Expected value in prediction markets compares your estimated probability with the price to show whether a trade looks favourable on average, not whether it will win.
The Basic Formula
For a YES share, expected value per share is your probability times $1.00, minus the price. A positive number means the price looks low relative to your estimate.
Estimates Drive Everything
Expected value is only as good as your probability. A small error in your estimate can flip the result.
Averages, Not Outcomes
Positive expected value can still lose many times in a row. It only describes the average over many similar decisions.
Worked Example
You estimate a 55% chance and YES costs 48¢. Expected value is 0.55 × $1.00 − $0.48 = $0.07 per share. On 20 shares that is $1.40 on average, yet this single market can still resolve NO and lose $9.60.
Key Takeaways
- EV = your probability × $1 − price.
- Your estimate is the weakest link.
- Positive EV does not mean a win.
- Size positions assuming you might be wrong.