All binary prediction markets contain precisely two competing outcomes, each represented through YES and NO shares. Grasping their pricing mechanics and settlement procedures forms the cornerstone of effective prediction market participation.
Basic Mechanics
- YES share: Delivers $1 upon event occurrence. Priced according to the market's implicit probability assessment.
- NO share: Delivers $1 should the event fail to materialise. Priced at one minus the YES quotation.
- YES price + NO price = $1: Combined, they invariably equal $1 (subject to minor spreads)
Illustration: "Will inflation surpass 3% during Q3 2026?" Should YES trade at $0.40, the market signals a 40% likelihood of inflation breaching that threshold. NO consequently trades near $0.60 (reflecting a 60% chance it remains subdued).
How to Read Probability from Price
A YES share's price directly reflects the market's embedded probability:
- YES at $0.90 = 90% likelihood the outcome materialises
- YES at $0.50 = 50% likelihood (even odds)
- YES at $0.10 = 10% likelihood (outsider bet)
- YES at $0.01 = 1% likelihood (remote possibility yet feasible)
Calculating Your Returns
Maximum settlement per share stands at $1, irrespective of 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 outsized upside but face lengthier odds. Favoured NO positions yield modest gains paired with stronger win probability.
Selling Before Resolution
Holding through market closure remains optional. Should prices shift favourably, liquidate your holdings early and crystallise gains:
- Purchased YES at $0.30, price climbs to $0.55 → exit immediately at $0.55/share, bypassing final settlement
- Trade moving against your thesis? Unwind at prevailing quotation to curtail drawdown
Multi-Outcome Markets
Markets encompassing three or more possibilities (such as "Which candidate will claim the presidency in 2028?") assign each option its own YES/NO contract pair. You may purchase YES on any alternative — victory by your selection triggers $1 payout per share held.
FAQ
- What happens to shares when a market resolves?
- Victorious shares automatically convert to $1 USDC apiece. Defeated shares forfeit all value. Payout occurs mechanically without user intervention.
- Can I hold both YES and NO shares in the same market?
- Absolutely — termed a hedged position. Participants occasionally maintain both contracts to dampen volatility or secure riskless returns from pricing inefficiencies.
- What is the minimum share purchase?
- PolyGram permits acquisitions commencing at $1 in notional value at prevailing rates. No floor on individual share quantity applies.