What Is Implied Probability? Reading Prediction Market Prices
Implied probability is the likelihood of an event as estimated by the market price of a prediction market share. A $0.70 share implies a 70% probability.
Definition
Implied probability is the probability of an outcome as reflected by the current market price of a prediction market share. In a binary market, the price of a YES share directly equals the implied probability.
The Formula
For binary markets:
Implied Probability = Share Price / Payout
Since payouts are typically $1:
- YES share at $0.65 = 65% implied probability
- NO share at $0.35 = 35% implied probability
Reading Implied Probability
Prediction market prices are the most information-dense probability estimates available. They aggregate the views of every participant, weighted by how much money they are willing to stake.
A share trading at $0.92 means the market is very confident (92%) the event will occur. A share at $0.50 means maximum uncertainty — a coin flip.
When Markets Are Wrong
If you believe the true probability differs from the implied probability, you have a trading opportunity:
- Market says 60%, you think 80% — buy YES shares at $0.60 for an expected profit.
- Market says 70%, you think 40% — buy NO shares at $0.30 for an expected profit.
This is the core of prediction market trading: finding mispricings between market-implied probabilities and your own estimates.
Implied Probability on Purrdict
Every market on Purrdict displays the current implied probability alongside the share price, making it easy to spot trading opportunities at a glance.