Tick Size

A binary prediction market contract pays $1.00 on YES resolution and $0.00 on NO resolution. With a one-cent tick size, contracts can be quoted at any integer cent value from 1 cent to 99 cents. This means the Price as Probability relationship is expressed in 1-percentage-point increments: a contract at 47 cents implies a 47% probability, and the next valid prices are 46 cents and 48 cents. The one-cent tick is common because it balances granularity against order book complexity. On thicker markets like presidential elections on Kalshi, the one-cent tick allows very precise probability expression. On thinly traded markets, the effective minimum Bid-Ask Spread is often several ticks wide because there is not enough Liquidity to support competition at adjacent price levels.

Tick size determines the finest price increment you can use to gain queue priority in the Order Book. On a Limit Order book with a one-cent tick, improving your price by a single tick guarantees you jump ahead of all same-priced resting orders in the Matching Engine queue. This is the minimum cost of buying queue priority. Tick size also sets a floor on the profitability of market-making: a Liquidity Provider quoting a one-tick Bid-Ask Spread earns one cent per round trip before Trading Fees, and only if that spread is not wider than the fee cost does the strategy work. On Polymarket, where the on-chain CLOB supports sub-cent precision, tick size is effectively smaller, enabling tighter spread competition but also more complex queue dynamics.