On this page (6 sections)
Content reviewed: 2026-10-13. Examples are hypothetical.
The Kelly criterion chooses a stake fraction that maximizes expected logarithmic wealth under a specified betting model. Its original justification concerns repeated opportunities and known probabilities; it does not make a single bet safe.[1]
Define the inputs consistently
For a fully funded binary contract, let p be your probability of winning and c the all-in entry cost per $1 payout. If the losing payout is zero, the net odds per dollar risked are b = (1 - c) / c. The unconstrained Kelly stake fraction is:
f = (b × p - (1 - p)) / b = (p - c) / (1 - c)
This is a fraction of bankroll committed as cost, not a fraction of the number of contracts. If it is negative, the calculator allocates zero to buying this outcome. It does not automatically recommend shorting or buying the opposite side.[1]
Work a complete example
For a hypothetical $1,000 bankroll, a 60% estimated probability and a 50-cent all-in cost, full Kelly is (0.60 - 0.50) / 0.50 = 20%, or $200. That buys 400 contracts before any additional costs. Half Kelly allocates $100; quarter Kelly allocates $50.
| Sizing choice | Cost allocated | Whole contracts at $0.50 | Loss if wrong |
|---|---|---|---|
| Full Kelly | $200 | 400 | $200 |
| Half Kelly | $100 | 200 | $100 |
| Quarter Kelly | $50 | 100 | $50 |
The interactive calculator accepts an entry fee per contract and rounds the position down to whole contracts. Use the fee from the provider's order preview. Check final venue rounding before submitting.
Test the probability estimate
At the same 50-cent cost, a 55% probability gives a 10% full-Kelly fraction. At 50%, it gives zero. A five-percentage-point change in the estimate can therefore halve the allocation in this example. The apparent accuracy of the stake calculation should not conceal uncertainty in p.
Fractional Kelly multiplies the model's stake by a chosen fraction. It reduces exposure, but it cannot rescue a negative-edge forecast or account automatically for correlated positions. Evaluate your portfolio as a whole before treating several separate calculations as compatible.
Establish limits outside the formula
The simple model omits withdrawal delays, inability to sell, exceptional settlements and personal cash needs. Keep those constraints outside the calculation and let them reduce or eliminate a position. If trading starts to exceed your planned budget, use platform controls such as deposit limits or trading breaks where available; Kalshi documents both.[2]
Try the calculation
Try the worked example in the Kelly calculator: $1,000 bankroll, 60% probability, a 50-cent contract, zero entered fees and quarter Kelly produce a $50 budget for 100 whole contracts. Change the fee or your probability to see the effect.
References
- J. L. Kelly Jr. A New Interpretation of Information Rate. Bell System Technical Journal 35(4), 917-926, July 1956. DOI: 10.1002/j.1538-7305.1956.tb03809.x.
- Kalshi. Responsible Trading Tools. Accessed October 13, 2026.