Prediction Market Returns Calculator: How Much Can You Make on Each Trade?

Every trade in a prediction market hinges on a straightforward expected value calculation. Mastering this mathematics ensures you approach each position with full clarity — you understand precisely what accuracy rate you need, at which confidence level, just to reach the break-even point.

Basic Return Calculation

When you purchase a YES share at price P:

• Win return: (1 - P) / P × 100% = your percentage gain should YES occur
• Loss: 100% of your initial investment if NO occurs
• Break-even probability: P (the market price itself represents your break-even threshold)

Examples:

• YES at $0.20: win = +400%, break-even = 20%
• YES at $0.50: win = +100%, break-even = 50%
• YES at $0.75: win = +33%, break-even = 75%
• YES at $0.90: win = +11%, break-even = 90%

Expected Value Formula

EV = (Your probability × Win amount) - ((1 - Your probability) × Stake)

Consider a $100 position on YES priced at $0.40, assuming your own probability estimate is 55%:

• Win amount if YES: $150 (you collect $250 total, having invested $100)
• Loss if NO: -$100
• EV = (0.55 × $150) - (0.45 × $100) = $82.50 - $45 = +$37.50 expected value

How to Use This in Practice

1. Establish your probability estimate BEFORE placing any trade
2. Determine the break-even probability (which equals the market price)
3. When your estimate exceeds break-even by more than the spread width: strong buy opportunity
4. When your estimate falls below break-even: evaluate NO shares as an alternative
5. When your estimate approximates break-even: pass — insufficient advantage exists

Position Size Calculator

Using half-Kelly: f = 0.5 × (bp - q) / b

• For a scenario where your p = 0.65, market = 0.40: b = 1.5, q = 0.35
• Full Kelly: (1.5 × 0.65 - 0.35) / 1.5 = 0.42 (42% of total capital)
• Half Kelly: 21% of total capital — nevertheless enforce a 5% maximum per single position

FAQ

Is there an automated calculator for prediction market trades?

PolyGram displays projected entry price, quantity of shares allocated, and maximum profit potential directly within the trade confirmation screen prior to execution. Conducting your own EV analysis remains beneficial for evaluating opportunities beforehand.

How do spreads affect the return calculation?

Modify your effective purchase price upward by incorporating half the spread width. When YES carries a bid of 0.38 and an ask of 0.42, your realistic entry point approximates 0.42 rather than 0.40.