Closed vs. Settled

#Definition

Closed vs. Settled refers to the important distinction between two sequential stages in a market's lifecycle:

• Closed: Trading has stopped, positions are frozen, awaiting outcome
• Settled: Outcome determined, payouts distributed, market complete

Many new traders confuse these states, expecting immediate payment when a market "closes." Understanding the difference is crucial for managing expectations and capital.

#The Key Difference

#Closed

What it means: "No more trading allowed"

✅ Trading stopped
❌ Positions frozen (cannot buy/sell)
❌ Outcome NOT yet final
❌ No payouts yet
⏳ Waiting for event and resolution

Example:

Election market closes at 8 PM when polls close
→ You cannot trade anymore
→ But you don't know who won yet
→ No money distributed yet
→ Market is CLOSED but not SETTLED

#Settled

What it means: "Winners paid, market complete"

✅ Outcome officially determined
✅ Winners received $1.00/share
✅ Losers received $0.00
✅ Market permanently complete
🔒 Cannot reopen

Example:

Next morning at 10 AM, race is called
→ Outcome: Biden wins
→ YES shares pay $1.00
→ NO shares worth $0.00
→ Money in your account
→ Market is SETTLED

#Timeline Comparison

#Typical Sequence

Time        Status          Your Shares    Your Money
─────────────────────────────────────────────────────
8:00 PM     CLOSED          Frozen         Locked
8:30 PM     CLOSED          Frozen         Locked
9:00 PM     CLOSED          Frozen         Locked
10:00 PM    RESOLVED        Winners known  Processing
10:15 AM    SETTLED         Redeemed       Available!

#The Gap

The "closed to settled" gap is when:

• You cannot trade
• You don't have your money yet
• Outcome may or may not be known
• You're waiting

Duration varies:

• Sports: 15 minutes to 2 hours
• Elections: 2 hours to 2 days
• Economic data: 1 hour to 1 week
• Contentious outcomes: Days to weeks

#Why Both Stages Exist

#Why Have "Closed"?

Prevents manipulation:

• Can't trade based on insider knowledge of outcome
• No last-second front-running
• Fair for all participants

Allows verification:

• Platform checks multiple sources
• Dispute period for challenges
• Quality control on resolution

Example without "Closed":

Bad scenario: Trading open during vote counting
→ Insiders see results first
→ Trade before public knows
→ Unfair advantage
→ Market integrity destroyed

#Why Delay Until "Settled"?

Verification needed:

• Confirm outcome from official source
• Cross-check multiple data points
• Allow dispute window
• Process payments

Example:

Sports game ends at 9:00 PM
→ Refs reviewing final play
→ Could change outcome
→ Wait for official confirmation
→ THEN settle

#Common Confusion

#Mistake #1: "Closed = Paid"

❌ Wrong thinking: "Market closed, where's my money?"

✅ Correct understanding: "Market closed, now waiting for outcome to be determined and settlement to process"

#Mistake #2: "Outcome Clear = Settled"

❌ Wrong thinking: "Election was called on TV, why isn't market settled?"

✅ Correct understanding: "Platform needs to verify via official source and process payouts"

#Mistake #3: "Resolved = Settled"

❌ Wrong thinking: "Outcome was determined, should have my money now"

✅ Correct understanding: "Outcome determined (resolved), but payouts still processing (not settled until you receive funds)"

#Real-World Examples

#Example 1: Fast Settlement

Sports game:

6:00 PM: Game ends → CLOSED
6:10 PM: Official score confirmed → RESOLVED
6:15 PM: Payouts sent → SETTLED

Gap: 15 minutes (closed to settled)

Why so fast?:

• Clear, objective outcome
• Immediate data source
• Automated settlement
• No disputes expected

#Example 2: Standard Settlement

Presidential election:

Tuesday 8 PM: Polls close → CLOSED
Wednesday 2 AM: Networks call race → RESOLVED
Wednesday 10 AM: Payouts sent → SETTLED

Gap: 14 hours (closed to settled)

Why delay?:

• Wait for official calls
• Verify multiple sources
• Allow dispute window
• Process payouts during business hours

#Example 3: Extended Settlement

Disputed election 2000:

Nov 7: Polls close → CLOSED
Dec 13: Supreme Court decides → RESOLVED
Dec 14: Payouts sent → SETTLED

Gap: 37 days (closed to settled)

Why so long?:

• Outcome genuinely uncertain
• Recounts and court cases
• Platform waited for official determination
• Extraordinary circumstances

#Platform Differences

#Kalshi (Centralized)

Closed:

• Automatic at contract expiry time
• Announced days/weeks in advance
• Precise to the second

Settled:

• Staff verify outcome
• Usually within hours
• Sometimes same day as close
• Email notification sent

Gap: Usually hours, rarely >24 hours

#Polymarket (Decentralized)

Closed:

• Smart contract enforced timestamp
• Or event-triggered (e.g., price hits target)
• Automated, no human intervention

Settled:

• UMA Oracle determines outcome
• 2-hour dispute window
• Users must manually redeem tokens
• Gas fee required

Gap: Minimum 2 hours (dispute window), plus user redemption time

#Manifold Markets (Play Money)

Closed:

• Creator closes manually
• Or automatic at set time
• Very flexible

Settled:

• Often simultaneous with close
• Creator resolves
• Instant Mana distribution
• No separate settlement step

Gap: Often zero (instant settlement)

#Managing the Closed-to-Settled Period

#What You Can Do

During the gap:

✅ Monitor outcome: Watch event unfold ✅ Prepare dispute: Gather evidence if outcome seems wrong ✅ Calculate returns: Estimate profits/losses ✅ Review other markets: Research new opportunities ✅ Plan reinvestment: Decide how to use winnings

#What You Cannot Do

During the gap:

❌ Trade this market: Positions frozen ❌ Withdraw locked funds: Money still tied up ❌ Modify positions: Cannot change your holdings ❌ Transfer shares: Locked until settlement

#Capital Management

Problem: Funds locked during gap

Solutions:

• Keep reserve capital for other opportunities
• Plan around known settlement timelines
• Don't put all capital in markets closing same day
• Accept locked period as cost of trading

Example:

You have $1,000 total
Market A closes Monday, settles Tuesday: $400 locked
Market B closes Tuesday, settles Wednesday: $300 locked
Market C closes Wednesday, settles Thursday: $300 locked

Result: Always have SOME capital locked, but not all
→ Can still trade with remaining funds
→ Staggered exposure

#When Things Go Wrong

#Extended Closed Period

If settlement delayed longer than expected:

Your options:

• Wait patiently (usually it resolves)
• Contact platform support
• File dispute if outcome is wrong
• Accept that complex outcomes take time

Platform's obligation:

• Communicate delays
• Provide updated timelines
• Resolve as quickly as reasonably possible
• Compensate only in extreme cases (rare)

#Incorrect Settlement

If market settles to wrong outcome:

Immediate action:

• Document the error
• File dispute ASAP (time-limited)
• Provide evidence
• Reference resolution rules

Possible outcomes:

• Re-settlement to correct outcome
• Market voided, all refunded
• Dispute rejected, original settlement stands

Example:

Market: "Will Fed raise rates?"
Resolution source: Fed announcement at 2 PM
Platform settles: YES at 2:05 PM

Problem: Fed actually held rates steady (NO)
→ File dispute with screenshot of Fed statement
→ Platform reviews
→ Re-settles to NO
→ Payouts reversed and corrected

#The Psychology of Waiting

#Trader Impatience

Common feelings during closed-to-settled gap:

• "Where's my money?"
• "Why is this taking so long?"
• "Did something go wrong?"
• "I want to trade other markets!"

Managing expectations:

• Know typical settlement timelines before trading
• Read platform FAQs on settlement
• Set realistic expectations
• Use the time productively (research other markets)

#Platform Communication

Good platforms:

✅ Announce expected settlement timeline ✅ Update if delays occur ✅ Notify when settlement completes ✅ Explain any issues clearly

Poor platforms:

❌ No communication ❌ Unexplained delays ❌ Surprise settlements ❌ Silent on problems

#Summary Table

#Best Practices

#For Traders

1. Read market rules: Know expected settlement timeline
2. Don't count on instant payment: Factor in locked period
3. Monitor after close: Watch for settlement notification
4. Verify payouts: Confirm you received correct amount
5. File disputes quickly: Time-sensitive if outcome wrong

#For Platforms

1. Communicate clearly: "Closed" vs. "Settled" in UI
2. Set expectations: Display expected settlement date
3. Notify users: Email when settlement completes
4. Be transparent: Explain any delays
5. Settle promptly: Faster is better (when accurate)

#The Bottom Line

Closed = "Game over, no more bets" Settled = "Dealer pays the winners"

There's always a gap between these states. Understanding and accepting this gap is part of being a successful prediction market trader.