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

At its core, every prediction market trade hinges on a straightforward expected value calculation. Mastering this framework ensures you approach each position with clarity — you'll understand precisely what success rate you require, the odds needed to reach profitability, and your exact threshold for breaking even.

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 investment should NO resolve 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)

Suppose you commit $100 to YES at $0.40, and you assess the true probability at 55%:

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

How to Use This in Practice

1. Establish your probability conviction BEFORE examining any trade
2. Determine the break-even threshold (which equals the current market price)
3. When your conviction exceeds break-even by a margin wider than the bid-ask spread: this signals a compelling opportunity
4. When your conviction falls below break-even: explore purchasing NO shares as an alternative
5. When your conviction aligns with break-even: pass — the edge isn't sufficient

Position Size Calculator

Applying half-Kelly: 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 total capital)
• Half Kelly: 21% of total capital — though practical limits cap any single position at 5% maximum

FAQ

Is there an automated calculator for prediction market trades?

PolyGram's trading interface displays your anticipated execution price, quantity of shares allocated, and maximum profit at settlement before you confirm. Performing your own EV analysis beforehand remains a prudent practice for trade validation.

How do spreads affect the return calculation?

Modify your entry price upward by incorporating half the spread width. When YES displays bid=0.38 and ask=0.42, your realistic entry point approximates 0.42 rather than 0.40.