SINGLE-EVENT LONG (YES OR NO)
Overview
The foundation of prediction market trading. Buy a Yes contract when you believe the market's implied probability is too low. Buy a No contract when you believe it's too high. Maximum loss is your entry cost; maximum gain is $1.00 minus your entry cost.
Setup
- 1.Identify a contract where your probability estimate differs meaningfully from the market price (>10% gap).
- 2.Verify you understand the exact resolution criteria — read the fine print.
- 3.Check liquidity: ensure spread is <5 cents and volume is >500 contracts.
- 4.Determine position size based on your edge and confidence (use half-Kelly for conservative sizing).
- 5.Place a limit order at your desired price — avoid market orders in all but the most liquid contracts.
- 6.Set a mental exit price: if the contract reaches 85%+ Yes and you bought at 45%, consider exiting early.
Max profit
$1.00 minus your entry price, per contract (e.g., buy Yes at $0.40 → max profit $0.60 per contract).
Max loss
Your entry price per contract (e.g., $0.40 per Yes contract, $0.60 per No contract).
Breakeven
Your entry price. The contract must resolve in your favor to profit.
When to use
When you have a well-researched probability estimate that diverges from the market price by at least 10 percentage points. Best on liquid contracts (Fed decisions, major economic data, broad financial market outcomes).
When to avoid
On illiquid contracts with wide spreads. When you can't articulate specifically why the market price is wrong. On contracts resolving more than 6 months out (thin liquidity, large uncertainty).