What is an Event Contract?

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Key Takeaways:

• An event contract is a derivative that pays out when an event occurs or does not occur.
• The price of a contract reflects the probability that the event will occur.
• Contract prices can fluctuate between $0 and $100.

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An event contract is a financial instrument whose payout is based on the outcome of an event; hence the name “event contracts.” You can buy and sell these contracts on a market the same way you can buy and sell stocks or crypto. The prices of these markets reflect the collective expectations for the likelihood that the event will occur. 

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Event contracts can be simple Yes/No propositions such as “Will the U.S. enter a recession in 2024?” with a $100 payout to the correct side per contract. Traders can take either the “Yes” or “No” side of the contract, depending on their view of the event. Before the market settles, contract prices can fluctuate between $0 and $100, reflecting market sentiment. For instance, a Yes side priced at $60.00 indicates a 60% market belief in a U.S. recession in 2024.

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Event contracts are a direct and simple way to trade on your predictions. Join our waitlist now to earn referral bonuses once Railbird launches in 2024!