Expected Value

On a Binary Market, a YES contract resolves to $1.00 or $0.00. If you buy YES at a Contract Price of $0.55 and estimate the true probability at 65%, the EV calculation is: (0.65 x $0.45) minus (0.35 x $0.55) = $0.2925 minus $0.1925 = $0.10 per contract. That $0.10 represents the expected profit per dollar of exposure. Crucially, this calculation depends entirely on the accuracy of your probability estimate. Overestimating the true probability turns a perceived positive-EV trade into a losing one. This is why Calibration of your probability estimates is inseparable from genuine positive-Edge trading. Platforms like Kalshi and Polymarket publish market prices in cents, making EV calculations straightforward once you have a reliable probability estimate.

Expected value is the mathematical language of Edge: positive EV and positive edge describe the same condition from different angles. A single positive-EV trade can still lose, and a single negative-EV trade can still win, which is why evaluating strategy across a portfolio of trades matters more than any individual result. Kelly Criterion connects EV directly to position sizing, recommending larger stakes when EV is high and edge is clear. Value Betting is the practice of systematically seeking and acting on positive-EV opportunities. Monitoring EV over a large sample using Brier Score or win-rate tracking reveals whether your probability estimates are genuinely better than market Implied Probability or whether perceived edge is illusory.