EV Calculator

What is Expected Value in Prediction Markets?

Expected Value is the single most important concept in prediction market trading. It answers the question: is the market price wrong enough that I should take a position? If the market says a recession has a 28% chance and your model says 40%, that gap is your edge. But the size of the gap relative to the market price is what actually matters — a 12-point gap at 28¢ is a much larger edge than a 12-point gap at 70¢.

The formula normalizes the gap to the market price, giving you a clean edge percentage. A +25% edge means the market is underpricing the event by 25% relative to what you believe is fair value. That's the number that tells you whether to trade — and how confident to be when you do.

When to BUY, SELL, or SKIP

The ±5% threshold filters out noise. Markets are rarely perfectly efficient, but small gaps often close before you can act on them. A BUY signal at +5% means you have meaningful edge. A BUY signal at +20% means the market is significantly mispriced — size accordingly (see the Kelly Criterion calculator for position sizing).

A SELL signal means the market is overpricing the YES outcome relative to your estimate. If you already hold YES contracts, this is a signal to exit. If you don't hold a position, you can consider buying NO — which on Kalshi is simply the inverse of the YES price.

EV vs. the market price

This is different from asking “is the market price low?” A market at 10¢ might be a terrible trade if you think it should be at 8¢. A market at 80¢ might be the trade of the week if you think it should be at 95¢. EV is always relative to your probability estimate — which is why the estimate matters more than anything else. Sharpen your model, and the calculator tells you exactly when to act.