Prediction Markets Lab

Key terms and concepts used throughout the prediction markets workspace.

Implied Probability

The market's estimate of an event's likelihood, derived from the current price. A contract priced at $0.65 implies a 65% probability. Not your model—the market's view.

Spread (Bid-Ask)

The difference between the best bid (highest buy order) and best ask (lowest sell order). Wider spreads indicate higher transaction costs and lower fill quality. Warning shown at >10% spread.

Orderbook Depth / Liquidity

The dollar amount available to trade at or near the current price.

• Kalshi: Sum of top 3 orderbook levels
• Polymarket: Top orderbook level only

Higher depth = lower market impact when trading.

Market Quality Score (MQS)

A tradability overlay that combines spread, liquidity, resolution clarity, and stability into one 0-100 score. It annotates browse results, but the Lab now keeps venue-native browse order by default.

Kalshi: Series / Event / Market

A series groups related contracts, an event holds one decision set inside that series, and a market is the tradable contract leg the workspace prices and sizes.

Polymarket: Event / Market / Outcome

A Polymarket event can contain many child markets or outcomes. The Lab resolves your input first, then opens the canonical market leg it needs for pricing and sizing.

Fee-Adjusted Price

Execution price plus the venue fee charged per contract. This is the true cost basis used when the Lab computes edge. fee_adjusted_price = execution_price + fee_per_contract

Edge

Your informational advantage: the difference between your probability estimate and the fee-adjusted market price. edge = user_probability − fee_adjusted_price
Positive edge = potential profit opportunity.

Kelly Fraction

The full canonical Kelly fraction is the bankroll percentage implied by your edge and the fee-adjusted price. kelly_fraction = edge / (1 − fee_adjusted_price)
The Lab shows half-Kelly as the default recommended path and caps Kelly at 25% of bankroll for safety.

Liquidity Cap

Maximum position size based on available orderbook depth. Default: 50% of available liquidity to minimize market impact. liquidity_cap = available_liquidity × 0.5

Event Risk Snapshot

A plain-language view of Time Pressure, Headline Volatility, and Jump Risk. The technical labels behind those cards are Event Theta, Event Vega, and Event Gamma.

Final Size

The recommended position size after applying all constraints. final_size = min(kelly_size, liquidity_cap)
This is the amount you should consider wagering.

Expected Value (EV)

The average profit or loss you'd expect if you could repeat this trade many times. EV = edge × final_size
Positive EV indicates a statistically favorable trade.

Risk of Ruin

The probability of losing your entire bankroll through a series of trades. High Kelly fractions (>10-25%) dramatically increase risk of ruin. Always consider fractional Kelly for variance reduction.

Fractional Kelly

Betting a fraction of the full Kelly amount (e.g., half-Kelly = 50%).

• Half-Kelly: Recommended default. 50% of Kelly, ~75% of growth, ~50% of variance.
• Quarter-Kelly: Conservative. 25% of Kelly for high uncertainty.

Reduces variance and risk of ruin while sacrificing some growth.

Platform Fees

• Kalshi: Price-dependent profit fee. The effective percentage is highest near 50¢ and lighter at the tails.
• Polymarket: Live YES-token CLOB fee rate. Many current markets read near zero, so the Lab uses the venue probe instead of a blanket platform constant.