In this guide
Key takeaway: Within prediction markets, share pricing functions as a direct measure of likelihood. When a YES share trades at $0.65, this signals that participants collectively assess a 65% probability of the outcome occurring. Grasping this relationship between market price and implied likelihood forms the cornerstone of successful market participation.
Should you arrive from the sports betting world, prediction market odds operate quite differently. Fractional odds (5/1), American odds (+400), and decimal odds (5.0) do not exist here. Instead, prediction markets employ a straightforward approach: the share price itself embodies the implied probability directly.
Price = Probability
Each prediction market contract splits into two opposing positions: YES and NO. These prices consistently total roughly $1.00 (accounting for a modest margin retained by the market operator). Decoding them follows this pattern:
- YES at $0.72 = Participants believe there is a 72% likelihood the outcome materialises
- NO at $0.28 = Participants believe there is a 28% likelihood the outcome does not materialise
- YES at $0.50 = Even odds — the market shows no clear preference either direction
- YES at $0.95 = Overwhelming consensus — merely a 5% probability of the opposite outcome
Calculating Your Expected Value
Expected value (EV) reveals whether a given position generates profit over repeated attempts. The calculation is straightforward:
EV = (Your probability x Potential profit) - ((1 - Your probability) x Potential loss)
Illustration: A market quotes "Event X" at $0.40 (representing 40%), yet your assessment suggests the genuine probability sits at 55%. Should you acquire YES at $0.40:
- Maximum gain if YES wins: $1.00 - $0.40 = $0.60
- Maximum loss if NO wins: $0.40
- EV = (0.55 x $0.60) - (0.45 x $0.40) = $0.33 - $0.18 = +$0.15 per share
When EV turns positive, the position holds favourable odds statistically. Accumulating many such positive-EV positions yields measurable gains through compounding.
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 resembles the "vig" familiar to sports bettors, though substantially tighter:
- Prediction market spread: 1-3% (functionally equivalent to vig)
- Sports betting vig: 5-15% embedded within the quoted odds
- Implied overround: Prediction markets see YES + NO prices converge near $1.00. Sports betting odds frequently generate implied probabilities totalling 110-115%
Reading the Order Book
The PolyGram order book depth chart displays all outstanding purchase and sale orders at every price tier. This information reveals:
- Liquidity: The volume available for trading before prices shift materially
- Support/resistance: Price zones where substantial orders accumulate, forming barriers against rapid movement
- Market sentiment: Whether demand or supply dominates at present 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
- Equating price with trade quality: A $0.90 position carries no inherent disadvantage versus a $0.10 position — only whether the quoted price accurately reflects true odds matters
- Overlooking the spread: Thin markets sometimes feature spreads of 5-10 cents, potentially eroding your statistical advantage
- Excessive confidence: When you believe the market has mispriced something, consider why tens of thousands of participants hold a different view
Browse current odds spanning 1,500+ markets via PolyGram. Begin trading on PolyGram →