Most prediction markets are built around two opposite contracts, YES and NO shares. Understanding how they relate to each other is essential before placing your first trade.
Two Sides of One Question
A market asks a single yes-or-no question. YES shares pay $1.00 if the event happens; NO shares pay $1.00 if it does not. You can buy either side depending on which outcome you expect.
How Their Prices Relate
In a well-functioning market, YES and NO prices tend to add up close to $1.00, before fees. If YES trades at 63¢, NO often trades near 37¢. This relationship reflects that exactly one side will pay out.
Buying Either Side
Buying YES is a bet the event happens. Buying NO is a bet it does not. Both are simply different ways to express your view about the same underlying question, and each has the same $1.00 maximum payout per share.
Combining Positions
Some traders hold both YES and NO shares at different times or prices to lock in a partial profit or reduce risk, a strategy related to hedging. This is more advanced but builds on this same YES/NO structure.
Worked Example
You believe an event is unlikely. NO shares trade at 80¢, implying YES is priced around 20¢. You buy 50 NO shares for $40.00 total. If the event does not happen, each NO share pays $1.00, so you receive $50.00, a $10.00 profit. If the event does happen, your NO shares pay $0 and you lose the $40.00.
Key Takeaways
- YES and NO are opposite bets on the same event.
- Their prices roughly sum near $1.00 before fees.
- Only one side pays out $1.00 per share at resolution.
- You can choose either side based on your own view.