Yes/No Shares

Paired binary contracts where one pays $1 if an [event](/wiki/event) happens ("[Yes](/wiki/yes)"), the other pays$1 if it doesn't ("No"). Yes + No ≈ $1 before fees/spread.

#Plain-English Definition

Yes/No shares are the two complementary sides of a binary market. Think of them like opposite sides of a coin flip: exactly one side must win. Each side is a $1-settled contract:

• A Yes share pays $1** if the stated event occurs, **$0 otherwise.
• A No share pays $1** if the event does **not** occur, **$0 otherwise.

Because the outcomes are complements, their prices are linked: Yes + No ≈ $1 before fees/spread. Small differences come from the bid-ask spread, fees, and rounding.

#The $1.00 Equation

(Note: Blue = YES Price, Orange = NO Price. They always stack to $1.00)

#History and Origins

The yes/no share structure traces its roots to the earliest forms of prediction markets. While informal betting on binary outcomes existed for centuries, the modern framework emerged in the late 1980s.

Key milestones:

• 1988: The Iowa Electronic Markets (IEM) pioneered standardized yes/no contracts for presidential elections, establishing the $1-settlement convention still used today.
• 2001: Intrade popularized yes/no trading for diverse events, from Oscar winners to geopolitical outcomes.
• 2004: HedgeStreet (later NADEX) became the first CFTC-designated contract market for binary event contracts in the United States.
• 2020: Polymarket launched on blockchain, making yes/no shares accessible globally via cryptocurrency.
• 2020: Kalshi received CFTC designation, bringing regulated yes/no contracts to U.S. retail traders.

The $1.00 settlement value became standard because it creates a direct mapping between price and probability; a 65-cent share implies 65% probability without requiring conversion.

#Yes vs No: Comparison Table

Price relationship example:

#How It Works

1. Read the question and rules. The market's resolution criteria define exactly what counts as "Yes" or "No".
2. Choose your side. Buy Yes if you think the event will happen; buy No if you think it won't.
3. Pay the market price. Each share is priced between $0 and$1 (exact tick size and fee model vary by platform).
4. Settle or exit early.
   • Hold to resolution: the correct side pays $1 per share; the other pays$0.
   • Or sell before resolution to lock gains or cut losses (subject to spread, liquidity, and fees).

Quick math: Treat price in $ as approximate probability in %. Example: Yes price of $0.58 ≈ 58% implies No ≈ $0.42, so 0.58 + 0.42 = 1.00 (before fees/spread).

#Illustrative Examples

Example 1: Sports Market Market: "Will the Lakers make the playoffs?"

• Quoted prices: Yes $0.65**, **No ≈$0.35 (0.65 + 0.35 = 1.00).
• You believe 80% chance, so you buy 100 Yes at $0.65 for **$65**.
  • If Lakers make it: receive $100**, profit **$35 before fees.
  • If they miss: payout $0**, loss **$65.

Example 2: Policy Market Market: "Will the Federal Reserve raise rates at next meeting?"

• Quoted prices: Yes $0.80**, **No ≈$0.20 (0.80 + 0.20 = 1.00).
• You think unlikely, buy 50 No at $0.20 for **$10**.
  • If no rate hike: receive $50**, profit **$40 before fees.
  • If rates rise: payout $0**, loss **$10.

Example 3: Arbitrage Note If Yes + No < $1** (e.g.,$0.61 + $0.38 =$0.99), buying one of each costs $0.99** and returns **$1.00 at resolution ($0.01** before fees). In practice, spread, fees, and slippage usually eliminate this edge.

#Trading Strategy & Guidance

When to trade each type:

• Buy Yes when your probability estimate exceeds the Yes price
• Buy No when your probability estimate is below the Yes price
• Sell existing positions when prices move favorably or your view changes

Critical considerations:

• Read resolution criteria carefully. Time zones, data sources, and exact thresholds matter. Small wording differences can flip payouts.
• Mind the spread and depth. Thin order books widen spreads and increase slippage on market orders. Use limit orders when possible.
• Exit vs hold. Selling early captures gains but pays the spread twice. Holding avoids exit spread but locks in outcome risk.
• Fees vary by platform. Break-even probabilities depend on fee structure; some charge on trades, others on winnings.

#Platform Comparison: Yes/No Shares

Different platforms implement yes/no shares with distinct mechanics:

#Common Pitfalls & Edge Cases

• Ambiguous resolutions. If criteria are unclear or source data changes, disputes arise. Some platforms have "invalid" outcomes or appeals; specifics vary by platform.
• Trading halts. Markets may pause near resolution, during major news, or if manipulation is suspected. Orders can be rejected or partially filled.
• Low liquidity traps. You might buy easily but struggle to sell later. Displayed prices may not reflect executable prices for larger orders.
• Platform differences. Some use cryptocurrency (e.g., Polymarket), others USD (e.g., Kalshi). Share creation methods vary by platform; some use automated market makers, others order books.
• Rounding errors. On some platforms, Yes + No may equal $0.99 or$1.01 due to tick size constraints. This is not an arbitrage opportunity after accounting for fees.

#Related Terms

• Binary Market
• Implied Probability
• Spread
• Liquidity
• Resolution Criteria
• Order Book
• Limit Order
• Slippage

#FAQ

#Why do Yes and No prices not always sum to exactly $1.00?

The sum can deviate slightly due to bid-ask spreads. If you're looking at ask prices (what you'd pay to buy), the sum often exceeds $1.00. If looking at bid prices (what you'd receive selling), the sum is often below$1.00. This reflects the cost of immediate execution, not a trading opportunity.

#Can I hold both Yes and No shares simultaneously?

Yes, but there's no financial benefit. Equal amounts of Yes and No form a "complete set" worth exactly $1.00; you'd lock up capital with no upside. However, you might temporarily hold both if you've partially exited a position or are implementing a complex strategy.

#Is buying Yes the same as selling (shorting) No?

Economically similar but mechanically different. Buying Yes means you pay cash now for shares that might pay $1.00 later. Selling No (if the platform allows shorting) means you receive cash now but may owe$1.00 later. On many prediction market platforms, you simply buy the opposite side rather than shorting.

#What happens to my shares at market resolution?

Winning shares (Yes if the event occurs, No if it doesn't) become redeemable for $1.00 each. Losing shares expire worthless at$0.00. On blockchain platforms like Polymarket, you must manually redeem winnings. On centralized platforms like Kalshi, your balance may update automatically.

#Why would someone buy a share priced at $0.95?

The $0.95 price implies 95$0.05) - (0.02 × $0.95) =$0.049 - $0.019 =$0.03 expected profit per share. Small edges at high prices can be worthwhile with proper position sizing.