A prediction market is an exchange where people trade contracts whose payout depends on the outcome of a future event. Each contract settles at a fixed value if the event happens and zero if it does not, so the trading price can be read as the market's collective probability estimate for that outcome.
Because a winning contract pays a known amount, price and probability are the same number on a different scale. A contract trading at $0.62 that pays $1.00 implies the market thinks the event is about 62% likely — before fees, and before any adjustment for the cost of tying up capital until resolution.
That equivalence is what makes prediction markets tradeable by software. A bot does not need a view on the world; it needs a view on whether the posted price is wrong relative to some other observable — another market, a faster price feed, or a model.
Reading price straight off as probability without accounting for the cost of the capital it locks up. A contract at $0.62 resolving in fifteen minutes and one at $0.62 resolving in six months imply the same probability and are completely different trades.
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