Turning a Price in Cents into a Probability
The conversion is division by one hundred, which is the easy part. The useful part is knowing what the resulting number does and does not claim about the world.
A contract that pays one dollar if an event happens, trading at 62 cents, implies a probability of 62%. The arithmetic is trivial. Everything interesting is in the interpretation.
The conversion
implied probability = price ÷ payout
With a one-dollar payout, a price of 62 cents gives 0.62. Polymarket quotes in dollars per share, so a price of 0.62 is already the probability. Kalshi quotes in cents, so 62 becomes 0.62. Both are the same number in different clothes.
If you have come from betting, the same conversion from odds is:
implied probability = 1 ÷ decimal odds
so decimal 1.61 is about 62%. Decimal, fractional and American odds, converted has the full set if you need to move between conventions.
Which price you convert matters more than the conversion
The formula does not care which price you feed it, and the answer changes a lot depending on your choice.
Convert the last trade and you get the probability as of whenever that trade happened. On a quiet market that could be days ago.
Convert the best offer and you get the probability implied by what it would cost you to buy right now — which is above the market's estimate, because you are paying the spread.
Convert the mid and you get the best single summary of where the market sits.
Convert both sides and average and you get the same as the mid, but you also see the spread, which tells you how much confidence to attach to the number. A mid of 62 with a 61/63 book is a real 62. A mid of 62 with a 55/69 book is not really a number at all.
What the number claims
An implied probability of 62% is a claim about frequency across many similar situations. It says: if this exact situation recurred a hundred times, the event would occur about sixty-two of them.
It is not a claim about this instance. It cannot be, because this instance happens once and then is either true or false. A market at 62% that resolves No was not wrong. A market at 62% that resolves No three hundred times when it should have resolved Yes a hundred and eighty-six of them was wrong, and that is the only way to find out. Calibration is the measurement.
What it does not include
It is not adjusted for cost. Buying at 62 and being right pays 100, which is a 61% return on capital. Buying at 62 and being right after fees pays slightly less. The implied probability is the market's estimate, not your breakeven. Your breakeven is higher. How fees eat a theoretical edge is the arithmetic.
It is not adjusted for time. Money committed to a market for six months has a cost even if you are right. A 62% probability resolving next week and a 62% probability resolving next year are not equally attractive, and the market price does not usually reflect the difference cleanly. Capital lockup covers it.
It does not account for resolution risk. The price is the probability of the contract paying, which includes the possibility of the rule doing something you did not expect. Usually those are the same number. Occasionally they are not.
The two systematic distortions
Two effects show up consistently enough to be worth knowing about before you interpret any price.
The long tail runs rich. Contracts priced in the low single digits tend to be worth slightly less than their price. Somebody is always willing to pay two cents for a lottery ticket, and nobody is enthusiastic about locking up 98 cents to collect two. The favourite-longshot bias documents the pattern.
The extremes compress. A market rarely trades at 1 cent or 99 cents even when the outcome is nearly settled, because the remaining pennies do not compensate for the capital and the tail risk. This means implied probabilities above about 96% should be read as "very likely" rather than as a precise number. Why prices near 1c and 99c behave differently covers it.
Converting between venues
When you compare Kalshi to Polymarket, convert both to probabilities first, then compare. Comparing 62 cents to 0.58 dollars invites arithmetic errors, and mixing quote conventions is how people end up reporting a four-point gap that is really a unit error.
Then check the second thing: are they the same contract? Two 62% prices on differently-worded questions are not a match. This site grades every cross-venue pair on how equivalent the underlying contracts are before reporting a gap at all, which is why the gap board shows a grade next to every difference.
A working habit
Whenever you read a probability from a market, say the whole sentence to yourself: "the mid on this market implies 62%, with a two-cent spread, on about eleven thousand dollars of volume." Every clause in that sentence changes how much weight the number deserves. The bare "62%" hides all of it.
Next
What implied probability does not tell you goes deeper into the gap between the price and the truth.
Educational content only. Nothing here is financial advice, a solicitation, or an offer to trade. Prediction markets can move against you and a position can lose its entire value. Where this guide describes a difference between venues it describes a theoretical cross-market edge in observed prices, which is not a profit: fees, spreads, capital lockup, transfer time and differing settlement rules all come out of it first.
Keep reading
Prices and Probability · 4 min readWhat Implied Probability Does Not Tell YouA market price is a probability weighted by money, not by knowledge. The difference explains most of the cases where a confident price turns out to be wrong.
Prices and Probability · 4 min readReading a Probability Change Without OverreactingMarkets move constantly. Most of that movement is noise. Here is how to tell which changes carry information and which are just the spread breathing.
Prices and Probability · 3 min readPercentage Points vs Percent, and Why It MattersA move from 2% to 3% is one percentage point and a fifty percent increase. Confusing the two produces headlines that are technically true and completely useless.
Order Books and Liquidity · 3 min readWhat the Spread Actually Costs YouThe gap between bid and offer is the largest cost on most event-market trades, and the only one that never appears on a statement. How to price it.