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

Every trade executed in a prediction market hinges on a fundamental expected value assessment. Grasping these mathematical principles ensures you approach each position with full clarity—you understand precisely what success rate you require, at which probability threshold, and whether the odds justify your capital commitment.

Basic Return Calculation

When you acquire a YES share at price P:

• Win return: (1 - P) / P × 100% = your percentage gain should YES resolve affirmatively
• Loss: 100% of your capital at risk if NO resolves instead
• Break-even probability: P (the prevailing market price itself represents your break-even threshold)

Illustrative scenarios:

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

Expected Value Formula

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

Suppose you commit $100 to a YES position priced at $0.40, and your internal probability assessment stands at 55%:

• Proceeds if YES resolves: $150 (you receive $250 total, having invested $100)
• Forfeiture if NO resolves: -$100
• EV = (0.55 × $150) - (0.45 × $100) = $82.50 - $45 = +$37.50 expected value

How to Use This in Practice

1. Document your probability assessment PRIOR to executing any trade
2. Determine the break-even threshold (equivalent to the quoted market price)
3. When your estimate exceeds break-even by more than the prevailing spread: compelling buy opportunity
4. When your estimate falls below break-even: evaluate NO shares as an alternative
5. When your estimate approximates break-even: abstain — insufficient margin of safety

Position Size Calculator

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

• Consider a scenario where your p = 0.65, market consensus = 0.40: b = 1.5, q = 0.35
• Full Kelly allocation: (1.5 × 0.65 - 0.35) / 1.5 = 0.42 (42% of total capital)
• Half Kelly allocation: 21% of total capital — nevertheless observe the 5% per-position ceiling

FAQ

Is there an automated calculator for prediction market trades?

PolyGram's trading interface displays projected settlement price, quantity of shares allocated, and terminal payout prior to order submission. Independent EV computation remains instrumental for thorough pre-execution due diligence.

How do spreads affect the return calculation?

Modify your entry price estimate by incorporating half the bid-ask spread. Should YES trade with bid=0.38 and ask=0.42, your realistic entry approximates 0.42 rather than the midpoint of 0.40.