Understanding Odds & Pricing

Learn how prices work on SolMarkets and what they mean for your trades.

The Basics

On SolMarkets, every market has two sides: YES and NO. Each side has a price between $0.01 and $0.99.

What Prices Mean

Prices roughly reflect the market's belief in probability:

• YES at $0.70 → Market thinks ~70% chance of happening

• NO at $0.30 → Market thinks ~30% chance of NOT happening

Note: YES price + NO price always equals approximately $1.

Why "Approximately"?

Prices are set by a mathematical formula based on the money in the pool, not by simple addition. Due to the parimutuel structure, there can be small variations.

Parimutuel Pricing

SolMarkets uses a parimutuel system - all bets go into a shared pool, and winners split the pot.

How It Works

1. Traders buy YES or NO positions

2. All money goes into one pool

3. Prices adjust based on how much is on each side

4. When resolved, the winning side splits the entire pool

Example

A market has:

• $700 on YES

• $300 on NO

• Total pool: $1,000

If YES wins:

• YES voters split $1,000 (minus fees)

• Each $1 of YES votes gets ~$1.43 (1000/700)

• NO voters get nothing

If NO wins:

• NO voters split $1,000 (minus fees)

• Each $1 of NO votes gets ~$3.33 (1000/300)

• YES voters get nothing

Early Advantage

The earlier you buy on the winning side, the better your price:

• Early buyers get more votes per dollar

• Late buyers push the price higher

• This creates opportunity for those with early insights

Reading the Order Panel

When you enter a trade amount, the quote shows:

Price Per Vote

The average price you'll pay for each vote. If you buy $100 of YES at various prices due to your trade's impact, this shows your blended average.

Votes Received

How many votes you'll own. Each winning vote is worth $1 at resolution.

To Win

Your maximum payout. This is simply: votes × $1

Potential Return

Your profit percentage if you win:

Return = ((To Win - You Pay) / You Pay) × 100%

Price Movement

Prices change constantly based on trading activity:

Price Goes Up When

• More money flows to that side

• Indicates growing confidence

• Higher price = lower potential return

Price Goes Down When

• Less money flows (relatively) to that side

• Indicates declining confidence

• Lower price = higher potential return

Following the Market

Smart traders watch for:

• Overreactions - Price moves too far on news

• Underreactions - Market hasn't priced in information yet

• Mean reversion - Extreme prices often correct

Calculating Expected Value

Professional traders think in expected value (EV):

EV = (Win Probability × Win Amount) - (Lose Probability × Lose Amount)

Example

• You think YES has 80% chance

• YES costs $0.60

• Bet $100, win $166.67 (100/0.60) or lose $100

EV = (0.80 × $66.67) - (0.20 × $100)
EV = $53.33 - $20.00
EV = +$33.33

Positive EV means the trade is profitable in the long run.

When to Trade

Good Entry Points

• Price diverges from your estimated probability

• News breaks that market hasn't priced

• Other traders are overreacting emotionally

Bad Entry Points

• Price matches your probability estimate

• No edge over other traders

• FOMO after big price moves

Risk Management

Position Sizing

• Don't bet more than you can afford to lose

• Diversify across multiple markets

• Keep reserves for new opportunities

Setting Exit Points

• Decide in advance when to take profit

• Know your stop-loss level

• Don't let winners turn into losers

Avoiding Common Mistakes

• Doubling down on losers - Sometimes you're just wrong

• Selling winners too early - Let conviction play out

• Ignoring fees - 1% per trade adds up

---

Next: Market Resolution →