How are Event Contracts priced?

Markets estimate probability through trading, as prices move as participants incorporate new data releases, forecasts, and macro news into what they are willing to pay. IBKR Prediction Markets also highlights that the "Yes" price is based on how likely an event is to happen…

Yes, positions can be exited before the event occurs. However, the ability to sell a contract depends on market liquidity and available prices at the time…

What is an event contract?

An event contract is a standardized, exchange-listed contract that lets you take a Yes/No position on the outcome of a specific, measurable event. For example, you can trade on whether a particular asset's price will be above a certain level at a set time. Each contract settles at a fixed value if the event happens ("Yes") and at zero if it does not ("No"). You can trade event contracts on Interactive Brokers through the Prediction Markets platform…

How does an event contract pay out?

Each contract is binary. It settles at its full contract value if the event resolves "Yes" and at zero if it resolves "No." Prices trade between those two endpoints (commonly quoted from about $0.01 up to $0.99 per contract), so the price at any moment reflects the market's estimate of how likely the event is to occur. A contract trading at $0.60, for example, implies roughly a 60% market-implied probability of a "Yes" outcome…