether the listed outcomes are both exhaustive and mutually exclusive.
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| Check | What to do | Why it matters |
|---|---|---|
| Outcome coverage | Confirm that every possible result is represented and that no outcomes overlap. | Missing or overlapping outcomes make a simple probability sum invalid. |
| Price total | Add the comparable executable prices. | A total near 100% is expected only after allowing for spreads, fees and market rules. |
| Normalization | If you rescale prices to total 100%, state the method and whether you used bids, asks or midpoints. | Silent normalization can hide trading costs and distort comparisons. |
For instance, three mutually exclusive contracts priced at 45%, 35% and 18% sum to 98%. That does not automatically mean one price is wrong: the gap can reflect spreads, fees, incomplete coverage or venue-specific mechanics. Conversely, a total far above 100% may reflect buying costs on every outcome rather than a set of probabilities that can all be realized.
What makes a market price informative—and what does not
Information aggregation
When traders with different information place capital at risk, new news can move bids, asks and completed trades quickly. The resulting price is often a useful summary of collective belief, especially in an active, well-defined market.
Risk preferences and incentives
A trader may accept a lower expected return to hedge another position, reduce uncertainty or obtain exposure to an outcome. Prices therefore need not equal a risk-neutral statistical probability. Fees and the cost of tying up capital also change the price at which participants are willing to trade.
Definition and settlement risk
Two contracts that appear to ask the same question may differ in cutoff time, geographic scope, data source, rounding, cancellation rules or treatment of edge cases. The winning side receives $1 only when the contract’s stated resolution rule is satisfied. A probability comparison that ignores those details can compare different events.
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Time to expiry and product type
A 2026 study of 23 million Kalshi sports trades found that calibration changes with time to expiry and product type. Its conclusion is that practical use of prediction-market prices as probability inputs requires conditioning on both variables, rather than applying a single correction to price alone. That finding concerns the studied products and sample; it is not a universal adjustment factor for every market.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Are prediction-market odds accurate?
Accuracy has to be defined. A price can be well calibrated if events priced near 60% occur about 60% of the time across a comparable set, yet any individual 60% event can fail. Calibration also depends on the horizon, product, liquidity and the exact settlement definition.
Use the percentage as a baseline forecast with a confidence level implied by the market, not as certainty. For a live decision, compare the market’s executable price with your own probability estimate and include every cost. For historical evaluation, group many comparable contracts by price range and examine realized frequencies; do not judge calibration from one headline event.
A practical checklist for comparing two markets
- Match the event: verify identical wording, geography, population, threshold and cutoff time.
- Match settlement: identify the official resolution source, publication time, rounding conventions and edge-case rules.
- Use comparable quotes: record bid, ask, midpoint or last trade explicitly rather than mixing them.
- Check depth: note the quantity available at each level and estimate the average price for your intended size.
- Subtract fees: include entry, exit and settlement charges that apply to your account and venue.
- Consider expiry: a 60% price one day before resolution is not directly comparable with a 60% price six months out.
- Check access and jurisdiction: eligibility, product availability and trading hours can differ by location and account type.
- Review calibration evidence: use studies for the same product and horizon; do not transfer a correction from one market to another without evidence.
A worked example from quote to decision
Assume a Yes contract shows a $0.58 bid and $0.64 ask. The displayed midpoint is $0.61, or 61%, but an immediate buyer pays $0.64 and an immediate seller receives $0.58. If your independent estimate is 68%, buying at $0.64 gives a simplified gross expected value of 0.68 × $1 − $0.64 = $0.04 per contract before fees and slippage. If your estimate is 60%, the same calculation is 0.60 − 0.64 = −$0.04 before fees.
Before acting, verify that the contract’s event and resolution source match your estimate, check whether enough contracts are offered at $0.64, and add the venue’s fee. If the order book is thin, the actual average purchase price may exceed $0.64 and eliminate the apparent edge.
Quick Recap
Common mistakes and how to avoid them
- Treating the display as executable: open the order book and use the ask for a purchase or bid for a sale.
- Ignoring the spread: quote both sides when reporting a probability, especially in an illiquid market.
- Forgetting fees: calculate net return, not just the $1 payout minus entry price.
- Comparing unlike contracts: align wording, timing and settlement sources before comparing percentages.
- Assuming a price is a guarantee: a 90% market-implied chance still allows a 10% outcome.
- Applying a universal calibration correction: evidence about one product, sport or expiry horizon may not transfer to another.
- Silently normalizing multi-outcome prices: disclose which quotes you used and how you rescaled them.
Key takeaways
- A binary contract priced at p dollars implies approximately p×100% before fees and execution effects.
- The displayed percentage may be a midpoint or a last trade, not the price available for your order.
- Bid-ask spreads, order-book depth, fees and time to settlement determine the trade’s real economics.
- Contract wording and settlement rules must match before two probabilities can be compared.
- Prediction-market prices are forecasts formed by trading; their calibration varies with product and time to expiry.
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
