Calculator
Use this calculator when the trade thesis is directional. If your edge comes from believing the contract is priced wrong relative to reality, EV is the first math test the idea should survive.
Market view
Size and friction
Hold-to-resolution model. If you plan to trade out early, check costs separately.
Table of Contents
How expected value works in a binary market
In a binary prediction market, the contract either pays $1.00 or it pays $0.00. That makes EV conceptually straightforward: weigh the net profit if you are right against the net loss if you are wrong, then scale both by your estimated probabilities.
The important operational detail is that EV should be calculated after friction, not before. If you only model the clean payout math, you risk approving trades that are positive on paper but negative once fees and slippage are included.
- Market price gives the implied probability you are buying or fading.
- Your own probability estimate determines whether an edge exists.
- Costs increase the breakeven probability you need to justify the trade.
What to enter in the EV calculator
Use the contract price you expect to pay, not the most optimistic screenshot from the top of the book. Then enter your own fair probability estimate. That estimate is the hardest part of trading and the place where real edge, if any, comes from.
Add fee rate, slippage, and any flat costs conservatively. The discipline here matters because small friction differences can erase the apparent advantage in markets with only a few points of edge.
- 1Estimate your fair win probability before you look for reasons to justify the trade.
- 2Use the likely fill price, not the best theoretical quote.
- 3Model friction with a slightly conservative bias.
- 4Reject trades that are only barely positive under optimistic assumptions.
Worked expected value example
Suppose a contract trades at $0.42, you estimate the event at 56%, and you want to commit $250. Before costs, the idea looks attractive because the market is pricing the event below your estimate. After fees and slippage, the relevant question becomes whether the edge is still wide enough to justify the risk.
The calculator turns that setup into a dollar EV, tells you the breakeven probability, and shows whether your estimate is only slightly above market or meaningfully above market. That prevents the common mistake of treating a weak opinion as a real edge.
- Positive EV does not guarantee the next trade wins.
- Negative EV can still occasionally win, but it is not a good repeated decision.
- The larger the modeled edge, the more room you have for estimation error.
Common expected value mistakes
The biggest mistake is confusing confidence with probability. Traders often say they feel very confident, but they have not converted that feeling into a number that can be compared with the market price.
Another common mistake is using EV to justify any size at all. EV tells you whether the idea is worth considering. It does not tell you how much of your bankroll should be allocated. That is the job of position sizing.
- Using narratives instead of quantified probability estimates
- Ignoring fees or slippage because they look small
- Treating EV as a guarantee instead of a repeated-decision metric
- Skipping sizing discipline after identifying a positive EV trade
First decide whether the trade is worth taking. Then decide how big it should be. Reversing that order is how traders oversize weak ideas.
Sources
These references support the assumptions and workflow guidance on this page. Always verify current platform rules before relying on a calculator preset.
Internal guide explaining how implied probability, true probability, and EV fit together in prediction market trading.
Internal primer on how contract prices translate into implied probability and payout structure.
Frequently Asked Questions
Short, practical answers to the questions readers usually ask after learning how prediction markets price, trade, and settle.