Event contract trading glossary for beginners

This document is for informational purposes only and does not constitute investment advice or a solicitation to trade. All trading involves risk and you could lose your entire investment.  Please see below for further disclosures. 

What is this glossary for?

Event contract trading can feel overwhelming when you're just starting out. Terms like ‘implied probability,’ ‘early exit’ and ‘contract volume’ might sound intimidating, but they're actually straightforward beginner trading terms when clearly explained.

This glossary is designed specifically for beginners using Crypto.com Predict to trade event contracts. 

Whether you're trying to understand what you see on your screen or want to feel more confident placing your first trade, this glossary of event contracts breaks down prediction market definitions into plain English.

Event contract trading isn’t about long term investing, but about making short-term predictions on real-world events. 

Think of this glossary as your reference guide while exploring Predict. You might want to bookmark the page as you navigate your first few trades and gradually build your understanding of how event contracts work.

Please note that this guide is for educational purposes only and doesn’t constitute a recommendation for you or investment advice.

Event contract trading terms you need to know

Ask price

The lowest price at which someone is willing to sell a contract. When you want to buy a contract, you'll typically pay the ask price, which appears as the ‘buy’ price displayed in the Predict platform for immediate execution.

Contract

Your digital agreement that pays out based on whether a real world event happens or not. When you buy a contract on Predict, you're essentially placing a bet on your prediction about the occurrence, non-occurrence, or extent of the occurrence of a specified event, with defined terms.

Contract volume

The total number of contracts that have been bought and sold for a particular event. Higher volume usually indicates more trader interest and activity, which typically leads to better liquidity, more competitive contract pricing, and if offered, the ability to exit early on reasonable terms.

Early exit

The ability to sell your contract before the event concludes and the market resolves. This feature lets you lock in profits or cut losses without waiting for the final occurrence of the event you originally predicted.

Event resolution

The process of determining the final occurrence of an event and distributing payouts to contract holders. Resolution happens after the real world event concludes and the result is officially confirmed through reliable, predetermined data sources.

Expiry

The date and time when an event contract stops trading and the market closes permanently. After expiry, no more contracts can be bought or sold, and traders must wait for event resolution to receive their payouts.

Implied probability

The likelihood of the occurrence, non-occurrence, or the extent of the occurrence of a specified event happening – based on current contract prices in the market. For example, if a ‘Yes’ contract costs $0.60, the implied probability is 60%, reflecting what traders collectively think will happen.

Liquidity

How easily you can buy or sell contracts at fair prices without affecting market conditions. High liquidity means many traders are active, allowing you to enter and exit positions quickly without any significant price impact on trades. Low liquidity implies the opposite, though less liquid markets can offer better probabilities.

Market maker

Responsible for the automated systems that provide continuous buy and sell prices for contracts throughout trading hours. Market makers try to make sure you can always trade, even when other users aren't actively buying or selling at that specific moment.

Market price

The current cost to buy a contract, reflecting real time supply and demand conditions. Market prices constantly change as new information emerges, and traders update their predictions about the likelihood of specific event occurrences.

Max payout

The maximum amount you can win from a single contract, typically $1.00 per contract on Predict. For example, if you buy a contract for $0.30 and it wins, your max payout would be $1.00, generating a $0.70 profit. You will generally be able to see your max potential payout before buying the contract.

Open contract

A contract you currently own that hasn't been sold or expired yet. Your open contracts will appear in your portfolio section, representing active positions on various events that haven't concluded or been resolved.

Order book

A list showing all current buy and sell orders for a contract at different price levels. While not always visible to beginners, order book mechanics drive the bid and ask prices you see when trading.

Payout

The money you receive when your contract wins after official event resolution. Winning contracts typically pay out $1.00 each, regardless of what you originally paid to purchase them, minus any platform fees or charges.

Position

Your stake in a particular occurrence, non-occurrence or extent of the occurrence of a specified event, represented by the total number of contracts you own. If you own 10 ‘Yes’ contracts on an event, that represents your position size and exposure in that specific market.

Predict tab

The section of the Crypto.com App where you can access event contract trading. This is your main hub for browsing available events, viewing your current positions, placing trades and managing your portfolio.

Premium

The amount above the theoretical intrinsic value that you pay for a contract. The premium reflects various factors like time remaining until expiry, market volatility and current trader sentiment beyond just basic probability calculations. This is a fairly complex concept for beginners, so you might consider further research.

Price per contract

The cost to buy an individual contract, usually displayed in dollars and cents. If the price per contract is $0.45, you'll pay a total of $4.50 to purchase 10 contracts.

Real-time payout

The current estimated value of your position if the event ended immediately, based on market conditions. This amount fluctuates as market conditions change and helps you decide whether to hold or exit early.

Settlement

The final step where winning contracts are credited to your account balance and losing contracts expire worthless. Settlement occurs automatically after event resolution, when we’ve confirmed whether the defined occurrence took place through official data sources.

Spread

The difference between the highest bid price and lowest ask price for a contract at any given time. Tighter spreads indicate better market liquidity and result in lower trading costs when entering and exiting positions.

Strike

A specific price or threshold level that determines contract occurrences. For example, a contract might have a strike of $100,000 for Bitcoin's price, with ‘Yes’ contracts winning if Bitcoin closes above that level.

Volume

The total dollar amount or number of contracts traded in a specific time period for an event. High volume suggests strong trader interest and typically leads to better pricing conditions, easier trade execution, and early exit if desired.

Wallet balance

The amount of money currently available in your account for trading event contracts. Your wallet balance shows exactly how much you can spend on new positions and gets updated automatically when you receive payouts.

Watchlist

The feature that lets you save and monitor interesting events without trading them. You can use your watchlist to track markets you're considering for future trades or to learn about different types of available events.

Winning probability

The percentage chance that your contract will be successful, calculated based on current market prices. A contract priced at $0.75 has a 75% winning probability according to current market sentiment and trader expectations.

Yes/No 

The two possible results for event contracts available on Predict. ‘Yes’ contracts win if the predicted occurrence happens as specified, while ‘No’ contracts win if the predicted occurrence doesn't happen as stated.

Zero sum market

A trading environment where one trader's profit equals another trader's loss in total. 

Where to learn more

Now that you understand the basic terminology, you're ready to get started with event contract trading. 

Start with how to trade event contracts to learn the step-by-step process of placing your first trade.

Before you begin, make sure you understand the risks involved by reading about event contract trading risks. This will help you trade responsibly and avoid common beginner mistakes.

When you're ready to start trading, check out our guide on how to choose your first event contract. 

This will help you find suitable events that match your knowledge and risk tolerance.

Remember, you can access all event contract trading through the Predict tab in the Crypto.com App. Take your time exploring the platform and use this glossary as a reference whenever you encounter any unfamiliar terms.

Ready to start trading?

1. Download the Crypto.com App
2. Go to the Predict tab
3. Use this glossary while exploring events
4. Place your trade with confidence

Important information: This content is for informational purposes only and does not constitute financial advice. Event Contract markets are volatile and carry risk. Please consult a financial adviser before making investment decisions.

Prediction is an event contract that is a derivatives product offered by Crypto.com | Derivatives North America (CDNA), a CFTC-regulated exchange. Trading on CDNA involves risk and may not be appropriate for all. By trading you risk losing your cost to enter any transaction, including fees. You should carefully consider whether trading on CDNA is appropriate for you in light of your investment experience and financial resources. Any trading decisions you make are solely your responsibility and at your own risk.