0.70 Is Not a Cosmic Truth
A YES price can be read as an implied probability, but liquidity, fees, preferences, and manipulation can move it away from reality.
- Treat price as a conditional market signal
- Use spread, depth, and volume to judge price quality
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- CURRENT0.70 Is Not a Cosmic Truth
A YES price can be read as an implied probability, but liquidity, fees, preferences, and manipulation can move it away from reality.
- NEXTWho Announces That the Future Happened?
Think about these questions first.
Choose an answer before opening the explanation. You can add anything unexpected to your review list.
Q01YES 62 + NO 45 = 107. How can market probability exceed 100%?＋
First check whether both numbers are simultaneous executable quotes for the same size. Two last trades or two asks can exceed 100: the former are asynchronous and the latter include paying two spreads, so neither is one probability distribution.
Q02Why can executable YES and NO asks below 100 create arbitrage?＋
If both can be bought simultaneously, fees are smaller than the gap, and a complete set reliably pays 100, you buy every future for less than 100. Gross edge is 100 minus total cost.
Q03Does a sum above 100 always create reverse arbitrage?＋
Only if both are bids you can actually sell into and you can split 100 collateral into YES + NO: sell the pair for 107 and keep a gross 7. If the numbers are asks, buying both locks in a loss instead.
Q04The same event trades at 64 on one venue and 72 on another. Why can the gap persist?＋
The venues may differ in sources, deadlines, fees, access, and collateral. Even identical contracts involve funding transfers and leg risk, so an eight-point screen gap is not automatically locked profit.
Q05If arbitrage appears, why doesn’t price snap back instantly?＋
Arbitrageurs face capital, depth, gas, approvals, and execution latency. The first unit may earn seven while the hundredth walks through the book; if the second leg fails, a supposedly riskless trade becomes directional exposure.
A YES share redeems 100 at resolution, so a trade at 70 is often read as “the market thinks the event is about 70% likely.” That is useful intuition, but it is an interpretation—not a fact written by the system.
Why price can resemble implied probability
Ignoring fees, funding costs, and personal preferences, a 70% belief gives a YES share an expected payout near 70. Below 70, buying may look attractive; above 70, a trader may prefer NO.
When many people with different information act this way, orders can compress scattered judgments into a price. The market's distinctive feature is that participants put budgets behind those judgments.
The same 0.70 can come from different markets
- Active participants
- 324
- Market depth
- deep
Many participants and a tight spread make it harder for one trader to move the price. It is still not a fact, but it may contain more dispersed information.
Why YES + NO does not always display as 100
“One event happens and the other does not, so the probabilities must sum to 100.” The logic is sound. The usual mistake is treating two screen numbers as the same kind of price.
- Last trades may come from different moments. YES might have traded at 62 now while NO 45 is ten minutes old.
- Midpoints average each side’s bid and ask; nobody has promised to trade at them.
- Asks are what you pay to buy. YES ask 62 plus NO ask 45 means a complete set costs 107; that includes paying two spreads, not a 107% consensus.
- Bids are what you receive when selling. If executable YES and NO bids are 62 and 45, that may support the opposite trade: lock 100, split one set, and sell it for 107.
Choose an action before reading the result
The sum alone is not enough. Decide whether these are asks or bids, then subtract execution friction.
- both quotes execute now for the same quantity
- fees, gas, and slippage are smaller than the gap
- the market guarantees exactly one 100-credit winner
- you can split/merge the set and settlement does not fail
The below-100 loop is intuitive. If YES can be bought at 46 and NO at 47, the pair costs 93 but the complete set returns 100 regardless of the winner—a gross edge of 7. Real execution must subtract fees, gas, slippage, and capital costs, while confirming the contract cannot fall into an invalid outcome.
Above 100 needs direction. If 62 and 45 are both asks, buying the pair costs 107 and returns only 100. If they are sufficiently deep bids, and 100 collateral can be split into YES + NO, selling the pair may produce a gross edge of 7.
Common distortions include:
- Thin liquidity: a small order can move a wide book.
- Risk and preference: someone may pay above expected value to hedge a different exposure.
- Restricted participation: informed people may be unable or unwilling to trade.
- Manipulation and display: a large order can temporarily move the quote when arbitrage is weak.
Inspect spread and depth before the large number
Showing only “YES 70%” creates false certainty. A responsible interface also exposes the best bid and ask, nearby quantity, the size of the last trade, and how long ago the price updated.
Our lab labels the number implied market price, and shows spread, open interest, and scenario state instead of disguising one trade as reality.
Expand: how this step works
displayPrice = lastTrade
?? midpoint(bestBid, bestAsk)
?? bestAvailableQuote
?? 50
Always label the price source. A midpoint with no trade is not a latest trade.
The latest YES trade is 70. Which statement is most accurate?
State passed to the next lesson
We know how to read a price, but reality has not entered the system yet. The final lesson asks who reports the result and how a wrong report can be challenged.