Prediction Market Contracts: Reading YES and NO Prices

Does a 62-cent price mean 62%? Mostly, yes, and reading a prediction market contract starts there. The lesson shows a YES unit that pays $1 or nothing, so ten units cost $6.20, return $10 on a win and zero on a loss. That price is your break-even probability. If you believe the true chance is 65%, you hold a three-cent margin, and fees, spread and slippage can eat it. You also learn why the last trade and the price you can actually buy at are different numbers, and why the resolution wording matters more than the headline. Beginners get a short routine to run through before putting money on any contract.

Learning objectives

• Interpret an illustrative YES quote and binary settlement.
• Distinguish quoted price from net expected return.
• Identify contract wording, fee and liquidity risks.

1. What the contract actually asks

A binary prediction-market contract is an agreement about a defined event. A YES position typically pays a fixed amount—often $1 per unit—if an event resolves YES, and $0 otherwise. Details vary among platforms. The exact settlement criteria, deadlines, official resolution sources, fee schedule, and jurisdiction matter more than a short market headline.

Worked example: Reading a 62-cent illustration

Suppose a fictional, fee-free contract can be purchased at $0.62 per YES unit and will resolve to either $1 or $0. Buying ten units costs $6.20. A YES resolution produces $10 total settlement proceeds, a $3.80 net profit. A NO resolution returns zero, a $6.20 loss.

Before fees, a 62-cent acquisition price has a 62% break-even probability for holding to final binary settlement. If an independent analysis assigns a true probability of 65%, the expected net profit per unit is 0.65 × $1 − $0.62 = $0.03. But a 3-cent modeled margin can disappear because of fees, spread, slippage, model error, and ambiguity.

3. Last price is not the same as executable price

A market may display a last trade at 62 cents while the cheapest available YES offer is 65 cents. At 65 cents, the same illustrative 65% probability estimate produces zero gross edge, even before fees. Market depth matters: a small quantity may trade at one level and a larger order at worse prices.

4. Read the resolution language

Compare the short title against the full contract. What is the deadline? Does the contract specify an exact government release, league ruling, certification, or named source? What happens after postponement, correction, or a disputed result? Two venues using similar event headlines may settle differently.

5. Guided market-research routine

Read the full rulebook and contract conditions. Identify the binary payout and expiry. Record the executable bid/ask and available quantity, not just the last price. Estimate probabilities independently, with uncertainty bounds. Account for fees and settlement delays. Compare expected value at the worst plausible fill. If the contract text is unclear or evidence is weak, treat the correct analytical conclusion as 'unresolved' rather than force a forecast.

Practice

Question: Ten fictional YES units cost 62 cents each and resolve YES at $1. What's net profit before fees? Answer: $3.80.

Question: Your estimated probability is 65%, but the executable ask is 65 cents. Is there gross expected value at that probability? Answer: Zero before fees and model uncertainty.

Recap

1. A YES contract pays a fixed amount, often $1, if the event resolves YES and $0 otherwise, so the exact resolution rules matter more than the headline.
2. A displayed price of $0.62 breaks even at 62%, not a forecast: ten units cost $6.20, return $10 on YES for $3.80 of profit, and lose the $6.20 on NO.
3. The last trade is not the executable ask; at a 65-cent ask a 65% estimate has zero gross edge before fees, so record bid, ask and size and call unclear contracts unresolved.

Frequently asked questions

How do prediction market contracts work?

A binary contract is an agreement about a defined event. A YES unit typically pays a fixed amount, often $1, if the event resolves YES and $0 otherwise. Details vary by platform, so read the settlement criteria, deadline, resolution source and fee schedule before looking at the price.

What does a 62-cent YES price mean?

It implies a 62% break-even probability if you hold to final settlement, before fees. Ten units cost $6.20, return $10 on YES for $3.80 profit, and lose $6.20 on NO. It is a price you pay, not a forecast of what will happen.

What is the difference between last price and ask price in a prediction market?

The last price is where the previous trade happened. The ask is the cheapest offer available to buy. In the lesson, a 62-cent last trade with a 65-cent ask leaves a 65% estimate with zero gross edge. Check depth too, since larger orders may fill at worse prices.

Why does contract wording matter in prediction markets?

Two venues with similar headlines can settle differently. Check the deadline, the named source, and what happens after a postponement, correction or disputed result. If the text is unclear or evidence is weak, the lesson says the right conclusion is unresolved. Availability also varies by state.

Related lessons

• Prediction Market Backtesting and Automated Research
• Prediction Market Fair Probability and EV Estimates
• Prediction Market Order Book: Spread and Slippage
• Sharp Markets primer — prediction markets 101

Sources and further reading

• CFTC: Learn and Protect
• About Sharp App: who builds these lessons and how the tools work.

Try it in the Prediction markets screen. Examples in this lesson are fictional, built to show the method. Work the numbers by hand first, then repeat the same steps on a real board. You can also read how Prediction Markets works on the Sharp App site.

Questions? Ask ARBAI about this lesson · Ask our Sharps in Discord →

Sharp App surfaces +EV opportunities from public sportsbook data. 21+ where legal. Betting carries risk, so only stake what you can afford to lose. If betting stops being fun, call 1-800-GAMBLER or visit ncpgambling.org. More at Sharp App responsible gaming.