Every binary prediction market contains precisely two possible outcomes, each represented through YES and NO shares. Grasping their pricing mechanisms and settlement procedures forms the cornerstone of effective prediction market participation.
Basic Mechanics
- YES share: Delivers $1 upon event occurrence. Valued according to the market's current probability assessment.
- NO share: Delivers $1 should the event fail to occur. Priced at one minus the corresponding YES valuation.
- YES price + NO price = $1: Combined value consistently equals $1 (with minor adjustments for bid-ask spreads)
Illustration: "Will inflation breach 3% during Q3 2026?" Suppose YES trades at $0.40; this signals the market assigns a 40% likelihood to inflation surpassing 3%. NO consequently trades near $0.60, reflecting a 60% probability it remains subdued.
How to Read Probability from Price
A YES share's price directly reflects the market's probability assessment:
- YES at $0.90 = 90% likelihood the event materialises
- YES at $0.50 = 50% likelihood (even odds)
- YES at $0.10 = 10% likelihood (improbable outcome)
- YES at $0.01 = 1% likelihood (remote but theoretically possible)
Calculating Your Returns
Maximum settlement per share stands at $1, irrespective of acquisition cost:
- Acquire 100 YES shares at $0.30 → outlay $30 → should YES resolve true: collect $100 (gain: $70, yield: 233%)
- Acquire 100 NO shares at $0.70 → outlay $70 → should NO resolve true: collect $100 (gain: $30, yield: 43%)
Underdog YES positions deliver amplified returns but face slimmer odds. Heavily-favoured NO positions yield modest gains paired with elevated success probability.
Selling Before Resolution
Holding until final settlement isn't mandatory. Should market sentiment shift favourably, exit positions early and realise profits immediately:
- Purchased YES at $0.30, market shifted to $0.55 → liquidate at $0.55/share, capturing gains without awaiting conclusion
- Trade moving unfavourably? Mitigate damage by exiting at prevailing market rates
Multi-Outcome Markets
Markets spanning multiple outcomes (such as "Which candidate will secure the presidency in 2028?") feature separate YES/NO pairs for each option. You may purchase YES on any contender — victory for your selection triggers $1 per share payout.
FAQ
- What happens to shares when a market resolves?
- Successful shares instantly convert to $1 USDC each. Unsuccessful shares forfeit value entirely. Payout occurs mechanically — participant intervention unnecessary.
- Can I hold both YES and NO shares in the same market?
- Absolutely — termed a hedge strategy. Traders frequently employ both positions to dampen volatility or capitalise on arbitrage inefficiencies with assured returns.
- What is the minimum share purchase?
- PolyGram permits acquisitions starting at $1 in current market value. No floor exists regarding absolute share quantity.