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

Every wager placed in a prediction market hinges on a fundamental expected value computation. Mastering these calculations ensures you approach each position with full clarity — you'll understand precisely what win rate you require, at what odds, and whether the numbers 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 initial outlay if NO resolves instead
• Break-even probability: P (the quoted market price represents your break-even threshold)

Worked 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 quoted at $0.40, where you assess the true probability at 55%:

• Payout if YES materialises: $150 (you collect $250 total, having risked $100)
• Forfeiture if NO materialises: -$100
• EV = (0.55 × $150) - (0.45 × $100) = $82.50 - $45 = +$37.50 expected value

How to Use This in Practice

1. Commit your probability assessment to paper BEFORE placing any trade
2. Determine the break-even probability (which equals the market price)
3. Should your estimate exceed break-even by more than the bid-ask spread: a compelling opportunity emerges
4. Should your estimate fall below break-even: examine NO shares as an alternative
5. Should your estimate align closely with break-even: abstain — the edge is insufficient

Position Size Calculator

Employing the half-Kelly approach: f = 0.5 × (bp - q) / b

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

FAQ

Is there an automated calculator for prediction market trades?

PolyGram's trading interface displays projected fill price, quantity of shares allocated, and maximum profit potential prior to order submission. Performing independent EV calculations beforehand remains a prudent analytical practice.

How do spreads affect the return calculation?

Incorporate the spread into your effective entry cost by adding one-half of the spread width. If YES carries a bid of 0.38 and an ask of 0.42, your realistic entry point sits around 0.42 rather than 0.40.