Expected value is the probability weighted average of every possible outcome, a single figure summarising what a position is worth on average.
Last reviewed 26 July 2025 · Educational, not advice
Expected value is a way of summarising an uncertain outcome in a single number. You take every possible result, multiply each by your estimate of its probability, and add them up. The total is the average result you would expect if the same situation were repeated many times. It is the standard tool for comparing choices when the outcome is not certain.
For a yes or no event contract the calculation is simple to state. If you think the true chance of yes is some probability, the expected value of buying yes at a given price is that probability times the one hundred cent payout, minus the price you paid, before fees. If your probability estimate is higher than the price implies, the figure is positive on average. If lower, it is negative.
The phrase positive expected value describes a position that, on your own probability estimate, pays more than it costs on average. It is the core of disciplined trading, but it rests entirely on the quality of your probability estimate. A confident but wrong estimate produces a positive number on paper and a loss in reality. Expected value is only as good as the inputs.
Crucially, expected value is an average over many repetitions, not a forecast of the next outcome. A single contract pays one hundred or zero. A position with positive expected value can and often does lose on any given event. The value of the idea is in repeated, well sized decisions over time, where the averages have room to show, not in any one trade.
Fees, the bid offer spread, and the risk of being wrong about the probability all eat into a theoretical edge. A small positive expected value can disappear once real costs are counted, which is why careful traders demand a margin of safety rather than acting on a razor thin number. Expected value frames a decision honestly. It does not guarantee the result.
Suppose you estimate the true chance of yes at 55 percent and the contract trades at 50 cents. The expected value of buying one yes is 0.55 times 100 cents, which is 55 cents, minus the 50 cents you pay, giving 5 cents before fees. That positive figure is an average. The single contract will still pay either 100 or zero, and fees reduce the edge.
Illustrative only. Numbers are examples, not a quote or a prediction, and exclude fees.
Expected value is an average over many trades, not a forecast of the next one, and it depends entirely on a probability estimate that may be wrong. A position with positive expected value can still lose, and fees can erase a thin edge. Stake only what you can afford to lose, never to chase a loss, and never on borrowed money. If it stops feeling like a free choice, step back. In the United States you can call or text the helpline on 1-800-GAMBLER or visit ncpgambling.org.
It is the probability weighted average of every possible outcome. You multiply each outcome by its probability and add the results, giving the average you would expect if the situation repeated many times.
Multiply your estimated probability of yes by the one hundred cent payout, then subtract the price you pay, before fees. A result above zero is positive on your estimate, a result below zero is negative.
No. It is an average over many repetitions and depends on your probability estimate being accurate. A single contract still pays one hundred or zero, and a positive figure can still lose on any given event.
Because fees, the bid offer spread, and the chance that the probability estimate is wrong all reduce a theoretical edge. A thin positive figure can vanish in practice, so a buffer guards against ordinary error.
The rules change fast. Get the changes that affect you, plain and current, not tips.
Independent. Every claim dated and sourced. No platform pays for its place.