Expected value
Updated November 10, 2026
Expected value (EV) is average profit per contract if you repeated the same trade many times. On a $1 binary, gross EV ≈ your probability minus price:
EV p c
(before fees and spread).
You estimate 58% chance; yes trades at 51¢. Gross EV ≈ 58% − 51% = +7¢ per $1 contract. On 100 contracts, expected gross profit ≈ $7.00 before fees. On Lumina, the 1¢ exchange fee and 0.35% commission add 1.1785¢ to your entry cost (ceff = 52.1785¢), so EV ≈ +5.8215¢ per contract. Try the EV calculator to include fees for your platform.
- Your estimate
- 58%
- Price of yes
- 51¢
- Expected value per contract
- +7¢
Where the +7¢ comes from
Expected value weighs each outcome by its probability. A yes contract bought at 51¢ has two possible results: it settles at $1 for a 49¢ gain, or at $0 for a 51¢ loss. Weighted by the 58% estimate:
0.58 49¢ 0.42 51¢ 28.42¢ 21.42¢ +7¢
The long form and the short form p − c give the same number, because on a $1 contract the terms reduce to it.
- If it settles yes
- +49¢
- If it settles no
- −51¢
- Average across both, weighted at 58%
- +7¢
No single contract ever pays +7¢. Each one lands on +49¢ or −51¢, and the +7¢ only shows up as an average across many trades like it.
Break-even and the price you actually pay
Set EV = 0 and the formula says the event has to happen more often than the price you pay, read as a percentage. At 51¢ the break-even probability is 51%. At an effective cost of 52.1785¢, it is 52.1785%.
The effective cost includes the spread and fees. If the quote you're looking at is the mid, buying now means paying the ask. On Lumina, fees at a 51¢ price are the $0.01 per-contract exchange fee plus 0.35% of 51¢ (0.1785¢), 1.1785¢ per contract in total, which puts the effective cost at 52.1785¢ before any spread. Statements and confirmations show amounts rounded to the cent. The break-even probability calculator runs this for any price.
What EV can't check
The formula takes your estimate as given. At the same 51¢ price, an estimate of 48% instead of 58% gives:
48 51 −3¢
the same arithmetic with the opposite sign. Nothing in the +7¢ result shows whether the 58% was any good. That is a separate question, answered over many resolved forecasts by measures like calibration and the Brier score.
FAQ
How do you calculate expected value on a prediction market?
Subtract the price from your probability estimate: EV = p − c, in cents per $1 contract. Use what you actually pay, including the spread and fees, as c.
What does positive expected value mean?
That across many repetitions of the same trade, at the same estimate and price, the average result would be positive. Any single contract still settles at $1 or $0.
Is expected value the same as implied probability?
No. Implied probability is the market's number, read from the price. Expected value is the gap between your own estimate and that price.