Spreads and slippage are two hidden costs in prediction markets that affect your real entry price even when no fee is shown.
The Spread
The spread is the gap between the best bid and best ask. Buying and immediately selling would lose roughly that gap.
Slippage
Slippage happens when your order is larger than the shares available at the best price, so part of it fills at worse levels.
Limit Orders
A limit order sets the worst price you accept. It can reduce slippage but may fill only partly or not at all.
Worked Example
YES shows a bid of 60¢ and an ask of 64¢, a 4¢ spread. A trader who buys at 64¢ needs the price to rise past 64¢ just to sell at break-even. Placing a limit bid at 62¢ could improve the entry, but only if a seller accepts it.
Key Takeaways
- The spread is a built-in cost of trading.
- Large orders in thin books suffer slippage.
- Limit orders control price but not execution.
- Include spread and slippage in your estimate of value.