All binary prediction markets consist of precisely two possible outcomes, each represented by YES and NO shares. Grasping their pricing mechanics and settlement procedures forms the cornerstone of effective prediction market trading.
Basic Mechanics
- YES share: Delivers $1 upon event occurrence. Trades at whatever the market assesses as the likelihood.
- NO share: Delivers $1 should the event fail to occur. Perpetually valued at the inverse of the YES price.
- YES price + NO price = $1: These two invariably total $1 (roughly, accounting for the bid-ask spread)
Consider this scenario: "Will inflation surpass 3% during Q3 2026?" Should YES trade at $0.40, traders are collectively estimating a 40% likelihood of inflation exceeding 3%. NO consequently trades around $0.60 (reflecting a 60% expectation it remains lower).
How to Read Probability from Price
A YES share's price represents the collective market assessment of probability:
- YES at $0.90 = market believes 90% likelihood the event materialises
- YES at $0.50 = market believes 50% likelihood (even odds)
- YES at $0.10 = market believes 10% likelihood (unlikely prospect)
- YES at $0.01 = market believes 1% likelihood (improbable yet conceivable)
Calculating Your Returns
Each share yields a maximum settlement value of $1, irrespective of your entry price:
- Acquire 100 YES shares at $0.30 → expenditure $30 → upon YES resolution: collect $100 (gain: $70, yield: 233%)
- Acquire 100 NO shares at $0.70 → expenditure $70 → upon NO resolution: collect $100 (gain: $30, yield: 43%)
Underdog YES bets deliver outsized returns but face steeper odds. Favoured NO positions generate modest gains with superior winning probability.
Selling Before Resolution
Market resolution need not be your exit point. Should conditions shift favourably, you may liquidate holdings early and realise profits immediately:
- Purchased YES at $0.30, price climbs to $0.55 → liquidate immediately at $0.55 per share, capturing gains without awaiting final outcome
- Trade moving unfavourably? Reduce exposure by exiting at prevailing market rates
Multi-Outcome Markets
Markets encompassing three or more outcomes (such as "Which candidate will claim the presidency in 2028?") feature separate YES/NO pairs for each option. You may purchase YES on any participant — should your selection prevail, each YES share settles at $1.
FAQ
- What happens to shares when a market resolves?
- Successful shares instantaneously receive $1 USDC each. Unsuccessful shares forfeit all value. The process executes mechanically — no participant intervention needed.
- Can I hold both YES and NO shares in the same market?
- Absolutely — traders refer to this as a hedge strategy. Many employ simultaneous positions across both sides to dampen volatility or capitalise on arbitrage inefficiencies.
- What is the minimum share purchase?
- PolyGram permits purchases beginning at $1 in notional value at prevailing rates. No floor exists on the quantity of shares acquired.