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

Every trade in 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 accuracy rate you require, at what confidence threshold, and which probability thresholds yield profitability.

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 capital if NO resolves instead
• Break-even probability: P (the quoted market price reflects 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)

Consider a $100 position on YES quoted at $0.40, where you assess the true probability at 55%:

• Win amount if YES: $150 (you receive $250 total, having staked $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 assessment BEFORE examining any trade opportunity
2. Determine the break-even threshold (equivalent to the market quote)
3. When your assessment exceeds break-even by a margin wider than the bid-ask spread: compelling opportunity
4. When your assessment falls below break-even: evaluate NO shares as an alternative
5. When your assessment aligns with break-even: pass — insufficient advantage exists

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 — still cap at 5% per position rule

FAQ

Is there an automated calculator for prediction market trades?

PolyGram displays projected execution price, quantity of shares allocated, and maximum profit potential within the order confirmation screen prior to submission. Performing independent EV analysis beforehand remains a prudent step in your decision-making process.

How do spreads affect the return calculation?

Factor the spread into your effective entry price by incorporating half its width. When YES carries a bid of 0.38 and ask of 0.42, your realistic acquisition price approximates 0.42 rather than 0.40.