Long Position

#Definition

A long position is a trading stance that profits when a predicted event occurs. In prediction markets, going long means you believe an outcome is more likely than the market implies and want to profit when it happens.

Going long is the most intuitive form of prediction market trading: you buy Yes shares, and if the event occurs, each share pays $1. The difference between your purchase price and$1 is your profit.

#Why It Matters in Prediction Markets

Long positions are the foundation of prediction market participation:

Expressing bullish views

When you believe an outcome is underpriced, going long is how you profit from your conviction. If you think an event is 70% likely but priced at 50%, buying Yes captures that edge.

Supporting price discovery

Long buyers push prices up toward fair value when markets underestimate probabilities. This buying pressure is essential for accurate price discovery.

Simple execution

Going long requires only buying an asset; no complex mechanics, borrowing, or multi-step processes. This simplicity makes long positions accessible to all traders.

Limited downside

Your maximum loss is what you paid. Unlike some financial instruments where losses can exceed investment, long prediction market positions have bounded risk.

#How It Works

#Basic Mechanics

Purchase: Buy Yes at $0.60
Maximum investment: $0.60 per share
Maximum loss: $0.60 per share (if event doesn't happen)
Maximum profit: $0.40 per share (if event happens, shares pay $1)

#Numerical Example

A market asks "Will inflation exceed 4% in Q1?"

• Yes: $0.45 (45% implied probability)
• No: $0.55

Your analysis: Recent data suggests inflation is accelerating. True probability is ~60%.

Long position: Buy 500 Yes shares at $0.45 =$225 invested

Outcome A: Inflation exceeds 4% (Yes wins)

Payout: 500 × $1 = $500
Profit: $500 - $225 = $275
Return: 122%

Outcome B: Inflation under 4% (No wins)

Payout: 500 × $0 = $0
Loss: $225
Return: -100%

Expected value (if your 60% estimate is correct):

EV = (0.60 × $275) - (0.40 × $225) = $165 - $90 = $75 expected profit

#Risk-Return Profile

Higher-priced longs have less upside but lose less when wrong. Lower-priced longs have more upside but higher loss amounts.

#Examples

#Example 1: Undervalued Candidate

A candidate trades at $0.35 (35% implied) but your polling analysis suggests 50% true probability.

Long strategy: Buy Yes at $0.35

• If candidate wins: $0.65 profit per share (186% return)
• If candidate loses: $0.35 loss per share
• Expected value: (0.50 × $0.65) - (0.50 ×$0.35) = $0.15 per share

#Example 2: Event Timing

A market asks "Will merger close by June 30?" Price: $0.55

Regulatory filings suggest approval is nearly certain, just a matter of timing. You believe 75% probability of June closure.

Long strategy: Buy Yes at $0.55

• If merger closes by June: $0.45 profit
• If delayed past June: $0.55 loss
• 75% probability × 20% edge = strong expected value

#Example 3: Momentum Confirmation

A market on economic growth has risen from $0.30 to$0.50 as data improved. New jobs report continues the trend.

Long strategy: Add to long position, expecting continued momentum to $0.65+

• Risk: Buying into strength means higher entry price
• Reward: Strong trend may continue

#Example 4: Small Position in Longshot

"Will underdog win championship?" trades at $0.08. Your analysis: True probability is 12%.

Long strategy: Small position in Yes

• 92% chance of losing $0.08
• 8% chance of gaining $0.92
• Expected value: (0.12 × $0.92) - (0.88 ×$0.08) = $0.11 -$0.07 = $0.04 per share

Even small edges on longshots can be valuable due to high payoff ratios.

#Risks and Common Mistakes

Overpaying for certainty

As events become more likely, prices approach $1. Buying at$0.95 offers only 5% upside but risks 95% downside. High-probability events often don't justify long positions.

Confirmation bias

It's tempting to go long on outcomes you want to happen. Separate your desires from your probability estimates. The market doesn't care what you prefer.

Ignoring opportunity cost

Capital in a long position is locked until resolution. A $0.50 position might take months to pay$1. Compare the annualized return to alternatives.

Failing to reassess

New information should update your view. If your thesis breaks, exit; don't hold hoping for recovery.

Oversizing on conviction

Strong conviction doesn't justify bet-the-farm sizing. Even 80% probability events fail 20% of the time. Use proper risk management.

#Practical Tips

• Calculate your edge before buying: Know the probability you assign versus the market's implied probability. The gap is your expected edge

• Size positions using Kelly or fractional Kelly: Don't overbet. Proper sizing protects against variance and emotional decision-making

• Set exit criteria: Know in advance what would make you sell, both for taking profits and cutting losses

• Consider time to resolution: Long-dated positions tie up capital. Factor the time value into your expected return calculations

• Use limit orders: Buying at the ask pays the spread. Posting a bid can save money if you're patient

• Diversify across uncorrelated markets: One wrong prediction shouldn't devastate your portfolio. Spread long positions across independent events

#Long vs. Short

In binary prediction markets, "Shorting YES" is mathematically identical to "Buying NO."

#Related Terms

• Short Position
• Yes/No Shares
• Implied Probability
• Expected Value (EV)
• Risk Management
• Kelly Criterion

#FAQ

#When should I close a long position early?

Close early if: (1) the price has risen and you want to lock in profit, (2) new information has changed your probability estimate below the market price, (3) you need the capital elsewhere, or (4) your original thesis is no longer valid.

#Is going long safer than going short?

Neither is inherently safer; they're directionally opposite bets. A long position risks 100% of what you paid; a short via No shares also risks 100%. The safety depends on your analysis accuracy, not the direction.

#How do I go long on Polymarket?

Buy Yes shares. The price you pay is your cost basis; if the event occurs, you receive $1 per share. The interface shows Yes and No prices; clicking buy on Yes establishes a long position.

#Can I leverage a long position?

Most prediction markets don't offer leverage; you can only buy what you can afford. Some platforms experiment with leverage, but it multiplies both gains and losses. The binary outcome structure makes leverage particularly dangerous.

#What's the maximum I can make going long?

Your profit per share is $1 minus your purchase price. If you bought at$0.30, maximum profit is $0.70 per share. There's no unlimited upside like stocks; prediction markets cap at$1.