Kelly Criterion Calculator

The Kelly Criterion was developed by John Kelly at Bell Labs in 1956 and has since become the foundational position-sizing framework for everyone from professional poker players to quantitative hedge funds. The core insight is simple but counterintuitive: overbetting a positive edge will destroy your bankroll faster than no edge at all. Variance compounds. Drawdowns at the wrong moment end the game before the expected value pays out.

On prediction markets like Kalshi and Polymarket, every contract is a binary bet resolving to $1.00. This makes the Kelly formula particularly clean to apply. If your model says an event has a 60% chance of occurring and the market is pricing it at $0.45, you have a 15-point edge. The Kelly formula tells you exactly what fraction of your bankroll to put to work — not based on confidence or gut feel, but on the mathematical relationship between your edge and your payout ratio.

Quarter Kelly is the professional standard. Full Kelly maximizes long-run geometric growth in theory, but your edge estimates are never perfect. A model that says 60% might actually be 56%. Quarter Kelly accounts for this estimation error — it captures the majority of the compounding benefit while reducing variance by 75%. Every serious prediction market trader, poker player, and quant fund running Kelly-based sizing uses a fraction, not the full formula.

This calculator auto-computes the payout ratio from your market price (no manual conversion needed), runs the EV check before showing you any sizing, and displays all four Kelly fractions so you can choose based on your conviction and risk tolerance. The edge is real when the math says it is — the calculator won't pretend otherwise.