Understanding Prediction Market Odds & Probability

Reading Prediction Market Odds

Unlike sports betting with -110 or +150 odds, prediction markets use simple cent-based pricing that directly shows probability.

Price = Probability

In prediction markets, prices represent implied probability:

Calculating Expected Value

Expected Value (EV) tells you if a trade is profitable long-term:

EV = (Win Probability × Profit) - (Lose Probability × Loss)

Example:

• •Yes contract at 40¢
• •Your estimated probability: 55%
• •Potential profit: 60¢ (if Yes wins)
• •Potential loss: 40¢ (if No wins)

EV = (0.55 × $0.60) - (0.45 × $0.40) = $0.33 - $0.18 = +$0.15

Positive EV = Good trade. Negative EV = Bad trade.

Finding Mispriced Markets

A market is mispriced when:

• •Market price: 40%
• •Your calculated probability: 55%
• •Edge: 15%

This is exactly what Propheta's AI identifies—contracts where the true probability differs significantly from the market price.

The Kelly Criterion

For optimal bet sizing:

Kelly % = (bp - q) / b

Where:

• •b = odds received (profit / stake)
• •p = probability of winning
• •q = probability of losing (1 - p)

Most traders use "fractional Kelly" (25-50% of Kelly) to reduce volatility.

Why This Matters for Propheta Users

When Propheta shows an 85% confidence signal on a 65¢ contract, the AI has identified a 20%+ edge. Our signals always include:

• •Current market price
• •AI confidence level
• •Implied edge
• •Recommended position size