Splitting converts $1.00 of collateral into one of each outcome token in a market; merging converts a complete set back into $1.00. Both operate at exactly $1.00 regardless of what the tokens are trading at, which is the mechanism that anchors outcome prices to their sum.
A trader who can buy a complete set on the book for less than $1.00 can merge it for $1.00 and keep the difference; one who can sell a set for more than $1.00 can split into it. Gas and fees set the width of the band in which this is not worth doing.
Ignoring transaction costs when sizing the opportunity. Gas and fees set a band around $1.00 inside which splitting or merging loses money, and that band is wider than the price gap looks.
Browse the full glossary (32 terms), the strategy database, or the build guides.
