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Guides for the disciplined retail trader — how event markets actually work, how professionals size and structure the same trades, and where the edges really are. Educational, never advisory.
What are prediction markets?
Prediction markets are exchanges where you trade contracts on whether a specific, checkable thing will happen, each one settling at $1 if the answer turns out to be yes and $0 if it turns out to be no. Because the payout is fixed at a dollar, the price is the market's probability in cents: a contract at 62¢ is the crowd saying there is about a 62% chance. You take the YES or NO side from other traders on an order book, and the trading fee is what decides whether a thin edge survives.
Read itHow does Kalshi work? Event contracts, explained
Kalshi is a CFTC-regulated US exchange where you buy and sell event contracts — yes-or-no claims on a real-world outcome that pay $1 if it happens and $0 if it doesn't. You trade them against other traders in an order book, so the price is the market's probability in cents: 38¢ means the crowd says about 38%. When the market's named settlement source resolves the event, winning contracts are credited $1 and losing ones expire at $0 — or you sell early at the going price instead of waiting.
Read itIs Kalshi legit? A sober look at the regulated prediction market
Yes — Kalshi is a Designated Contract Market regulated by the Commodity Futures Trading Commission, settling in US dollars under filed rulebooks, with customer funds held segregated at regulated US institutions. What regulation does not do is make trading safe: a contract that settles against you pays $0, event contracts carry no SIPC protection, and long-tail markets can be thin to exit. The litigation Kalshi is in concerns which markets it may list, not whether customer money is handled properly.
Read itKalshi stock: can you buy shares in Kalshi?
No — Kalshi is a privately held company, so there is no ticker, no shares listed on any US exchange, and no public offering filed with a date attached; anyone showing you a Kalshi ticker is showing you something else. What you can buy on Kalshi is event contracts, including ones on index levels, economic data, and company milestones, which is what most people searching the phrase actually wanted.
Read itKalshi arbitrage: how it works — and its limits
Arbitrage on Kalshi means a set of prices that is mathematically inconsistent — buckets that must sum to 100% but don't, or a harder threshold priced above an easier one — and a combination of positions that pays whichever outcome lands. It is real and it appears, usually for minutes after news moves one leg and the others lag, but it is small: on the three-bucket set worked below, a 6¢ gross inconsistency gives up about 4.6¢ per set in taker fees at a 100-set order size, leaving roughly 1.4¢ before slippage. The durable trade next door is relative value, which accepts basis risk rather than pretending there is none.
Read itKalshi trading strategies that actually make sense
Three approaches hold up on an event exchange: out-researching a scheduled catalyst, trading relative value when related markets price incoherently, and trading base rates against a price driven by narrative. Each rests on the same three things written down before entry — a probability you can defend, a size derived from the edge, and the condition that would tell you you are wrong. Full autonomy is the part worth leaving out: automation is reliable at the scanning, research, and arithmetic around a decision, and event markets are exactly where automated logic fails quietly.
Read itLong/short strategy: what you are actually paid for
A long/short strategy runs two books at once — shares you own and borrowed shares you have sold — so what you are paid for is the spread between them rather than the market's direction. Take $10,000 split evenly, both books moving one-for-one with the market, your longs beating it by 2 points and your shorts lagging by 1: before costs that book earns about $150 whether the market rises 10%, sits flat, or falls 10%, and loses the same $150 in all three if the selection is backwards. Equal dollars only cancel the market when both sides carry equal market sensitivity — and you have swapped market risk for selection risk, not removed risk.
Read itMarket-neutral strategy: how beta hedging works
A market-neutral strategy sizes the short book so its beta-dollars — position value multiplied by beta, the stock's estimated move per 1% of market move — cancel the long book's, leaving your selection to decide the outcome instead of the market's direction. A $6,000 long book at a weighted beta of 1.30 carries $7,800 of beta-dollars, so hedging it with names of beta 1.10 takes a $7,090.91 short leg: zero estimated exposure to the benchmark while slightly net short in dollars. Neutral means neutral to that one estimate — not to being wrong about the names, to error in the betas themselves, to sector and factor risk the benchmark cannot see, or to the borrow costs only the short side pays.
Read itThe Kelly criterion: sizing positions by edge, not feel
The Kelly criterion turns an edge into a position size: stake the fraction f* = (b·p − q)/b of the capital allocated to a strategy, where p is your probability of winning, q is 1 − p, and b is the profit per $1 staked. On an event contract trading at 38¢ that your research says is worth 52¢, that comes to about 22% of the bankroll at full Kelly — aggressive enough to feel wrong, which is why most practitioners trade half Kelly, near 11%. The formula is only ever as good as the probability you put into it.
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