A binary market allows traders to buy or sell contracts tied to a question with only two possible outcomes. These markets are common in prediction markets, event-driven trading platforms, and certain derivatives exchanges. The contracts typically settle at a fixed value—often 0 or 1, or 0 and 100—depending on whether the event occurs.
The price of a binary contract represents the market’s estimated probability of the event happening. For example, if a contract trades at 0.65, the market is implying a 65% chance the event will occur. Traders can take positions based on how they believe the probability will change as new information becomes available.
Binary markets are used for forecasting elections, economic data releases, interest rate decisions, crypto events, and many other measurable outcomes. They simplify the trading structure by focusing only on probability rather than full price movement, volatility, or order-book complexity.
Binary markets help traders, researchers, and analysts measure real-time probability of future events. They also support quantitative models that require clean probability estimates rather than traditional price data.
Binary market prices map directly to implied probability because each contract settles at a fixed value. If a contract settles at 1 when the event occurs and 0 if it does not, then a price of 0.40 reflects a 40% market-implied probability. Traders refine these probabilities continuously as new information enters the market, making binary markets a dynamic forecasting tool rather than a standard trading venue.
Prices move when new data, rumors, statistical updates, or market sentiment changes affect the perceived likelihood of an outcome. For example, an upcoming economic report, breaking political news, or shifts in broader market conditions can cause large probability adjustments. Because binary outcomes are absolute, even small pieces of information can meaningfully shift expectations.
Binary markets focus solely on the probability of an outcome, not on complex price levels or multi-directional movement. Unlike stocks or currencies, where value can rise or fall indefinitely, binary markets always converge to one of two final settlement points. This structure reduces pricing complexity and allows traders to concentrate on forecasting accuracy rather than long-term price behavior.
A prediction market lists a binary contract asking whether a central bank will raise interest rates at its next meeting. If the contract trades at 0.72, the market believes there is a 72% chance of a rate hike. After the meeting, the contract settles at 1 if the rate hike happens and 0 if it does not.
FinFeedAPI’s Prediction Market API provides real-time and historical data for binary contracts across various platforms. Developers use this data to build forecasting tools, analyze probability trends, and evaluate how markets update expectations in response to new information.
