01In plain English
A YES/NO market poses one question with a clear, checkable answer - "Will the Fed cut rates in September?" - and lets you trade two sides of it. Buy YES if you think it happens; buy NO if you think it does not. When the event is settled, the market resolves: the winning side is worth $1.00 per contract, the losing side is worth nothing.
Because the two contracts are mirror images, their prices carry information. A YES trading at $0.63 is the market saying, in dollars, that it puts roughly a 63% chance on the event. The price is the forecast.
02Price as implied probability
On a binary market, price and probability are the same number wearing different clothes. A contract that pays $1.00 if an event occurs is worth its probability of occurring. So price ≈ P(event). When traders push YES from $0.50 to $0.70, they are collectively revising the estimated likelihood from 50% to 70%. This is what makes prediction markets useful as forecasting tools rather than simple bets.
03Why YES + NO sums to one
Exactly one outcome will pay. That constraint forces the fair price of YES plus the fair price of NO toward $1.00. If YES is $0.60, NO should be about $0.40. When the two books drift apart and the pair trades for less than $1.00, a risk-free gap opens - the basis of sum-to-one arbitrage.
04Binary vs. scalar and multi-outcome markets
- Binary (YES/NO). Two outcomes, one true. The simplest and most common structure on Polymarket and Kalshi.
- Multi-outcome. A question with several mutually exclusive answers (e.g. an election with many candidates), usually built as a bundle of linked YES/NO markets whose prices should sum to one across the set.
- Scalar. The payout scales with a number - a temperature, a vote share - rather than settling to a flat $1.00 or $0.00.
05Why this matters for bots
The YES/NO structure is what makes automated strategies tractable. Because both sides live as separate order books that must reconcile to $1.00, a bot can watch for mis-quotes and act on them mechanically - no outcome prediction required. It underpins arbitrage, market making on reward markets, and the pricing logic inside copy-trading systems.