How to Trade Event Contracts: A Step-by-Step Guide
How to trade event contracts in 5 steps: buy, sell, and calculate profit on binary contracts priced 0-100 cents. Includes 3 worked examples with fee math.
What Event Contracts Are
Event contracts are binary instruments priced between $0.00 and $1.00. Each contract represents a yes/no question about a real-world outcome. "Will inflation exceed 3% in March?" or "Will the Eagles win the Super Bowl?" You buy Yes if you think it happens. You buy No if you think it does not.
If you are right, the contract settles at $1.00. If you are wrong, it settles at $0.00. Your profit is the difference between $1.00 and the price you paid. Your loss is the price you paid. That is the entire mechanic.
The contract price is also the market's implied probability. A contract trading at $0.62 means the market prices the event at 62% likely. If you believe the true probability is higher, you buy. If lower, you sell (or buy the No side). This is the same logic behind expected value betting, just in a different format.
Use the prediction market converter to translate any contract price into American, decimal, or fractional odds. A $0.62 contract equals -163 in American odds or 1.61 in decimal. If you are coming from sportsbook betting, that converter bridges the two formats instantly.
How Buying and Selling Works
Event contracts trade on order books, not against a house. You place orders and other traders fill them. Two order types matter.
Limit orders. You set the price you want to pay. Your order sits on the book until someone takes the other side. If you place a limit buy at $0.58, it fills only when someone is willing to sell at $0.58. You control your price but not your timing.
Market orders. You buy or sell at the best available price right now. Instant execution, but you take whatever price the order book offers. On a thin book, a market order can fill 2-5 cents worse than the displayed price.
The order book has a bid side (buyers) and an ask side (sellers). The bid is the highest price someone will pay. The ask is the lowest price someone will accept. The gap between them is the spread. On liquid contracts like presidential elections, spreads are 1 cent. On niche contracts, spreads widen to 3-5 cents.
Every time you buy a Yes contract, someone else is selling it to you. Every time you sell, someone buys. The contract is a zero-sum instrument between participants. The platform takes a cut through fees or spreads, which is why understanding prediction market fees is non-negotiable before you trade.
Converting Between Contract Prices and Odds
If you have traded sports, you think in American odds. Event contracts use a different language. The conversion is straightforward.
Contract price to implied probability: The price IS the probability. A $0.75 contract implies 75%.
Contract price to American odds:
- If price > $0.50: American odds = -(price / (1 - price)) x 100
- If price < $0.50: American odds = +((1 - price) / price) x 100
Examples across the price spectrum:
| Contract Price | Implied Probability | American Odds | Decimal Odds |
|---|---|---|---|
| $0.20 | 20% | +400 | 5.00 |
| $0.35 | 35% | +186 | 2.86 |
| $0.50 | 50% | +100 / -100 | 2.00 |
| $0.62 | 62% | -163 | 1.61 |
| $0.80 | 80% | -400 | 1.25 |
| $0.90 | 90% | -900 | 1.11 |
A $0.35 contract is equivalent to a +186 sportsbook line. That means the same thing: you risk $35 to profit $65. The math is identical. Only the format differs. The prediction market converter handles every direction of this conversion, including accounting for fees that shift the effective odds.
For a full breakdown of how these odds formats relate, see odds formats explained.
How to Evaluate a Contract Before Buying
The price tells you what the market believes. Your job is to decide whether the market is wrong. Here is the evaluation framework with real numbers.
Step 1: Estimate the true probability. You think a candidate has a 72% chance of winning. The contract trades at $0.62. That is a 10-percentage-point gap between your estimate and the market.
Step 2: Calculate expected value.
- Cost per contract: $0.62
- Profit if Yes: $1.00 - $0.62 = $0.38
- Loss if No: $0.62
Pre-fee EV = (0.72 x $0.38) - (0.28 x $0.62) = $0.2736 - $0.1736 = +$0.10
That is a 16.1% return on your $0.62 risk. Strong edge.
Step 3: Subtract fees. On Kalshi with a 7% winner fee, your profit if Yes drops from $0.38 to $0.38 x 0.93 = $0.3534.
Post-fee EV = (0.72 x $0.3534) - (0.28 x $0.62) = $0.2544 - $0.1736 = +$0.0808
Fees cut your EV by 19%, from $0.10 to $0.08. Still solidly positive. Run this math on every contract using the PM EV calculator. It shows pre-fee and post-fee expected value side by side so you can see exactly how much the platform takes from your edge.
Step 4: Size the position. A 13% post-fee edge (0.0808 / 0.62) at these odds suggests a Kelly fraction of about 13% of bankroll. Use half Kelly (6.5%) to reduce variance. On a $5,000 bankroll, that is $325 in contracts, roughly 524 contracts at $0.62 each. For the full sizing framework, see the Kelly criterion guide.
Worked Example: Trading In and Out of a Position
You do not have to hold every contract to settlement. Selling before resolution lets you capture profit early, cut losses, or free capital for better opportunities. Here is a complete example.
The setup: You buy 200 contracts on Kalshi at $0.62 each. Total cost: $124.00.
The price moves in your favor. News breaks and the contract jumps to $0.78. You decide to sell.
Selling at $0.78: You place a limit sell at $0.78. All 200 contracts fill. Gross revenue: 200 x $0.78 = $156.00.
Profit calculation:
- Revenue: $156.00
- Cost basis: $124.00
- Gross profit: $32.00
- Kalshi fee: Kalshi does not charge the 7% winner fee on secondary market trades. You only pay the bid-ask spread on entry and exit.
- Assuming 1-cent spread cost on each side: 200 x $0.01 x 2 = $4.00
- Net profit: $28.00 (22.6% return on $124.00)
Compare that to holding to settlement. If the contract resolves Yes:
- Revenue: 200 x $1.00 = $200.00
- Gross profit: $76.00
- Kalshi 7% fee: $76.00 x 0.07 = $5.32
- Net profit: $70.68 (57.0% return)
Holding to settlement produces more profit if you are right. But selling at $0.78 locks in $28 of profit with zero settlement risk. If the event later goes the other way, the holder loses $124. The seller already banked the gain. This is the exit flexibility that prediction markets offer and sportsbooks do not.
Worked Example: Same Event on a Sportsbook vs Contract Price
The same event often appears on both a sportsbook and a prediction market. Comparing prices tells you where to route the trade.
The event: Will the Fed raise rates at the June meeting?
Sportsbook odds: Yes at -180 (implied 64.3%). No at +150 (implied 40.0%). Total implied: 104.3%. After stripping the vig, the de-vigged probability for Yes is approximately 61.6%.
Kalshi contract: Yes trades at $0.58 (implied 58%).
The sportsbook's sharp line (after de-vigging) says 61.6%. Kalshi's market says 58%. That is a 3.6-percentage-point gap. If the sportsbook line is efficient, Kalshi's Yes contract is underpriced.
EV of buying Yes on Kalshi at $0.58 (using the sportsbook's de-vigged 61.6% as true probability):
- Pre-fee EV: (0.616 x $0.42) - (0.384 x $0.58) = $0.2587 - $0.2227 = +$0.036
- Post-fee EV (7% Kalshi fee): (0.616 x $0.3906) - (0.384 x $0.58) = $0.2406 - $0.2227 = +$0.018
The net edge is 3.1% after fees. That is thin but positive. Whether you take it depends on your confidence in the sportsbook line as a probability benchmark.
This cross-referencing between platforms is where prediction markets and sportsbooks create value for informed traders. When prices disagree, one side is wrong. For cases where the gap is large enough to bet both sides risk-free, see cross-platform arbitrage.
Platform Mechanics: Kalshi vs Polymarket
The two largest prediction markets operate differently. These differences affect your trading costs and workflow.
Kalshi is CFTC-regulated. You deposit and withdraw in USD via bank transfer. Contracts settle in dollars. Tax reporting comes on a 1099. The fee is approximately 7% of net profit on contracts held to settlement, with no fee on secondary market trades. Minimum contract price increments are $0.01.
Polymarket runs on crypto rails. You deposit USDC on the Polygon blockchain. No explicit trading fees, but you pay the bid-ask spread on every trade plus gas fees on deposits and withdrawals. No automated tax reporting. Deeper liquidity on political and cultural markets.
| Feature | Kalshi | Polymarket |
|---|---|---|
| Currency | USD | USDC (crypto) |
| Regulation | CFTC-regulated | Crypto-based |
| Trading fee | ~7% of profit at settlement | None (spread cost only) |
| Secondary market fee | None | None |
| Tax reporting | 1099 issued | Manual tracking |
| Best liquidity | Economic data, weather | Politics, crypto, culture |
| Minimum deposit | $1 | Gas fees to bridge USDC |
For a deeper platform comparison including worked fee examples at every price point, read the full Kalshi vs Polymarket comparison.
The platform choice affects every trade. A $0.50 contract that costs $0.035 in Kalshi fees costs roughly $0.01-$0.02 in Polymarket spread. Over 100 trades, that difference compounds into real money. Always run both options through the fee calculator before routing your trade.
Live Trading: Buying and Selling During Active Events
Everything above describes pre-event trading: you analyze a contract, buy at your target price, and wait for resolution. But event contracts also trade in real time while outcomes unfold. A Fed press conference, a jobs report release, a playoff game. Prices move as information arrives.
Live trading changes the math in three ways. Spreads widen because market makers pull liquidity during volatile moments. Order book depth thins, meaning large orders move prices more. And the speed of information processing matters more than pre-event research.
Quick example. You hold 150 Yes contracts at $0.55 on a CPI report. The number comes in hot. The contract jumps to $0.78. You sell into the momentum.
- Revenue: 150 x $0.78 = $117.00
- Cost basis: 150 x $0.55 = $82.50
- No settlement fee (secondary market exit on Kalshi)
- Net profit: $34.50 (41.8% return)
Holding to settlement would produce more profit if the contract resolves Yes, but selling at $0.78 captures $34.50 with certainty and frees capital for the next trade.
Live trading is not for everyone. It requires domain expertise, real-time judgment, and strict position sizing. For the full framework, including 4 specific strategies with worked examples, read prediction market live trading.
Fees on Every Trade: What You Actually Pay
Fees are the single biggest factor most new traders ignore. Every contract has a visible price and an invisible cost. The gap between them is your real edge.
On Kalshi, the 7% winner fee shifts your break-even probability. A contract at $0.50 breaks even at 50% without fees. With the 7% fee, break-even shifts to 51.8%. At $0.80, it shifts to 83.5%. The higher the contract price, the more fees eat into thin margins.
On Polymarket, the spread is your fee. A 1-cent spread on a $0.50 contract adds roughly 2% to your cost. A 3-cent spread on a thin market adds 6%. No percentage fee, but the order book determines your real cost.
Both platforms cost money. The question is which costs less for your specific trade. The answer changes depending on contract price, liquidity, and whether you hold to settlement or trade out early.
For the complete fee math, including the 3x rule for filtering trades that survive fee drag, read prediction market fees explained. To understand how these fees compare to traditional sportsbook vig, see the full sportsbook vs prediction market comparison.
Frequently asked questions
- What is an event contract?
- An event contract is a binary financial instrument that pays $1.00 if a specified event occurs and $0.00 if it does not. The contract price represents the market's implied probability. You buy at the current price and profit the difference between $1.00 and your purchase price if correct.
- How much money do I need to start trading event contracts?
- Kalshi has no minimum deposit, and contracts start at $0.01. A practical starting bankroll is $100-$500, which lets you take meaningful positions while managing risk. On Polymarket, you need USDC on Polygon, plus a small amount for gas fees.
- Can I sell an event contract before it settles?
- Yes. Both Kalshi and Polymarket have secondary markets where you can sell contracts at the current market price before the event resolves. This lets you lock in profits, cut losses, or free capital. On Kalshi, secondary market sales are not subject to the 7% settlement fee.
- How do event contract prices relate to sportsbook odds?
- A $0.62 contract equals -163 in American odds or 1.61 in decimal odds. The contract price is the implied probability divided by 100. Use the prediction market converter to translate between formats, including fee adjustments.
- What fees do event contract platforms charge?
- Kalshi charges approximately 7% of net profit on winning contracts held to settlement. Polymarket charges no explicit fee but costs you the bid-ask spread on every trade. The cheaper platform depends on the contract price, liquidity, and your hold time.