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

Every prediction market trade hinges on a straightforward expected value calculation. Grasping this mathematical foundation ensures you approach each position with clarity — you'll understand precisely what success rate you require, at what odds, and which probability threshold separates profit from loss.

Basic Return Calculation

For a YES share acquired 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 quoted market price represents your break-even threshold)

Examples:

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

Expected Value Formula

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

Consider a $100 position on YES priced at $0.40, where you estimate the true probability at 55%:

• Payout if YES resolves: $150 (you receive $250 total, having invested $100)
• Outcome 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 BEFORE executing any trade
2. Determine the break-even probability (equivalent to the market price)
3. When your estimate exceeds break-even by more than the bid-ask spread: strong buy opportunity
4. When your estimate falls below break-even: evaluate NO shares as the alternative
5. When your estimate aligns with break-even: pass — insufficient edge exists

Position Size Calculator

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

• For a scenario where your p = 0.65, market quotes = 0.40: b = 1.5, q = 0.35
• Full Kelly allocation: (1.5 × 0.65 - 0.35) / 1.5 = 0.42 (42% of total bankroll)
• Half Kelly allocation: 21% of total bankroll — still subject to the 5% per-position maximum rule

FAQ

Is there an automated calculator for prediction market trades?

PolyGram displays projected fill price, quantity of shares allocated, and settlement proceeds within the order confirmation screen prior to submission. Independent EV computation remains essential for thorough pre-execution due diligence.

How do spreads affect the return calculation?

Revise the effective acquisition price by incorporating half the spread width. Should YES display a bid of 0.38 and ask of 0.42, your realistic entry point approximates 0.42 rather than 0.40.