How do prediction market prices work?
Why a price is also a probability, and what that means for traders.
ExplainerPrice equals probability
On most prediction markets, a contract pays $1 if the outcome happens. So a price of 30 cents implies about a 30% chance. If the outcome happens, the trader receives $1, a gain of 70 cents on each contract.
Yes and no
Every market has two sides. If Yes trades at 30 cents, No trades at about 70 cents. Together they add up to roughly $1, with a small spread between buyers and sellers.
What moves prices
News, data and trading activity. Prices update in real time as traders react.
Spreads and liquidity
The spread is the gap between the best price to buy and the best price to sell. Tighter spreads make it cheaper to trade. Market makers help keep spreads tight.
Rewarding bold calls
The lower the price a trader buys at, the bolder the call. FlowsPredicts Call Points uses this to reward traders for being right, weighted by the odds. See how Call Points works.
