7 min readHow to Read Polymarket Odds: Complete Beginner Guide
New to Polymarket? Understanding how odds work is crucial for profitable trading. Unlike traditional sports betting with complex American odds (-110, +250), Polymarket uses an elegant system: the price equals the probability. A share priced at $0.65 represents a 65% probability. This comprehensive guide explains exactly how to read Polymarket odds, calculate expected profits, convert between odds formats, find value bets, and understand the market mechanics that determine prices. If you're brand new, start with our introduction to Polymarket.
Key Takeaways
- •Price = Probability: A $0.65 share means the market believes there's a 65% chance of YES
- •Payout: Winning shares pay $1.00, losing shares pay $0.00—your ROI depends on entry price
- •YES + NO = $1.00: If YES is $0.65, NO is ~$0.35 (small spread for market maker profits)
- •Value betting: You profit when your probability estimate exceeds the market price
- •Expected Value: EV = (Your Probability × Payout) - (Cost) determines long-term profitability
Table of Contents
- 1. Price = Probability: The Core Concept
- 2. How Profit Works
- 3. YES vs NO Shares Explained
- 4. Understanding Bid-Ask Spread
- 5. Converting Between Odds Formats
- 6. Expected Value (EV) Calculations
- 7. Finding Value Bets
- 8. Multi-Outcome Markets
- 9. Position Sizing with Kelly Criterion
- 10. Liquidity and Slippage
- 11. Real Examples with Calculations
- 12. Common Mistakes
- 13. FAQs
Price = Probability: The Core Concept
Polymarket's pricing system is elegant in its simplicity. Unlike traditional sportsbooks that use confusing American odds (-110, +250) or fractional odds (3/1, 5/2), Polymarket prices directly represent probabilities as cents on the dollar:
Core Principle
$0.65 = 65% probability
If YES shares trade at $0.65, the market collectively believes there's a 65% chance the event happens. YES + NO prices always sum to approximately $1.00 (minus a small spread for liquidity providers).
Why This System Works
The price-equals-probability system works because of how markets resolve:
- YES wins: Every YES share pays $1.00, every NO share pays $0.00
- NO wins: Every NO share pays $1.00, every YES share pays $0.00
- Binary outcome: One side always wins, one always loses
- Zero-sum: What winners gain, losers lose (minus any fees)
If you believe the true probability is higher than the market price, buy YES. If you believe it's lower, buy NO (or sell YES if you own it). This creates a natural arbitrage mechanism that keeps prices aligned with collective probability estimates.
Price Discovery: How Market Prices Form
Market prices emerge from the interaction of buyers and sellers on Polymarket's orderbook:
1. Limit Orders Create the Book
Traders place limit orders at prices they're willing to trade. Buy orders stack below the current price, sell orders stack above.
2. Market Orders Execute Instantly
Market orders match against the best available limit orders. Large market orders move the price by consuming multiple price levels.
3. News Triggers Rebalancing
When news breaks, traders rush to adjust positions. The price moves until it reflects the new consensus probability.
How Profit Works
Your profit on Polymarket is determined by the difference between your purchase price and the final payout. Here's the math:
Profit Formula
Profit = (Payout - Entry Price) × Shares
If YES wins: Payout = $1.00 | If NO wins: Payout = $0.00
ROI by Entry Price
Your return on investment depends entirely on your entry price. Here's a reference table:
| Entry Price | Cost for 100 Shares | If Win (Payout $100) | Profit | ROI % |
|---|---|---|---|---|
| $0.10 | $10 | $100 | $90 | +900% |
| $0.20 | $20 | $100 | $80 | +400% |
| $0.30 | $30 | $100 | $70 | +233% |
| $0.40 | $40 | $100 | $60 | +150% |
| $0.50 | $50 | $100 | $50 | +100% |
| $0.60 | $60 | $100 | $40 | +67% |
| $0.70 | $70 | $100 | $30 | +43% |
| $0.80 | $80 | $100 | $20 | +25% |
| $0.90 | $90 | $100 | $10 | +11% |
| $0.95 | $95 | $100 | $5 | +5% |
Key Insight
Notice how low-probability bets have huge ROI if they hit. A $0.10 share that wins returns 900%. But remember—it only wins 10% of the time (according to the market). The high ROI reflects the risk, not free money.
The Loss Case
If your bet loses, your shares are worth $0.00. You lose your entire investment:
Loss = -100% of Investment
Buy 100 shares at $0.65 ($65 cost) → Market resolves NO → Shares worth $0 → Loss = $65 (100%)
This is why position sizing matters. Even confident bets can lose. Never risk more than you can afford to lose on a single market. We cover portfolio management strategies in a separate guide.
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YES vs NO Shares Explained
Every Polymarket market has two tradeable shares: YES and NO. Understanding how they relate is crucial for identifying the best entry points:
YES Shares
- • Pay $1.00 if event happens
- • Pay $0.00 if event doesn't happen
- • Price = Market's probability estimate
- • Buy when you think probability is higher than price
NO Shares
- • Pay $1.00 if event doesn't happen
- • Pay $0.00 if event happens
- • Price = 1 - YES price (approximately)
- • Buy when you think probability is lower than YES price
YES + NO ≈ $1.00 (The Constraint)
Because one side must win and one must lose, YES and NO prices must approximately sum to $1.00. If YES is at $0.65, NO must be around $0.35. If this relationship breaks, arbitrageurs instantly profit by buying both sides:
Arbitrage Example
Suppose YES = $0.45 and NO = $0.45 (sum = $0.90, should be ~$1.00):
- • Buy 100 YES for $45
- • Buy 100 NO for $45
- • Total cost: $90
- • Guaranteed payout: $100 (one side always wins)
- • Risk-free profit: $10 (11% return)
Arbitrageurs exploit this instantly, pushing prices back to sum of ~$1.00
When to Buy NO vs Sell YES
If you're bearish on an outcome, you have two options:
| Action | When to Use | Pros | Cons |
|---|---|---|---|
| Buy NO | No existing YES position | Simple, one transaction | May have worse spread than selling YES |
| Sell YES | Own YES shares from earlier trade | Lock in gains, reduce exposure | Requires existing position |
In practice, check the spread on both YES and NO before trading. Sometimes buying NO has better liquidity than selling YES, or vice versa.
Understanding Bid-Ask Spread
The bid-ask spread is the difference between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask). This spread represents a real cost to traders:
Spread Example
Best Bid
$0.63
Buyers will pay
Spread
$0.02
2 cents / 3.1%
Best Ask
$0.65
Sellers want
Why Spreads Matter
The spread is an immediate cost when you trade:
- Market buy: You pay the ask price ($0.65)
- Market sell: You receive the bid price ($0.63)
- Instant round-trip cost: Buy at $0.65, immediately sell at $0.63 = $0.02 loss per share (3.1%)
Tight spreads (1 cent) are trader-friendly. Wide spreads (5+ cents) indicate low liquidity and make short-term trading difficult. You can use PolyTrack to monitor market liquidity and find markets with tight spreads.
Limit Orders vs Market Orders
Using limit orders can save you the spread cost:
| Order Type | Execution | Price | Best For |
|---|---|---|---|
| Market Order | Instant | Pay spread | Breaking news, need to exit fast |
| Limit Order | Waits for price | Your specified price | Patient entries, saving on spread |
Converting Between Odds Formats
Coming from sports betting? Here's how Polymarket prices convert to traditional odds formats:
| Polymarket | Implied Prob | American | Decimal | Fractional |
|---|---|---|---|---|
| $0.10 | 10% | +900 | 10.00 | 9/1 |
| $0.20 | 20% | +400 | 5.00 | 4/1 |
| $0.25 | 25% | +300 | 4.00 | 3/1 |
| $0.33 | 33% | +200 | 3.00 | 2/1 |
| $0.50 | 50% | +100 / -100 | 2.00 | 1/1 (Evens) |
| $0.60 | 60% | -150 | 1.67 | 2/3 |
| $0.67 | 67% | -200 | 1.50 | 1/2 |
| $0.75 | 75% | -300 | 1.33 | 1/3 |
| $0.80 | 80% | -400 | 1.25 | 1/4 |
| $0.90 | 90% | -900 | 1.11 | 1/9 |
Conversion Formulas
Polymarket to Decimal
Decimal Odds = 1 / Polymarket Price
Example: $0.40 → 1/0.40 = 2.50
Polymarket to American
If Polymarket price < $0.50:
American = ((1/price) - 1) × 100
If Polymarket price ≥ $0.50:
American = -100 / ((1/price) - 1)
Polymarket to Fractional
Fractional = (1 - price) / price
Example: $0.25 → (1-0.25)/0.25 = 3/1
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Expected Value (EV) Calculations
Expected Value is the most important concept for profitable prediction market trading. EV tells you whether a bet is profitable in the long run, regardless of any single outcome.
EV Formula
EV = (P(win) × Profit if Win) - (P(lose) × Loss if Lose)
Where P(win) is YOUR probability estimate, not the market's
Worked Example
Market: "Will Biden win 2024 election?" Trading at YES = $0.40
You believe the true probability is 55%, not 40%.
EV Calculation
- • Cost: $0.40 per share
- • Profit if win: $1.00 - $0.40 = $0.60 per share
- • Loss if lose: $0.40 per share (total loss)
- • Your P(win): 55% (0.55)
- • Your P(lose): 45% (0.45)
EV = (0.55 × $0.60) - (0.45 × $0.40)
EV = $0.33 - $0.18 = +$0.15 per share
This is a +EV bet! You expect to profit $0.15 per share on average, or +37.5% ROI.
When EV is Negative
Same market at $0.40, but now you think the true probability is only 35%:
EV = (0.35 × $0.60) - (0.65 × $0.40)
EV = $0.21 - $0.26 = -$0.05 per share
Negative EV! The market is overpriced relative to your estimate. Don't bet YES. Consider betting NO instead.
EV Shortcut Formula
For Polymarket, there's a simpler formula:
EV = Your Probability - Market Price
If your P = 55% and market = $0.40 (40%), your edge = 15 cents per share.
Finding Value Bets
A "value bet" is any bet where your probability estimate exceeds the market price. Finding value consistently is how professional traders profit. For advanced value-finding strategies, see our arbitrage strategies guide.
Value Bet Framework
| Your Estimate | Market Price | Edge | Action |
|---|---|---|---|
| 60% | $0.50 | +10% | BUY YES |
| 40% | $0.50 | +10% | BUY NO |
| 50% | $0.50 | 0% | NO EDGE |
| 55% | $0.60 | -5% | PASS / BUY NO |
Sources of Edge
Where can you develop probability estimates better than the market?
1. Domain Expertise
If you're a political scientist, you may have better election models than the market. Doctors may better assess FDA approval odds.
2. Information Speed
If you learn news before others (legally!), you can trade before prices adjust. This is where PolyTrack's whale alerts help.
3. Model Arbitrage
Compare Polymarket to other prediction markets (Kalshi, PredictIt). Discrepancies may indicate mispricing.
4. Whale Following
Successful traders often have an edge. Following their positions can be profitable. See our whale tracking guide.
Multi-Outcome Markets
Not all Polymarket markets are binary YES/NO. Multi-outcome markets (like "Who will win?" with multiple candidates) work slightly differently:
Multi-Outcome Example: GOP Nominee
Key Principle: Prices Sum to $1.00
In multi-outcome markets, all outcomes should sum to approximately $1.00. If they sum to more (like $1.05), there may be arbitrage by buying all outcomes. If they sum to less, there's opportunity to sell all outcomes.
Finding Value in Multi-Outcome Markets
The same EV framework applies. If you think DeSantis has a 25% chance (not 15%), there's value in buying DeSantis at $0.15:
EV = (0.25 × $0.85) - (0.75 × $0.15)
EV = $0.2125 - $0.1125 = +$0.10 per share
+67% expected ROI if your probability estimate is correct.
Position Sizing with Kelly Criterion
Found a +EV bet? How much should you wager? The Kelly Criterion provides a mathematically optimal answer:
Kelly Formula
f* = (p × b - q) / b
Where: p = probability of winning, q = probability of losing (1-p), b = odds (decimal - 1)
Kelly Example
Market at $0.40 (2.5 decimal odds). You estimate 55% probability.
- • p = 0.55
- • q = 0.45
- • b = 2.5 - 1 = 1.5
f* = (0.55 × 1.5 - 0.45) / 1.5
f* = (0.825 - 0.45) / 1.5 = 0.25
Kelly suggests betting 25% of your bankroll. Most traders use "half Kelly" (12.5%) for safety.
Warning: Kelly Requires Accurate Probabilities
Kelly is only optimal if your probability estimates are accurate. Overestimating your edge leads to overbetting and ruin. Most professionals use fractional Kelly (25-50% of the calculated amount) for safety.
Liquidity and Slippage
Liquidity refers to how easily you can buy or sell without moving the price. Low liquidity markets have wide spreads and high slippage.
Understanding Orderbook Depth
The orderbook shows all open orders at different price levels. "Depth" refers to how much volume exists at each price:
Example Orderbook (YES Side)
Slippage Calculation
If you want to buy $10,000 worth of YES shares in the market above:
- First $3,000 fills at $0.65 (best ask)
- Next $7,000 fills at $0.66 (second level)
- Average price: ($3,000 × $0.65 + $7,000 × $0.66) / $10,000 = $0.657
- Slippage: $0.657 - $0.65 = $0.007 (1.1%)
Large orders move the price against you. Always check orderbook depth before placing big trades.
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Real Examples with Calculations
Let's walk through some realistic trading scenarios:
Example 1: Election Market
Scenario: "Will Biden win 2024?" @ $0.42
- Your analysis: Based on polling aggregates and historical patterns, you estimate 48% probability.
- Market probability: 42%
- Your edge: 48% - 42% = +6%
- EV per share: (0.48 × $0.58) - (0.52 × $0.42) = $0.279 - $0.218 = +$0.06
- Decision: Buy YES at $0.42
- Position size (Half Kelly): ~7% of bankroll
Example 2: Sports Market
Scenario: "Chiefs win Super Bowl?" @ $0.25
- Your analysis: Vegas sportsbooks have Chiefs at +350 (22% implied). Polymarket at 25%.
- Comparison: Polymarket HIGHER than Vegas. Possible overpricing.
- Your edge: Likely negative if you trust Vegas odds
- Decision: Pass or buy NO at $0.75 (if you have conviction Vegas is more accurate)
Example 3: Breaking News Trade
Scenario: Fed rate decision market @ $0.35 (before announcement)
- Breaking news: Fed announces rate cut (market was at 35% pre-announcement)
- New probability: 100% (it happened)
- Price move: $0.35 → $1.00
- If you bought at $0.35: Profit = $0.65 per share (186% ROI)
- Key lesson: Speed matters. Using PolyTrack whale alerts can notify you when big traders move on breaking news.
Common Mistakes
Avoid these costly errors that trip up new Polymarket traders:
1. Confusing Price with Value
A $0.10 share isn't "cheap" if the true probability is 5%. The price IS the probability. Cheap means underpriced relative to reality, not low absolute price.
2. Ignoring the Spread
A 5-cent spread means you lose 5% immediately on a round-trip trade. Factor this into your EV calculations. Wide spreads kill profitability.
3. Overbetting Without Kelly
Even +EV bets can cause ruin if sized wrong. A 10% edge doesn't justify betting your entire bankroll. Variance will destroy you.
4. Overconfidence in Probability Estimates
If you think your estimate is 70% and market says 50%, you might be wrong. Markets aggregate many opinions. Be humble.
5. Not Accounting for Resolution Risk
Some markets have ambiguous resolution criteria. Read the rules carefully. A bet can be "right" but resolve against you due to technicalities.
6. Chasing Losses
After a loss, the temptation is to bet bigger to "win it back." This destroys bankrolls. Stick to your sizing rules regardless of recent results.
Frequently Asked Questions
What does a $0.65 share price mean on Polymarket?
How do I convert Polymarket prices to American odds?
What is a "value bet" on Polymarket?
Why do YES and NO prices add up to approximately $1.00?
What is the bid-ask spread and why does it matter?
How do I calculate expected value (EV) for a Polymarket bet?
What is the Kelly Criterion and how do I use it?
How do multi-outcome markets work on Polymarket?
What is slippage and how do I minimize it?
Should I buy YES or NO shares if I'm bearish on an outcome?
What's the difference between limit orders and market orders?
How can I track my Polymarket portfolio performance?
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Whale Tracking Guide
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Portfolio Management
Track and optimize your prediction market positions
Trading Strategies
Proven approaches for consistent profits
Orderbook Explained
Master market microstructure for better execution
Polymarket vs PredictIt
Compare the leading prediction market platforms
Fees Explained
Understand all costs affecting your trades
Summary
Polymarket odds are elegantly simple: price equals probability. A $0.65 share represents 65% probability, paying $1.00 if correct and $0.00 if wrong. To profit consistently, focus on finding positive expected value bets where your probability estimate exceeds the market price. Use the Kelly Criterion for position sizing, understand bid-ask spreads to minimize trading costs, and always account for liquidity and slippage on larger trades.
Ready to apply these concepts? PolyTrack helps you track markets, monitor whale activity, and manage your portfolio for maximum profitability.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Prediction market trading involves significant risk of loss. Past performance does not guarantee future results. Always do your own research and never risk more than you can afford to lose. Polymarket may not be available in all jurisdictions.
Frequently Asked Questions
Prices represent probability. A 70-cent YES share means the market predicts 70% chance of that outcome occurring.
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