> ## Documentation Index
> Fetch the complete documentation index at: https://docs.marketlens.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Prediction markets

> How binary outcome markets differ from spot and futures — dual books, prices from 0 to 1, and matching.

Prediction markets (including Hyperliquid [HIP-4 outcome markets](https://hyperliquid.gitbook.io/hyperliquid-docs/hyperliquid-improvement-proposals-hips/hip-4-outcome-markets) and venues like [Polymarket](https://docs.polymarket.com/concepts/prices-orderbook)) trade **fully collateralized outcome tokens** that settle inside a fixed range. The usual binary case is Yes / No.

They use the same **limit** and **market** order types you already know from [exchanges](/exchanges). The microstructure is different: **two complementary books**, prices only from **0 to 1**, and matching that often links Yes and No.

## Spot and futures vs outcomes

|                            | Spot / perps                       | Binary prediction / outcomes                                                           |
| -------------------------- | ---------------------------------- | -------------------------------------------------------------------------------------- |
| **What you hold**          | Base asset or a leveraged position | Fully backed **Yes** or **No** tokens                                                  |
| **Price domain**           | Open-ended (or exchange-specific)  | Only **from 0 to 1** (e.g. \$0.00–\$1.00 per share)                                    |
| **Price meaning**          | Asset price                        | Often read as **implied probability** of that outcome                                  |
| **Leverage / liquidation** | Common on perps                    | Outcome contracts are **fully collateralized**; no perp-style leverage or liquidations |
| **Settlement**             | Delivery or ongoing mark/funding   | Dated event: Yes pays `settleFraction`, No pays `1 − settleFraction` (binary: 1 and 0) |
| **Books**                  | One bid/ask stack per instrument   | **Two sides** (Yes and No), economically linked                                        |

HIP-4 describes outcomes as contracts that settle within a fixed range, useful for prediction markets and other bounded instruments. Polymarket’s binary markets use the same economic idea: a complete Yes+No set is backed by one unit of collateral.

## Prices from 0 to 1

Each share costs somewhere between **nothing** and **one full unit of quote** (often written like \$0.00 to \$1.00). That scale doubles as a simple probability: 0.25 ≈ 25% chance, 0.75 ≈ 75%.

| Yes price     | Rough reading             |
| ------------- | ------------------------- |
| 0.25 (\$0.25) | About a 25% chance of Yes |
| 0.50 (\$0.50) | Coin-flip                 |
| 0.75 (\$0.75) | About a 75% chance of Yes |

If the event resolves Yes, a Yes token is worth **1** and No is worth **0** (and the reverse if No wins). Before resolution, you can buy or sell either side on the book.

Because Yes and No are complements for a binary market:

```
price(Yes) + price(No) ≈ 1
```

when the books are tight and arbitraged. A bid to buy Yes at `p` is economically the same idea as selling No at `1 − p` (see matching below).

## Dual order books

A binary market has **two tokens** and, from a reading perspective, **two books**:

* **Yes book** — bids and asks on Yes
* **No book** — bids and asks on No

You still place ordinary **bids** (buy) and **asks** (sell) on a chosen side. Depth, spread, and tape exist per side the way they do on spot.

### Why two books?

1. **Two tradeable claims.** Traders express “this happens” or “this does not” without shorting a single unbounded asset in the futures sense.
2. **Bounded risk.** Buying Yes at 0.40 risks at most 0.40 of collateral per share if Yes loses; max win is 0.60 to 1.00. No open-ended mark-to-market like a leveraged perp.
3. **Shared economics.** One unit of collateral can mint a **complete set** (1 Yes + 1 No). That ties the two books together.

On Polymarket, splitting \$1 of collateral creates 1 Yes + 1 No; merging both sides returns \$1. HIP-4 similarly supports split/merge of outcomes and treats the two sides as a dual system.

### Merged liquidity (HIP-4)

Hyperliquid **merges** Yes and No books so they share liquidity. Explicitly:

* Buy Yes at price `p` is equivalent to sell No at price `1 − p`
* Priority on the merged book is **price–side–time**: at the same merged price, resting sells are ranked ahead of dual buy interest

Most trading UX hides that duality; under the hood, a single aggressive order can interact with liquidity that was posted on the other side.

Polymarket’s CLOB is the same **complementary dual-token** model. Infrastructure differs (e.g. offchain matching + onchain settlement on Polymarket vs HyperCore for HIP-4), but the **book logic traders care about** is the same: prices only from 0 to 1, Yes/No complements, complete sets worth 1.

## Limit and market orders

Same verbs as on a CEX:

* **Limit** — rest at your price (or better). Guarantees price, not fill.
* **Market** — take liquidity now. Guarantees urgency, not price.

On Polymarket, “market” orders are typically implemented as aggressive limits that cross the book. HIP-4 outcome trading is API-similar to spot, with outcome-specific asset IDs and dual-book rules.

You can:

* Buy Yes (or No) with a limit or a marketable order
* Sell tokens you already hold
* Provide liquidity on one side while others trade the dual side

## How matching works

### 1. Same-side CLOB matching

On a single side (e.g. Yes only), matching is the usual central limit order book:

1. An incoming **buy** matches the **lowest ask** if the buy price ≥ ask price.
2. An incoming **sell** matches the **highest bid** if the sell price ≤ bid price.
3. Resting orders keep **price–time** priority (on HIP-4’s merged book, **price–side–time** at equal merged price).

Trades print when one side takes the other. Partial fills are normal.

### 2. Complements and complete sets

Because Yes and No sum to one unit of collateral, liquidity can form **across** sides.

Classic complementary match (Polymarket-style price discovery):

1. Trader A bids to **buy Yes at 0.60**
2. Trader B bids to **buy No at 0.40**
3. `0.60 + 0.40 = 1.00` → the system can mint a complete set: A receives Yes, B receives No, \$1 collateral is locked

No one needed a resting ask on Yes if the dual buy completes the set.

Equivalence view (HIP-4 merged book):

* Buying Yes at `p` competes with **selling No at `1 − p`**
* Selling Yes at `p` competes with **buying No at `1 − p`**

So when you read **two books** in MarketLens, you are not looking at two unrelated instruments. You are looking at one bounded market expressed twice, with matching that can cross the dual.

### 3. After the trade

* **Positions** are balances of Yes and/or No tokens.
* **Before settlement**, you can sell on the book, or merge a complete set back to collateral where the venue allows.
* **At settlement**, winning side pays out per the settle rule; the losing side goes to zero.

## Reading dual books in practice

* Tight Yes and No books with midpoints summing near 1 → coherent market.
* Wide spread on one side only → liquidity or inventory is skewed; the dual may still trade.
* Large size on Yes bids near `p` is related to No offers near `1 − p` when books are merged or arbitraged.

For how MarketLens shows HIP-4 markets in the product, see [HIP-4](/hip-4).

## References

* [HIP-4: Outcome markets (Hyperliquid)](https://hyperliquid.gitbook.io/hyperliquid-docs/hyperliquid-improvement-proposals-hips/hip-4-outcome-markets)
* [Polymarket: Prices & order book](https://docs.polymarket.com/concepts/prices-orderbook)
* [Polymarket: Positions & tokens](https://docs.polymarket.com/concepts/positions-tokens)