The main types of contract
| Market | Example | What settles it | Read closely |
|---|---|---|---|
| Sports | Home team wins tonight | The official result | Overtime, ties, postponements |
| Economic releases | Core CPI 0.3% or higher | The agency's published number | Which line, strike wording, first print |
| Interest rates | Fed holds in December | The FOMC statement | How a move in the range is measured |
| Elections and politics | Candidate wins the state | A named source | Whether a media call or certification counts |
| Weather | City high above 90°F | One named station | The station, the date, the rounding |
| Culture and awards | Film wins best picture | The announcement | The deadline and any tie rule |
| Companies | Revenue above a set figure | The company's filing or report | Which figure, and adjusted or not |
What's listed changes by exchange and by where you live, so check what's available to you. Some markets are limited to adults 21 and over.
The math is the same in all of them
A price in cents reads as a rough probability. A weather contract at 30¢ says the market puts it near 30%, and a Fed contract at 30¢ says the same. Your break-even is that price plus fees.
Take 100 contracts at 30¢ with an estimated 7% × P × (1−P) fee. They cost $30.00 plus a $1.47 fee, so $31.47 in all. They pay $100.00 if the contract settles yes and $0 if it doesn't, so it has to settle yes about 31.5% of the time to break even. That's true whatever the contract is about.
Combos and hedges carry over too. Multiply the legs to get a reference price, whether they're games, data releases or one of each. To hedge, buy the opposite side and look at both outcomes first.
Five questions for any contract
- What exactly settles it? The named source, and the exact number or statement.
- When does it settle? The date, the time, and what happens if the event is delayed.
- What does the wording count? "Above" and "at or above" are different contracts.
- What does it really cost? The price you can actually get, plus fees.
- What happens if it goes wrong? You can lose all of what you paid, so size it with that in mind.
The settlement rules checklist goes through each of these in more detail.
