All binary prediction markets contain precisely two possible outcomes, each represented through YES and NO shares. Grasping how these instruments are valued and what their settlement procedures entail forms the cornerstone of effective prediction market participation.
Basic Mechanics
- YES share: Delivers $1 upon the event's occurrence. Valued according to the market's current probability assessment.
- NO share: Delivers $1 should the event fail to occur. Valued at the complement of the YES price.
- YES price + NO price = $1: These two values consistently total $1 (allowing for minor bid-ask spreads)
Consider this scenario: "Will inflation surpass 3% during Q3 2026?" Should YES trade at $0.40, the market suggests a 40% likelihood of inflation exceeding 3%. Correspondingly, NO would trade near $0.60 (reflecting a 60% chance it remains below that threshold).
How to Read Probability from Price
A YES share's market price directly reflects the collective probability assessment:
- YES at $0.90 = 90% likelihood the event materialises
- YES at $0.50 = 50% likelihood (equiprobable outcome)
- YES at $0.10 = 10% likelihood (improbable scenario)
- YES at $0.01 = 1% likelihood (remote but theoretically possible)
Calculating Your Returns
Each share yields a maximum settlement value of $1, irrespective of your acquisition cost:
- Acquire 100 YES shares at $0.30 → outlay $30 → upon YES resolution: collect $100 (gain: $70, yield: 233%)
- Acquire 100 NO shares at $0.70 → outlay $70 → upon NO resolution: collect $100 (gain: $30, yield: 43%)
Underdog YES positions deliver amplified returns but face diminished success odds. Favoured NO positions provide modest gains paired with elevated winning probability.
Selling Before Resolution
Market conclusion need not be your exit point. Should conditions shift favourably, you may liquidate holdings prematurely and realise gains without awaiting final settlement:
- Purchased YES at $0.30, price advances to $0.55 → exit at $0.55 per share, capturing profit immediately
- Trade moving adversely? Mitigate exposure by exiting at prevailing market rates
Multi-Outcome Markets
Markets encompassing multiple possibilities (such as "Which candidate will secure the presidency in 2028?") feature separate YES/NO instruments for each option. You may back any candidate through YES shares — victory by your selection triggers $1 settlement per share held.
FAQ
- What happens to shares when a market resolves?
- Successful shares are credited $1 USDC automatically. Unsuccessful shares forfeit all value. The settlement mechanism operates without requiring participant involvement.
- Can I hold both YES and NO shares in the same market?
- Certainly — such dual positioning serves as a hedge. Participants occasionally maintain both to minimise volatility exposure or capitalise on pricing discrepancies through arbitrage.
- What is the minimum share purchase?
- PolyGram permits share acquisitions beginning at $1 in notional value at prevailing rates. No floor exists on the quantity of shares purchased.