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Glossary/Trading & Pricing

Trading & Pricing Glossary

How prices form, how orders fill, and what the numbers on a market mean

12 terms

B1 term

The bid-ask spread is the gap between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask) for an event contract. This gap represents an implicit transaction cost every trader pays when entering or exiting a position.

D1 term

Depth of Market

Depth of market (DOM) is a measure of the volume of buy and sell orders available at various price levels beyond the best bid and ask in an event contract's order book. Greater depth means the market can absorb larger trades without significant price disruption.

I1 term

Implied Probability

Implied probability is the likelihood of an event occurring as expressed by the current market price of a prediction market contract. On binary markets, a contract priced at 65 cents implies a 65% chance the event resolves YES.

L2 terms

The last price is the price at which the most recent trade was executed for a given event contract. It serves as a simple, backward-looking reference point for where the market has been, though it may not reflect the current best available price.

Line shopping is the practice of comparing prices for the same event contract across multiple prediction market platforms to find the most favorable entry price before placing a trade. It is one of the simplest and most reliable ways to improve long-run returns.

M3 terms

Mark-to-market (MTM) is the process of revaluing an open prediction market position at current market prices to calculate unrealized profit or loss. It provides a real-time snapshot of what a position would be worth if closed immediately at the prevailing price.

The market price of an event contract is the current prevailing price at which the contract is being quoted or traded, typically represented as the midpoint between the best bid and best ask on the order book. It reflects the crowd's real-time consensus probability for the event.

The midpoint price is the arithmetic average of the best bid and best ask prices on an event contract, calculated as (best bid + best ask) / 2. It is widely used as a neutral, fee-adjusted estimate of a contract's fair value.

O2 terms

Open interest is the total number of event contract positions that are currently outstanding and have not yet been resolved, closed, or settled. Each unit of open interest represents one buyer and one seller who both still hold their positions.

An order book is the real-time electronic ledger that lists all outstanding buy (bid) and sell (ask) orders for an event contract, organized by price level. It is the central mechanism through which prediction market exchanges match buyers and sellers.

S1 term

Slippage is the difference between the price a trader expects to pay (or receive) for an event contract and the actual price at which the order is filled, caused by insufficient liquidity at the desired price level. It is most common on large orders or in thin markets.

T1 term

Trading volume is the total number of event contracts (or total dollar value of contracts) that change hands during a specified period, typically measured over 24 hours. It is a primary indicator of market activity and liquidity for a prediction market contract.