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

Every trade on a prediction market hinges on a fundamental expected value calculation. Mastering this framework ensures you approach each position with clarity — you'll understand precisely what win rate you require, at what threshold your position turns profitable, and the underlying probability assumptions needed to succeed.

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 should NO resolve instead
• Break-even probability: P (the quoted market price doubles as 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)

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

• Payout if YES resolves: $150 (you collect $250 total, having risked $100)
• Payout 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. Before committing capital, establish your probability estimate FIRST
2. Determine the break-even probability (which equals the market price)
3. If your estimate exceeds break-even by a margin larger than the spread: compelling buy opportunity
4. If your estimate falls short of break-even: examine NO shares as an alternative
5. If your estimate aligns with break-even: pass — the edge is insufficient

Position Size Calculator

Using 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 bankroll)
• Half Kelly: 21% of bankroll — nevertheless observe the 5% maximum per trade ceiling

FAQ

Is there an automated calculator for prediction market trades?

PolyGram's trading interface displays projected entry price, quantity of shares allocated, and expected return before you finalise the order. Performing your own EV analysis beforehand remains a prudent discipline.

How do spreads affect the return calculation?

Modify your actual entry price upward by incorporating half the bid-ask spread. Should YES trade with bid=0.38 and ask=0.42, your realistic entry sits closer to 0.42 rather than 0.40.