Prediction market glossary

A–E

American odds

An odds format using a $100 reference. A negative number is how much you’d stake to win $100; a positive number is how much $100 would win. Convert any price with the odds converter.

Arbitrage

Buying opposite sides of the same outcome across different platforms (or markets) when their prices don’t add up, to lock in a near-risk-free profit. Gaps are usually small and short-lived. See cross-platform arbitrage.

Ask

The lowest price a seller is currently willing to accept for a share. The gap between the ask and the bid is the spread.

Bankroll

The total pool of money you’ve set aside for trading and can afford to lose. Sound bankroll management — risking only a small slice per market — is the first discipline of a lasting trader.

Bid

The highest price a buyer is currently willing to pay for a share.

Binary market

A market with exactly two outcomes — Yes and No — one of which will be true at resolution. The winning side pays $1, the losing side $0. Most prediction markets are binary.

Contract (event contract)

The thing you actually trade: an agreement that pays $1 if a specified event happens and $0 if it doesn’t. In the US these are regulated by the CFTC as derivatives.

Decimal odds

An odds format showing total return per $1 staked, including the stake. 1.56 means $1 returns $1.56 on a win.

F–M

Fractional odds

An odds format showing profit relative to stake. 9/16 means you win $9 for every $16 risked.

Implied probability

The chance of an outcome as suggested by its price. On a prediction market the contract price in cents is the implied probability — a 64¢ Yes share implies a 64% chance.

Kelly criterion

A formula for sizing a position according to your edge and the odds. Most traders use a fractional version for lower volatility. See sizing with Kelly.

Limit order

An order to buy or sell only at a price you specify or better. It may not fill immediately, but you control the price. Contrast with a market order.

Liquidity

How much money is available to trade in a market. High liquidity means tighter spreads and the ability to trade larger size without moving the price.

Maker

A trader who posts an order that rests in the book (adding liquidity), rather than filling an existing one. Some platforms reward makers with a rebate.

Maker rebate

A small payment or fee discount some exchanges give to makers as an incentive to provide liquidity.

Market order

An order to buy or sell immediately at the best available price. Fast and certain to fill, but you accept whatever price the book offers — which matters in thin markets.

N–R

No share

A contract that pays $1 if the event does not happen. Its price plus the Yes price always equals roughly a dollar.

Order book

The live list of all outstanding buy and sell orders at each price. It’s where peer-to-peer trades are matched. We walk through one in how markets work.

Peer-to-peer

Trading directly against other traders rather than against “the house.” Because no bookmaker sets the odds, there’s no built-in margin (vig) and winning accounts aren’t limited.

Position

The shares you currently hold in a market. A position can be closed early by selling, or held to resolution.

Resolution

The moment a market settles, when the outcome is known and contracts pay out — $1 to the winning side, $0 to the losing side. Always read the exact resolution rules before trading.

Resolution source

The agreed authority used to decide the outcome — an official result, a data release, a designated report. Defining it precisely prevents disputes.

ROI

Return on investment: your profit as a percentage of what you staked. The profit calculator computes it for any trade.

S–Z

Scalar (range) market

A market whose payout depends on where a number lands — an inflation rate, a final score. Usually built from a ladder of binary contracts, so the same Yes/No logic applies underneath.

Settlement

The process of paying out a resolved market and crediting winners. On dollar platforms funds land in your account; on crypto platforms, in your wallet.

Share

A single unit of a contract. Buy a share at its cent price, and it’s worth $1 if your side wins, $0 if it loses.

Slippage

The difference between the price you expected and the price you actually got, caused by limited liquidity. Larger orders in thin markets slip more.

Spread

The gap between the best bid and the best ask. A narrow spread signals a liquid, efficient market; a wide one means higher cost to enter and exit.

Stablecoin (USDC)

A cryptocurrency pegged to the US dollar, used to fund crypto-native platforms like Polymarket. One USDC is intended to equal one dollar.

Taker

A trader who fills an existing resting order (removing liquidity), as opposed to a maker who posts one.

Vig (vigorish)

The built-in margin a traditional sportsbook bakes into its odds. Peer-to-peer prediction markets have no vig, which is part of why pricing tends to be tighter.

Volume

The total amount traded in a market, a quick proxy for how active and liquid it is.

Yes share

A contract that pays $1 if the event does happen. Its cent price is the market’s implied probability of Yes.