Glossary
Plain-language definitions of prediction-market terms, A to Z.
40
terms in our glossary
A
B
- Bankroll
- A bankroll is the total amount of money you have set aside specifically for trading or betting activity.
- Bid
- The bid is the highest price a buyer is currently willing to pay for a share in the order book.
- Binary Option / Contract
- A binary contract has only two possible outcomes, YES or NO, and pays exactly $1.00 to holders of the winning side at resolution.
C
- CFTC
- The CFTC is the US Commodity Futures Trading Commission, the federal regulator overseeing certain derivatives and event-contract exchanges.
D
- Dispute Process
- A dispute process lets traders challenge a proposed market outcome before it becomes final, typically through a bond and review period.
E
- Event Contract
- An event contract is a financial instrument whose payout depends on whether a specific real-world event occurs.
- Expected Value
- Expected value is the average outcome of a bet if repeated many times, calculated by weighting each possible payoff by its probability.
F
- Fractional Kelly
- Fractional Kelly is a more conservative approach that bets a fraction, such as half, of what the full Kelly criterion suggests.
G
- Gas Fee
- A gas fee is the cost paid to a blockchain network to process a transaction, separate from any platform trading fee.
H
- Hedging
- Hedging means taking an offsetting position to reduce risk on an existing trade, usually lowering potential loss and potential gain together.
I
- Implied Probability
- Implied probability is the chance of an outcome suggested by a share's price, since prices range from 1¢ to 99¢ and a winning share pays $1.00.
K
- Kelly Criterion
- The Kelly criterion is a formula for sizing bets based on your edge and the odds, aiming to grow a bankroll while limiting ruin risk.
L
- Limit Order
- A limit order is an instruction to buy or sell shares only at a specified price or better, giving control over your entry cost.
- Liquidity
- Liquidity is the amount of buy and sell interest available in a market, which affects how easily you can trade without moving the price.
M
- Maker
- A maker is a trader who places a limit order that rests in the order book, adding liquidity rather than taking it immediately.
- Maker Rebate
- A maker rebate is an incentive some platforms pay to traders who add liquidity, partially offsetting trading costs.
- Market Maker
- A market maker is a trader or firm that regularly places both buy and sell orders to provide liquidity to a market.
- Market Order
- A market order buys or sells immediately at the best available price in the order book, prioritizing speed over price control.
N
- NO Share
- A NO share is a contract that pays $1.00 if the market resolves in the negative and $0 otherwise.
O
- Odds
- Odds express the likelihood of an outcome, often shown as a ratio or fraction, and can be converted to and from implied probability.
- Open Interest
- Open interest is the total value of shares currently outstanding and unresolved in a market at a given moment.
- Oracle
- An oracle is a system or process that feeds real-world data into a blockchain-based market so it can be resolved automatically or by a review process.
- Order Book
- An order book is the live list of buy and sell orders at different prices for a market, showing available liquidity at each level.
- Overround / Vig
- Overround, or vig, is the built-in margin when the prices of all outcomes in a market add up to more than 100%.
P
- Polygon
- Polygon is a blockchain network used by some prediction market platforms to process trades with lower fees than other chains.
- Position Size
- Position size is the amount of money or number of shares committed to a single trade relative to your total bankroll.
- Prediction Market
- A prediction market is a marketplace where traders buy and sell shares tied to the outcome of a future event, with prices reflecting the crowd's estimated...
R
- Resolution
- Resolution is the process of determining and finalizing a market's outcome, after which winning shares pay $1.00 and losing shares pay $0.
- Resolution Source
- A resolution source is the reference, such as an official report or news outlet, that a market uses to decide the final outcome.
S
- Settlement
- Settlement is the final step where winning contracts are paid out and accounts are updated to reflect a market's outcome.
- Slippage
- Slippage is the difference between the price you expected and the price you actually got, usually from moving through the order book.
- Spread
- The spread is the gap between the best bid and best ask, and a narrower spread usually means a more liquid market.
- Stablecoin
- A stablecoin is a cryptocurrency designed to hold a steady value, usually pegged to a fiat currency like the US dollar.
T
- Taker
- A taker is a trader whose order fills immediately against existing orders in the book, removing liquidity.
U
- USDC
- USDC is a US-dollar-pegged stablecoin commonly used to fund accounts and settle trades on prediction market platforms.
V
- Volume
- Volume is the total dollar amount or number of shares traded in a market over a given period, indicating trading activity.
W
- Wallet
- A wallet is the software or hardware tool that stores your crypto assets and keys, used to hold funds for trading on-chain markets.
Y
- YES Share
- A YES share is a contract that pays $1.00 if the market resolves in the affirmative and $0 otherwise.
Prediction market terms A–Z
From implied probability and liquidity to market maker, order book, speculation, hedging, resolution and oracle, this glossary defines the words you'll meet on Polymarket, Kalshi and other event-contract platforms — plus related finance terms like futures contracts, efficient market hypothesis and mark to market.