Glossary of Terms
A
All In Cost
All in cost is the total trading cost including execution costs (spread, slippage) plus fees. It is the cost you must overcome for a trade to be profitable.
Ask
Ask is the lowest price a seller is currently willing to accept. It is the best available sell quote in an order book.
B
Bid
Bid is the highest price a buyer is currently willing to pay. It is the best available buy quote in an order book.
Bid Ask Spread
Bid ask spread is the difference between the best ask and best bid (ask − bid). It is the most basic measure of immediate trading cost.
C
Contract
A contract is a tradable instrument in a prediction market representing a specific outcome under defined market rules, with a defined payout at settlement.
D
Depth at Best Bid Ask
Depth at best bid and ask is the available quantity at the top of the order book. It is the first limit on how much you can trade at the best prices.
E
Effective Spread
Effective spread is an execution-cost metric: 2 × |execution price − midquote|, showing how far your fill is from the market midpoint.
Execution Price
Execution price is the actual price you get filled at. With multiple fills, the correct single number is the VWAP across fills.
Expiration
Expiration is the time when trading ends for a prediction market. After expiration, the market resolves and settles according to the rules.
F
Fair Price
Fair price is an estimate of the contract’s true value (often expressed as a probability) based on your information and model, independent of microstructure noise.
Fee per Contract
Fee per contract is a fixed charge per contract (often per side). It scales linearly with the number of contracts traded.
Fill
A fill is an executed portion of an order. One order can have one fill or many fills at different prices and sizes.
H
Half Spread
Half spread is half of the quoted bid ask spread: (ask − bid)/2. It is the distance from midquote to either best quote.
I
Implied Probability
Implied probability is the probability suggested by a market price. In many prediction markets priced from 0 to 1 (or 0 to 100 cents), price is often interpreted as probability.
L
Last Traded Price
Last traded price is the price of the most recent trade. It may differ from current bid and ask and is not a substitute for midquote.
Limit Order
A limit order sets the maximum buy price or minimum sell price. It provides price control but may not fill if the market does not reach your price.
Liquidity
Liquidity is how easily you can buy or sell without materially moving price. High liquidity usually means tight spreads and deep order books.
M
Maker Taker
Maker taker is a fee model where liquidity providers (makers) and liquidity removers (takers) pay different fees or receive rebates depending on order type.
Market Depth
Market depth is the amount of buy and sell quantity available at different price levels in the order book. It determines how much you can trade without moving price.
Market Maker
A market maker provides liquidity by continuously quoting bids and asks. Market makers help tighten spreads and deepen the order book.
Market Order
A market order executes immediately against the best available quotes. It prioritizes speed over price and can cause slippage in thin markets.
Market Rules
Market rules define the exact question being traded, how the outcome is determined, the settlement source, and key timing details like expiration.
Midquote
Midquote is the midpoint between the best bid and best ask: (bid + ask)/2. It is the standard reference price for spread and execution-cost metrics.
Mispricing
Mispricing is the gap between market price and an estimated fair price. A mispricing is only actionable if it exceeds trading costs and uncertainty.
O
Order Book
An order book is the live list of buy and sell orders (bids and asks) for a market. It shows available prices and sizes across levels.
Order Types
Order types are the different ways to submit trades, such as market orders and limit orders. The order type you choose strongly affects execution costs.
P
Partial Fill
A partial fill happens when only part of your order executes immediately. The rest may wait, cancel, or fill later at different prices.
Payout
Payout is the amount a contract or share returns at settlement, based on the resolved outcome under the market rules.
Percent Fee
Percent fee is a fee calculated as a percentage of trade notional. The fee increases with both price level and position size.
Position
A position is your exposure in a prediction market, defined by the number of contracts or shares you hold and your average entry price.
Price (Contract Price)
Contract price is the current trading price of a prediction market contract. In many markets, it is quoted from 0 to 1 or 0 to 100 cents.
Price Impact
Price impact is the price movement caused by your own trade. It increases with order size and decreases with depth and liquidity.
Price Improvement
Price improvement happens when your execution is better than the current best quote, for example buying below the ask or selling above the bid.
Q
Quoted Spread
Quoted spread is the displayed bid ask spread at a moment in time: best ask minus best bid. It is a quote based measure, not fill based.
R
Resolution
Resolution is the determination of which outcome occurred under the market rules. Resolution precedes settlement and triggers payout calculations.
Round Trip Cost
Round trip cost is the total cost of entering and exiting a position. It typically includes the spread both ways plus fees on both sides.
S
Settlement
Settlement is the process where a prediction market contract is finalized and paid out based on the resolved outcome under the market rules.
Settlement Source
Settlement source is the official data reference used to decide the outcome at settlement, such as a named website, exchange price, or official record.
Shares
Shares are the units you trade in some prediction markets. Buying shares gives you exposure to an outcome and a defined payout at settlement.
Slippage
Slippage is the difference between the price you expected and the price you actually get, often caused by limited depth and fast moving quotes.
Spread Widening
Spread widening is when the bid ask spread increases, often due to falling liquidity, rising uncertainty, or market makers pulling quotes.
T
Thin Market
A thin market has low liquidity, meaning limited depth and often wide spreads. Small orders can move price and executions can be unreliable.
Trading Fees
Trading fees are platform charges for executing trades. Fees add to execution costs and should be measured separately from effective spread.
V
VWAP
VWAP (volume weighted average price) is the correct way to combine multiple fills into a single execution price: sum(price×qty) / sum(qty).
W
Wide Spreads
Wide spreads mean a large gap between bid and ask. They usually indicate low liquidity and lead to higher trading costs.
Y
Yes No Contract
A yes no contract is a prediction market contract that resolves to a binary outcome, typically paying 1 if YES happens and 0 if NO happens.