Tradesports betting markets are binary in nature. This means they present propositions to which there are only two possible outcomes - either YES or NO. For example:
- The New England Patriots to win the Super Bowl
- Packers at Bears - Packers to win by more than 3.5 points
- Red Sox at Yankees - Over 9.5 runs scored in the game
There are two possible outcomes to each of these propositions - yes, the proposition will happen as described, or no, it will not happen. The Patriots will either win the Super Bowl or they won't. The Packers will either beat the Bears by more than 3.5 points or they won't. You get the idea.
This allows you take a clear position on each proposition - you either believe the proposition will happen, or it won't happen. You then back up your belief by buying or selling shares in the market. Your opinion on what the outcome of the underlying event will determine whether you buy shares or sell shares:
- If you believe the market proposition will happen then you BUY shares
- If you believe the market proposition will not happen then you SELL shares
(Yes, you can sell shares before you own them. This is known as "short selling" and is explained further HERE.)
- If you believe the Patriots will win the Super Bowl then you will BUY shares.
- If you believe the Patriots will not win the Super Bowl then you will SELL shares
- YES, the market proposition has happened - the market will be settled at $10.00
- NO, the market proposition has not happened - the market will be settled at $0.00
For example, the market for the Patriots to win the Super Bowl. If the Patriots win then the market will settle at $10.00. If they do not win the market will settle at $0.00.
Let's say you believe the Patriots will win the Super Bowl, so you buy shares. If the Patriots do win the Super Bowl the market will settle at $10.00 and you will have a profit. How much of a profit will depend on the price you paid for the shares. But if the Patriots do not win the Super Bowl the market will settle at $0.00 and you will lose.