What Is a Prediction Market?
A prediction market lets you bet on whether real-world events will happen — think "Will inflation hit 3% by December?" or "Will this bill pass Congress?" You're buying shares that pay out $1 if you're right, $0 if you're wrong.
Say a market asks "Will the Fed cut rates in September?" If YES shares cost $0.65, the crowd thinks there's a 65% chance it happens. You buy 100 shares for $65. If the Fed cuts, you collect $100 (your $65 back plus $35 profit). If they don't, you lose your $65.
How it's different from options: Options give you the right to buy/sell a stock at a set price — you're betting on where the stock price goes. Prediction markets bet on events that aren't tied to a ticker: elections, policy moves, even whether a celebrity gets indicted. The payout is fixed ($1 or $0), the odds move with the crowd, and there's no strike price or expiration Greeks to manage. You're trading information, not direction.
Prediction markets live on platforms like Polymarket and Kalshi. They're newer, less liquid than options, and regulated differently — but when you've got an edge on the news cycle, they print.