Skip to main content

​
A price is a probability

Every outcome trades somewhere between 0 and $1. An outcome at 62 cents means the market thinks it is about 62% likely. That is the whole translation. A price is the crowd’s estimate, written as money. It works that way because a winning share is worth exactly $1. The cheaper an outcome, the less the crowd expects it, and the more it pays if they are wrong. If you believe something is 80% likely and you can buy it at 62 cents, you are getting it below what you think it is worth. Enough people acting on views like that is what pulls the price toward the truth, and it is why prediction markets tend to forecast better than polls or pundits.

​
There is always someone to trade with

You never wait for another person to take the other side of your trade. Numera runs an automated market maker, a system that continuously quotes a price to buy and a price to sell, on every outcome, instantly. It is the counterparty to every trade. So the market is open whenever you are. Big trade or small, busy afternoon or quiet night, there is always a live price and always a fill.

​
Why prices move

Buying pushes a price up. Selling pushes it down. Every trade is a little bit of information, and the price absorbs it immediately. How far it moves depends on two things: The size of the trade. A small trade nudges the price. A large one moves it meaningfully. How much money is in the market. A busy market absorbs even large orders smoothly. A brand new one responds more to each trade, since there is less behind it.
Across all outcomes, prices add up to slightly more than $1. That small difference is what funds having a counterparty available at every moment. It is the same idea as a bookmaker’s margin, or the gap between the buy and sell price at a currency desk.It narrows as a market grows, so the busier a market is, the better the pricing you get.

​
Your payout is always covered

This is the strongest guarantee Numera makes, and it is worth understanding. A winning share is worth exactly $1, so the most a market could ever need to pay is the number of shares held on whichever outcome wins. Numera always holds more than that. Every market is fully funded for every possible result, at every moment, from the first trade to the last. That is not a target or a reserve policy. It falls directly out of the way prices are calculated. The pricing formula and the funding requirement are the same piece of maths, so a fully funded market is the only kind the system can produce. As a market tilts toward one outcome, the price of that outcome rises, which brings in exactly the money needed to cover it. Numera confirms it independently too. After every trade, it verifies the market still covers every possible payout before accepting the result. This is what makes early exits possible. Systems that pool everyone’s money together cannot safely let people leave partway, because paying someone out early might leave too little for the winners at the end. Numera’s funding holds no matter who leaves or when, so you can always take your money out.
Every round of a continuous market is held to the exact same standard. Fully funded, checked after every trade, no exceptions for how fast the rounds move.

​
The spread

Every trade includes a small spread, from 0.5% to 3%. That is the cost of instant liquidity that is always available. Most of the time you will pay near the minimum. The spread sits at its lowest in calm conditions, well before a deadline, when odds are reasonably balanced. It widens in two situations: as a deadline gets close, and when an outcome sits far from even. Both are moments when whoever is trading is more likely to know something the market has not caught up with yet, so pricing adjusts to keep the market fair for everyone else.
Prices update continuously, so a quote you looked at a while ago may have moved. Numera always refreshes and shows you the current price before you confirm, so what you see at the moment you approve is what you get.

​
For the curious

Numera uses a damped liquidity sensitive logarithmic market scoring rule, known as LS LMSR. It is a well established design used in prediction markets and studied in academic literature.A single formula describes how much money the market holds for any given set of positions. Any trade costs the difference between that formula’s value before and after.Two useful properties come straight out of it:Path independence. Reaching a given position costs the same however you get there, whether one large trade or ten small ones. Prices stay consistent no matter how you trade.Guaranteed funding. The formula’s value is always greater than the largest possible payout. It is a mathematical identity, which is why full funding holds automatically rather than needing to be managed.The damping part gives brand new markets extra depth so they quote sensible prices from the very first trade, then eases off as real volume arrives.