How yes/no contracts work
What you buy when you buy a prediction market contract: a yes/no question priced 0 to 100, what each side pays, and who is on the other side of the trade.
A prediction-market contract is a question with two answers. "Will the Federal Reserve cut rates at its next meeting?" Yes or no. (The live version of that question is on the Fed decision odds page.) The contract pays out 100 to whoever holds the side that turns out to be right, and 0 to the other side. Everything else about these markets follows from that one fact.
The price is a split of 100
Because the winning side gets 100, the two sides of a contract always add up to about 100. If YES trades at 34, NO trades at about 66. Buying YES at 34 means you pay 34 now and receive 100 if the event happens, a gain of 66. Buying NO at 66 means you pay 66 now and receive 100 if the event does not happen, a gain of 34.
The person on the other side of your trade is not the exchange. It is another trader who took the opposite view at the same price. The exchange holds the money and pays the winner when the question settles.
A worked example
Take a contract on the Fed holding rates unchanged, priced at YES 45.
| You buy | You pay | If it happens | If it does not |
|---|---|---|---|
| 10 YES at 45 | 450 | receive 1,000 (profit 550) | receive 0 (lose 450) |
| 10 NO at 55 | 550 | receive 0 (lose 550) | receive 1,000 (profit 450) |
Prices are in cents on Kalshi and in dollars-per-share on Polymarket, but the arithmetic is the same: the price is your cost, 100 is the payout, and the difference is the profit. We print every price as a percentage for that reason. A YES at 34% costs 34 and pays 100.
Where the price comes from
Nobody sets the price. It is the last level at which a buyer and a seller agreed, the same way a stock price is. When more people want YES than NO at the current price, YES rises until enough NO buyers show up. The price you see is therefore a record of what traders were willing to risk, which is why it is read as a probability. That reading has limits, covered in Price versus probability.
What the contract is not
A contract is not a bet with the house, so there is no bookmaker margin built into a single price. But there is a spread between the best bid and the best ask, and there are fees on most venues, so the round trip is never free. Payout versus profit covers that.
A contract is also not the headline. "Will the Fed cut?" is settled by a specific rule naming a specific decision on a specific date. Two contracts that sound identical can settle differently. How settlement works covers why the fine print is the contract.
What to take away
- The price is the cost of one side; 100 is the payout; the gap is the profit.
- YES and NO always sum to about 100 because one of them will be worth 100.
- Your counterparty is another trader, not the exchange.
- The question that pays is the rule text, not the title.
Reviewed Thu, Sep 17, 2026. Guides are re-read against the live markets every week; fees, rules, and availability change, and the venue’s own page is the final word.