The Outcome Market: the event contract, explained
An event contract is one question turned into a tradable thing. The price sits between 0 and 100, it pays a fixed amount if the answer turns out to be yes, and it pays nothing if the answer is no. This desk is about that instrument: the price, the book that matches its two sides, the source that settles it, and the money it can and cannot lose.
- samples
- 10 invented
- contract price
- 62c
- payout at yes
- 1.00
- fee
- maker 0.00
one price, two jobs: the market's chance of yes, and the money at stake. gain on yes 0.38 / 0.62 = 61.3% of the price; loss on no 0.62 / 0.62 = 100% of it.
A contract missing any one of the five has no defined payoff, and a thing with no defined payoff has no price - only a guess about a guess. Four of the five are fixed by the venue; the fifth is the rule that decides where the money goes when the event produces no answer at all.
five fields per contract; on the samples five were fixed in the listing and the tie rule was the one a reader had to look up.
An event contract is a share priced from 0 to 100 that pays a fixed amount - 1.00 on the samples - if a named event resolves yes, and nothing if it resolves no. At a price of 62c a contract pays 1.00 on yes for a 0.38 gain, and loses the 0.62 paid on no, so the price is also the market's probability.
What the samples show
The desk's central artifact is one contract. Its price is 62c; a contract bought at that price pays 1.00 if the event resolves yes and 0.00 if it does not, so the gain on yes is 0.38 and the loss on no is the 0.62 paid. Read as a probability, 62c is 62.0%. That double reading - a price that is also a chance - is the whole product, and everything else on this site is the machinery around it.
Two findings do most of the work. First, the price is a probability rather than an opinion about value: a contract at 62c is only a good or bad buy relative to what the reader thinks the true chance is, and the desk takes no view on that. Second, the loss is bounded by what was paid - there is no margin call, no stake multiplied, and no way to lose more than the price of the contract - which is the property that separates it most cleanly from a spread bet or a leveraged position.
None of the samples describes a real venue, contract, event or person. They are ten invented sets of prices, counts and windows, defined on this page, and every other figure on the site is derived from them.
Ten samples
One price, two payouts.
- price
- 62c
- payout on yes
- 1.00
- gain / loss
- 0.38 / 0.62
The two sides of the price.
- bid / ask
- 60 / 62
- mid
- 61
- spread
- 2c
Who placed and who took.
- fills
- 100
- maker
- 74
- taker
- 26
How 200 contracts settled.
- contracts
- 200
- from the source
- 176
- void and refunded
- 4
The round trip in cents.
- mid
- 61
- spread + fee
- 4c
- share of mid
- 6.6%
100 contracts at 62c.
- at risk
- 62.00
- most to gain
- 38.00
- ratio
- 1.63
Market against book.
- market
- 62.0%
- book implied
- 58.0%
- gap
- 4.0 points
How 500 contracts resolved.
- contracts
- 500
- yes
- 312
- no
- 188
Two further samples are defined on the pages that use them: sample I on leaving a position early, and sample J on the arithmetic of a settled book.
The contract in one table
The clearest place to start is the one thing all four questions about this product come back to: what does the price buy, and what does it risk?
| Outcome | The contract pays | Against 62c paid | Result |
|---|---|---|---|
| Resolves yes | 1.00 | -0.62 | +0.38 |
| Resolves no | 0.00 | -0.62 | -0.62 |
| Read as a probability | 62.0% | - | the price is the chance |