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identifying-positive-ev

Finding +EV: Stop Guessing, Start Calculating

📅 Dec 24, 2024✍️ Poly Team⏱ 18 min read

In the world of professional betting and trading, there is only one term that matters: +EV (Positive Expected Value). If you only take trades with a positive expected value, you are mathematically guaranteed to make money over time. If you take -EV trades, you are just a gambler waiting for the house to win.

What exactly is EV?

Expected Value is the amount you can expect to win or lose on average if you were to place the same bet thousands of times. It’s a simple calculation of probability vs. payout.

The Coin Flip Example

Imagine I offer you a bet: We flip a fair coin (50/50). If it’s heads, I pay you $1.10. If it’s tails, you pay me $1.00.

  • Win: 50% chance of +$1.10 (0.5 * 1.10 = 0.55)
  • Loss: 50% chance of -$1.00 (0.5 * -1.00 = -0.50)
  • EV: +$0.05 per flip.

This is a +EV trade. Even if you lose the first flip, you should keep taking this bet until I run out of money.

Applying +EV to Prediction Markets

This is where it gets fun. A prediction market gives you the "market probability." If a share is 60¢, the market says there’s a 60% chance. Your job is to find instances where the actual probability is higher than the market says.

If you’ve done your research and you are 80% sure an event will happen, but the shares are only 60¢, you have found a massive +EV opportunity. You aren't "betting" that it will happen; you are "buying" probability at a discount.

Common Places to Find +EV

  • Specialized Knowledge: You follow a specific industry or niche closer than the general public.
  • Speed: Major news breaks, and you react before the market bots have fully adjusted the price.
  • Sentiment Overreaction: The crowd gets emotional (fear or hype) and pushes the price too far in one direction.

The Discipline to Wait

The hardest part of +EV trading is doing nothing. Some days, there are no mispriced markets. A pro trader is like a sniper; they wait hours for the one shot where the math is on their side. If you feel like you "have" to trade, you’re probably looking for entertainment, not profit.