A contract trading at 54 cents is a bet that something is less likely than your own number says. Prediction market expected value comes down to one subtraction: your estimated probability minus the price you pay. If you believe 58%, that is four cents per share on paper. The real work is making that 58% defensible. The lesson shows how to document a method, use market prices as inputs without treating them as truth, and avoid multiplying probabilities that are linked. It also separates how well you know the probability from whether the event happens, which is why a sound estimate can still lose and a small uncertainty can flip the sign.
Learning objectives
- Understand the mechanics and assumptions of this technique.
- Reproduce a worked calculation or decision worksheet.
- Identify cases when the evidence supports passing rather than trading.
