How Views Enter the Order Book
Alice, Bob, and Carol hold different beliefs, but only a price and quantity someone will fund can enter the market.
- Separate a subjective belief, a limit price, and a quantity
- Convert BUY NO into a sell order in the YES book
- PREVIOUS100 Credits, Two Futures
- CURRENTHow Views Enter the Order Book
Alice, Bob, and Carol hold different beliefs, but only a price and quantity someone will fund can enter the market.
- NEXTHow Matching Produces a Price
Think about these questions first.
Choose an answer before opening the explanation. You can add anything unexpected to your review list.
Q01If Alice believes 80%, why might she refuse to buy at 80?＋
Eighty is her valuation, not a required payment. She may demand room for model error, capital lockup, and uncertainty, so she might bid only 68 and limit the size.
Q02Why can a thousand YES votes leave the market price unchanged?＋
Opinions do not enter the book automatically. Only funded orders with a price and quantity change executable conditions; votes and forecasts create no counterparty.
Q03The event resolves NO. How could someone who bought YES still profit?＋
They may have bought at 40 and sold at 60 before resolution, realizing a 20-point trading gain. A position can be held to settlement or transferred as information changes; profitable trading is not the same as a correct final forecast.
“I think it will happen” is not yet market information. A view becomes public only when someone is willing to risk a specific quantity at a specific price.
Three people, three possible orders
Alice reads the mission plan and thinks YES is close to 75%. She will buy 3 YES shares at no more than 68. Bob thinks delay risk is high and will buy 2 NO shares at 35. Carol has no strong direction and waits for a cheap quote.
Each participant must choose:
- Direction: YES or NO.
- Limit: the most they will pay per share.
- Quantity: the most exposure they can tolerate if wrong.
Belief chooses the direction, the limit sets the most you will pay, and quantity sets how much a wrong judgment can cost. You are willing to express the view with more quantity.
Belief, quote, and trade are different things
If you believe YES has a 70% chance, you do not have to buy at 70. You might require a safety margin and bid 62, or pay 74 to hedge another risk.
The book sees an affordable, executable intention—not the complete probability inside someone's head. Budget, risk tolerance, and existing positions all shape the quote.
BUY NO becomes a sell in the YES book
Our binary market displays one YES book. Buying NO at a maximum of 35 is equivalent to being willing to sell YES at 65:
BUY NO @ 35becomesSELL YES @ 65
When a BUY YES @ 65 meets it, the two sides sum to 100 and the engine can create one fully collateralized contract.
Expand: how this step works
toYesBook(order):
if order.outcome == YES:
return BID at order.price
else:
return ASK at 100 - order.price
Unfilled orders reserve limit * remaining quantity until cancellation, so the same budget cannot be promised twice.
Someone believes YES has a 70% chance but submits BUY YES @ 62. What is the best interpretation?
State passed to the next lesson
The book now contains funded willingness to buy YES and NO. Next the matching engine decides who meets first and which price becomes the trade.