How Are Prices Calculated?

Understanding how share prices work in OddsForge's parimutuel prediction markets.

Prices = Probabilities

On OddsForge, every market has two outcomes: YES and NO. The share prices directly represent the market's estimated probability of each outcome.

A YES share at $0.75 means the market believes there's a 75% chance the event will happen.
A NO share at $0.25 means the market believes there's a 25% chance the event won't happen.

The prices of YES + NO shares always add up to approximately $1.00.

Parimutuel Pricing

OddsForge uses a parimutuel model — the same system used in prediction platforms and forecasting markets. Here's how it works:

The Pool

When traders buy shares, their USDC goes into a shared pool:

YES Pool — Total USDC placed on YES by all traders
NO Pool — Total USDC placed on NO by all traders
Total Pool — YES Pool + NO Pool

Price Formula

The price of each share is determined by the proportion of the total pool:

YES Price = YES Pool / Total Pool
NO Price  = NO Pool / Total Pool

Example:

Pool	Amount	Price
YES Pool	$7,000	$7,000 / $10,000 = $0.70
NO Pool	$3,000	$3,000 / $10,000 = $0.30
Total Pool	$10,000	$0.70 + $0.30 = $1.00 ✓

How Prices Move

Prices change dynamically as traders buy shares:

More people buy YES → YES pool grows → YES price goes up, NO price goes down
More people buy NO → NO pool grows → NO price goes up, YES price goes down

This creates a natural price discovery mechanism. As new information becomes available (news, announcements, data), traders adjust their positions, causing prices to reflect the latest probabilities.

ℹ️

Why this matters: Unlike an orderbook model where prices depend on matching buyers and sellers, parimutuel pricing ensures there's always a price and always liquidity. Every trade is immediately executed against the pool.

Payout Calculation

When a market resolves, winners are paid from the total pool:

Your Payout = (Your Trade / Winning Pool) × (Total Pool × 0.95)

// The 0.95 accounts for the 5% platform fee
// deducted from the losing side

Example Payout:

Market: "Will ETH hit $5,000 by Q1 2026?"

Detail	Value
Your YES trade	$200
Total YES pool	$6,000
Total NO pool	$4,000
Total pool	$10,000
Platform fee (5% of NO pool)	$200
Distributable pool	$9,800
Your share	$200 / $6,000 = 3.33%
Your payout	$9,800 × 3.33% = $326.67
Your profit	$326.67 - $200 = $126.67 (63.3% ROI)

Key Properties

Property	Description
Always liquid	You can always buy shares — no need to find a counterparty
No spread	Unlike orderbooks, there's no bid-ask spread. You trade at the pool price.
Dynamic odds	Prices update with every trade, reflecting real-time sentiment
Fair distribution	Payouts are proportional to your share of the winning pool
Transparent	All pool sizes and calculations are on-chain and verifiable

💡

The earlier you predict the correct outcome, the better your odds. As more people agree with you, the price goes up — meaning later buyers get a smaller payout per dollar.

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