Prediction market
a.k.a. Event contracts, Event market
A market where you trade contracts on whether a future event will happen, priced between $0 and $1 like a live probability.
In a prediction market, each contract pays out a fixed amount, usually $1, if an event happens and nothing if it does not. Will a rate be cut? Will a vote pass? The price reflects how likely the crowd thinks it is.
A contract at $0.35 roughly says "35% chance". If you think the true odds are higher, you buy; lower, you sell. Rules and legal status vary a lot by country, and liquidity can be thin.
Reading the odds
- A "Yes" contract trades at $0.35 and pays $1 if the event happens.
- You buy 100 contracts: 100 × $0.35 = $35.
- If it happens: 100 × $1 = $100, a $65 profit. If not: you lose the $35.
Bottom line: The $0.35 price was the market saying "about a 35% chance".
Treating the market price as the truth. It is the crowd's guess, and crowds can be badly wrong.
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