When to distrust the odds
Prices are a strong signal, not gospel. The handful of situations where they go wrong.
Thin markets are noisy
Low volume and low liquidity mean a wide spread and a price that a single large trade can shove around. A number with little money behind it is a rough guess — weight it accordingly.
Manipulation happens
Because anyone can trade, a big player can push a price for attention or advantage — documented from the 2004 Tradesports election “bear raid,” where a trader briefly hammered a contract to zero, to large-position “whale” episodes on modern venues. Deep, liquid markets absorb this; thin ones don't. Regulated exchanges are required to monitor for it.
The favorite-longshot bias
Crowds tend to slightly overprice unlikely outcomes and underprice near-certain ones — a long-documented pattern. So treat the extremes (very low and very high prices) as a little fuzzier than they look.
Far-off events drift
For events years away, money is tied up for a long time, so fewer people trade and prices are noisier and slower to update. Near-term markets are usually sharper.
Resolution risk is the big one
The costliest surprise is a market resolving against what looked obvious, because of a wording edge case. Always read the criteria — see “How markets resolve.”
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