Is this prediction market trade actually positive expected value?
A trade is positive EV when your probability of winning is above the break-even probability after costs. At a $0.42 price with 0.3% fees and 0.25% slippage, break-even is 42.23%, so a 56% estimate is worth $81.96 on a $250 stake.
The calculator turns your probability into dollar EV, EV as a share of stake, and the break-even line your estimate has to clear.
- Best for
- Filtering trade ideas before sizing them
- Primary output
- Expected value after modeled friction
- Use before
- Any directional trade based on edge
Key points
- Turns your probability estimate into dollar EV and EV on stake
- Shows the break-even probability after fees and slippage
- Puts your estimate and the break-even line on one scale
Method and assumptions
How expected value works in a binary market
A binary contract pays $1.00 or nothing. EV weighs the net profit if you are right against the net loss if you are wrong, each multiplied by the probability of that outcome: EV = p × profit − (1 − p) × loss.
Work it out after costs. Fees and slippage lower the profit and raise the loss, which moves the break-even probability above the market price.
- The price is the market’s implied probability
- Your estimate is where any edge comes from
- Costs raise the probability you need to break even
What to enter in the EV calculator
Enter the price you expect to fill at for your size, not the best quote on the screen. Then enter your own probability, set before you look for reasons to take the trade.
Set fees and slippage slightly high. When the edge is a few points, small cost differences decide whether EV is positive.
- Write down your probability before checking the price.
- Use the likely fill price for your size.
- Set fees and slippage slightly conservative.
- Skip trades that are positive only under the best assumptions.
Worked expected value example
A contract trades at $0.42 and you estimate 56%. A $250 stake buys 595.24 contracts. If you are right, they pay $595.24, a net profit of $343.86 after $1.38 of costs. If you are wrong, you lose $251.38.
EV is 0.56 × $343.86 − 0.44 × $251.38 = $81.96, or 32.78% of the stake. Break-even is 42.23%, so your estimate clears it by about 14 points. At 45% the EV would still be positive; at 42% it would turn slightly negative.
- Positive EV does not mean the next trade wins
- Negative EV can win once and still be a bad repeated decision
- A wider edge leaves more room for a wrong estimate
Common expected value mistakes
Confidence is not a probability. Until you can put a number on your view, such as 56%, you cannot compare it with the price.
EV says whether to take a trade, not how big it should be. Size it separately with the Kelly position size calculator.
- Using narratives instead of quantified probability estimates
- Ignoring fees or slippage because they look small
- Treating EV as a guarantee instead of a repeated-decision metric
- Skipping sizing discipline after identifying a positive EV trade
EV first, then size: Reject a trade on EV before you size it. Sizing a weak idea is how small mistakes become large ones.
Sources and assumptions
Frequently asked questions
What does positive EV actually mean?
Across many similar trades, the average result is a profit if your probability estimates are accurate. Any single trade can still lose.
Why does the calculator ask for my own probability instead of using the market probability?
Because the point of EV is to test whether your view differs enough from the market to justify taking the trade.
Can I use this if I plan to sell before resolution?
It models holding to resolution. If you plan to sell early, run the fee calculator as well so the exit leg and its costs are included.
What is a good minimum EV threshold?
It depends on how reliable your estimates are. Many traders skip setups with an edge of only a few points, because estimation error and execution costs can erase it.