Modified on: Tue, 26 Jul, 2016 at 3:24 PM
Trading shares in markets with multiple contracts works a little bit differently than in those with only one contract. The mechanics of buying and selling are the same, but because the outcomes of the contracts are linked—only one contract can resolve to ‘Yes’, all others to ‘No’—PredictIt debits your account based on your risk in the market overall. This is often much lower than the face value of your shares.
Which state will have the highest voter turnout
Imagine that you decide to participate in the market above by buying five shares of No in Iowa for 80 cents each. PredictIt would debit the full cost ($4) from your account.
Then you decide to buy the four shares of No in Wisconsin for 75 cents each. Instead of debiting you an additional $3, PredictIt would credit you 90 cents.
Why? Because now the most you can possibly lose in this market—your maximum level of risk—is $3.10. (If Iowa has the highest turnout, you will make a 90 cent profit (including PredictIt’s trading Fee) on your Wisconsin shares, but lose your $4 investment in Iowa.) That’s 90 cents less than the $4 deducted for your initial Iowa shares, hence the credit.
You will see the adjustment to your risk when you are asked to confirm the purchase of the Wisconsin shares.
A detailed calculation of your overall risk in each market is available on My Shares and on the relevant market and contract pages.
Selling shares involves the same recalculation of risk. Just as it is possible to buy shares while lowering risk, you could sell shares but have your risk increase, requiring PredictIt to debit your account for the difference. If you do not have sufficient funds to cover the increase in risk, the offer will not be processed.
If you sell shares at a loss, funds necessary to cover the loss will be deducted at the time of sale.
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