Custom Markets

Comprehensive guide to trading multi-choice prediction markets on Veyra.

What are Custom Outcome Markets?

Definition

Custom outcome markets allow trading on events with 3 or more possible outcomes, unlike binary YES/NO markets.

Example:

Question: "Who will win the 2026 NBA Championship?"

Outcomes:
- Boston Celtics: $0.22 (22%)
- Los Angeles Lakers: $0.18 (18%)
- Denver Nuggets: $0.15 (15%)
- Milwaukee Bucks: $0.12 (12%)
- Phoenix Suns: $0.10 (10%)
- Other Team: $0.23 (23%)

Total: $1.00 (always)

How They Work

Share Value:

Each outcome is a separate market
Buy shares of any/all outcomes
Only ONE outcome will resolve to $1.00
All others resolve to $0.00

Winning Example:

You bought:
- 50 Lakers shares at $0.18 = $9.00
- 30 Celtics shares at $0.22 = $6.60
Total investment: $15.60

Lakers win championship:
- Lakers shares: 50 × $1.00 = $50.00
- Celtics shares: 30 × $0.00 = $0.00

Payout: $50.00
Profit: $50.00 - $15.60 = $34.40 (220% ROI)

Types of Custom Markets

1. Categorical Markets

Multiple distinct options

Example: Presidential Nominee

"Who will be the Democratic nominee?"

Candidates:
- Candidate A: $0.35
- Candidate B: $0.28
- Candidate C: $0.20
- Candidate D: $0.12
- Other: $0.05

2. Range Markets

Price or value ranges

Example: Bitcoin Price

"Bitcoin price on Dec 31, 2025?"

Ranges:
- Below $100K: $0.15
- $100K-$150K: $0.45
- $150K-$200K: $0.30
- Above $200K: $0.10

3. Ranking Markets

Order of finish

Example: Award Show

"Best Picture Oscar 2026?"

Movies:
- Drama A: $0.30
- Thriller B: $0.25
- Comedy C: $0.20
- Biopic D: $0.15
- Other: $0.10

4. Time-Based Markets

When will event occur

Example: Product Launch

"When will Tesla FSD launch?"

Dates:
- Q1 2026: $0.15
- Q2 2026: $0.35
- Q3 2026: $0.25
- Q4 2026: $0.15
- Later: $0.10

Trading Strategies

1. Top Pick Strategy

Back the most likely winner

Approach:

1. Identify most likely outcome
2. Buy large position
3. Hold until resolution
4. High conviction play

Example:

Market: NBA Championship
Your analysis: Celtics have 30% chance
Market price: $0.22 (22%)

Mispricing: 30% - 22% = +8%
Action: Buy 100 Celtics shares
Cost: $22

If correct:
Payout: $100
Profit: $78 (354% ROI)

2. Hedging Strategy

Buy multiple outcomes

Approach:

1. Buy top 2-3 outcomes
2. Reduce risk
3. Lower return but higher probability
4. Insurance play

Example:

Buy:
- Lakers: 30 shares at $0.18 = $5.40
- Celtics: 30 shares at $0.22 = $6.60
- Nuggets: 30 shares at $0.15 = $4.50

Total cost: $16.50

If any wins:
Payout: $30
Profit: $13.50 (82% ROI)

Probability: 55% (combined)

3. Value Hunting

Find underpriced outcomes

Approach:

1. Research each outcome
2. Calculate true probability
3. Compare to market price
4. Buy undervalued options

Example:

Outcome: Milwaukee Bucks at $0.12
Your analysis: 18% chance

Value: 18% - 12% = +6%
Expected value:
(0.18 × $1.00) - $0.12 = +$0.06 per share

Positive EV → Buy!

4. Arbitrage Between Outcomes

Exploit pricing inefficiencies

Check Total Prices:

Sum of all outcomes should = $1.00

If < $1.00: Arbitrage opportunity
Buy all outcomes, guaranteed profit

If > $1.00: No arbitrage
Prices will correct

Example Arbitrage:

NYC Mayoral Election:
- Candidate A: $0.30
- Candidate B: $0.25
- Candidate C: $0.20
- Candidate D: $0.15
- Other: $0.08

Total: $0.98

Arbitrage:
Buy 1 share of each: $0.98
Guaranteed payout: $1.00
Risk-free profit: $0.02 (2%)

Scale up:
100 shares each: $98
Payout: $100
Profit: $2

5. Swing Trading

Trade on momentum

Approach:

1. Watch for price movements
2. Buy rising outcomes
3. Sell when momentum fades
4. Don't hold to resolution

Example:

Day 1: Candidate polling improves
Price: $0.15 → $0.18

Day 2: More positive news
Price: $0.18 → $0.22

Day 3: Momentum peaks
Sell at: $0.22

Bought: 100 shares at $0.15 = $15
Sold: 100 shares at $0.22 = $22
Profit: $7 (47% ROI in 3 days)

Advanced Concepts

Portfolio Allocation

How to distribute capital:

Proportional Betting:

Allocate based on conviction:

Top choice: 40% of budget
2nd choice: 30% of budget
3rd choice: 20% of budget
4th choice: 10% of budget

Example:

Budget: $100

Allocate:
- Lakers ($0.18): $40 = 222 shares
- Celtics ($0.22): $30 = 136 shares
- Nuggets ($0.15): $20 = 133 shares
- Bucks ($0.12): $10 = 83 shares

Total: 574 shares across 4 outcomes

Expected Value Calculation

For each outcome:

EV = (Your Probability × $1.00) - Market Price

Positive EV = Good bet
Negative EV = Avoid

Example:

Lakers at $0.18:
Your belief: 25% chance
EV = (0.25 × $1.00) - $0.18
   = $0.25 - $0.18
   = +$0.07 per share

Positive EV of $0.07!

Buy 100 shares:
Expected profit: $7

Correlation Analysis

Related outcomes:

Example: Political Markets

Market A: "Democrat wins Presidency"
Market B: "Democrat wins Senate"

Positive correlation:
If A likely, B also more likely

Strategy:
If betting on Democrat President,
consider also betting on Democrat Senate

Example: Sports Markets

Market A: "Lakers win West"
Market B: "Lakers win Championship"

Strong correlation:
Can't win Championship without winning West

Strategy:
If Lakers win West is mispriced,
Championship market might be too

Risk Management

Diversification

Don't put all eggs in one basket:

Bad: 100% on one outcome
Good: Spread across 3-5 outcomes

Example:
- 30% on top choice
- 25% on 2nd choice
- 20% on 3rd choice
- 15% on 4th choice
- 10% on 5th choice

Position Sizing

How much per outcome:

Conservative:

Max per outcome: 10% of bankroll
Total per market: 30% of bankroll

Moderate:

Max per outcome: 20% of bankroll
Total per market: 50% of bankroll

Aggressive:

Max per outcome: 30% of bankroll
Total per market: 80% of bankroll

Stop Loss Strategy

When to exit:

If outcome drops to 50% of purchase price:
→ Re-evaluate
→ Sell if fundamentals changed
→ Hold if still confident

Example:
Bought at: $0.20
Drop to: $0.10 (50% loss)

Decision:
- New information? → Sell
- Market overreaction? → Hold/Buy more

Real-World Examples

Example 1: NYC Mayoral Election

Market Setup:

19 candidates running
Top 5:
- Zohran Mamdani: $0.943
- Andrew Cuomo: $0.057
- Eric Adams: $0.005
- Curtis Sliwa: $0.005
- Other: $0.001

Analysis:

Mamdani is heavily favored
But small hedge on Cuomo might be valuable

Strategy:
- 90 Mamdani shares at $0.943 = $84.87
- 10 Cuomo shares at $0.057 = $0.57

Total: $85.44

If Mamdani wins (94.3% chance):
Payout: $90
Profit: $4.56 (5.3% ROI)

If Cuomo wins (5.7% chance):
Payout: $10  
Loss: -$75.44

Expected Value:
(0.943 × $4.56) + (0.057 × -$75.44)
= $4.30 - $4.30
= ~$0 (fair market)

Example 2: Bitcoin Price Range

Market Setup:

"Bitcoin price Dec 31, 2025?"

Ranges:
- Below $100K: $0.15
- $100K-$150K: $0.45
- $150K-$200K: $0.30
- Above $200K: $0.10

Your Analysis:

Based on:
- Halving cycle
- ETF inflows
- Institutional adoption

Your probabilities:
- Below $100K: 10%
- $100K-$150K: 40%
- $150K-$200K: 35%
- Above $200K: 15%

Value Plays:

$150K-$200K:
Market: $0.30 (30%)
Your belief: 35%
Value: +5%

Above $200K:
Market: $0.10 (10%)
Your belief: 15%
Value: +5%

Strategy:
- 50 shares $150K-$200K at $0.30 = $15
- 50 shares Above $200K at $0.10 = $5
Total: $20

Best case (Above $200K):
Payout: $50
Profit: $30 (150% ROI)

Worst case (neither):
Loss: -$20

Example 3: FIFA World Cup Winner

Market Setup:

7 main contenders:

- Brazil: $0.25 (25%)
- Argentina: $0.22 (22%)
- France: $0.18 (18%)
- Germany: $0.12 (12%)
- Spain: $0.10 (10%)
- England: $0.08 (8%)
- Other: $0.05 (5%)

Hedging Strategy:

Buy top 3 favorites:

- 20 Brazil at $0.25 = $5.00
- 20 Argentina at $0.22 = $4.40
- 20 France at $0.18 = $3.60

Total: $13.00

Coverage: 65% probability

If any wins:
Payout: $20
Profit: $7 (54% ROI)

If other wins (35% chance):
Loss: -$13

Expected Value:
(0.65 × $7) + (0.35 × -$13)
= $4.55 - $4.55
= ~$0 (fair)

Market-Making in Custom Markets

Providing Liquidity

How it works:

1. Place limit orders for all outcomes
2. Earn spread between buy/sell
3. Manage inventory risk
4. Continuous adjustment

Example:

Outcome: Lakers
Market: $0.18

Your orders:
Buy: 100 shares at $0.17
Sell: 100 shares at $0.19

Spread: $0.02 per share

If both fill:
Bought: $17
Sold: $19
Profit: $2 (11.7%)

Risk for Market Makers

Inventory Risk:

You accumulate shares of losing outcomes
Must hedge or accept losses

Example:
Sold 100 Lakers at $0.19
Now short 100 shares

If Lakers win:
Must pay: $100
Received: $19
Loss: -$81

Must buy back shares to hedge!

Common Mistakes

1. Ignoring Math

Problem:

❌ Not checking if prices sum to $1.00
❌ Not calculating expected value
❌ Not understanding probability

Solution:

✅ Always verify total = $1.00
✅ Calculate EV for each bet
✅ Learn basic probability

2. Over-Diversification

Problem:

❌ Buying too many outcomes
❌ Diluting returns
❌ Approaching 100% coverage (bad math)

Example:

Buying all outcomes:
Cost: $1.00
Payout: $1.00
Profit: $0 (minus fees!)

Worse than doing nothing!

Solution:

✅ Focus on 2-4 outcomes
✅ Choose highest value plays
✅ Accept some risk

3. Recency Bias

Problem:

❌ Overweighting recent events
❌ Following momentum blindly
❌ Ignoring base rates

Solution:

✅ Look at historical data
✅ Consider long-term trends
✅ Don't chase pumps

Tools & Resources

Research Tools

For Sports:

Team statistics sites
Injury reports
Historical matchups
Expert analysis

For Politics:

Poll aggregators
Betting odds
Historical election data
News sources

For Crypto:

On-chain analytics
Technical analysis
Social sentiment
Regulatory tracking

Calculation Tools

Expected Value:

EV = Σ (Probability × Payout) - Cost

For each outcome:
EV = (P × $1.00) - Price

Kelly Criterion:

Kelly% = (Edge / Odds) × 100

Edge = Your probability - Market probability
Odds = (1 - Price) / Price

Portfolio Tracker:

Spreadsheet with:
- All positions
- Entry prices
- Current prices
- Unrealized P&L
- Position sizes

Advanced Tips

💡 Tip 1: Look for "Other" Value

Often "Other" outcome is mispriced
Market focuses on favorites
"Other" includes many possibilities

Example:
Top 5 candidates: 77%
Other: 23%

But 14 other candidates exist!
Each has small chance, but combined = 23%

Value play if you think field is stronger

💡 Tip 2: Early vs Late Entry

Early (right after creation):
- Lower prices
- Higher uncertainty
- More mispricing
- Better value

Late (near resolution):
- Higher prices
- More certainty
- Efficient pricing
- Lower returns

Strategy: Buy early, sell before resolution

💡 Tip 3: Watch for News

Custom markets react to events:

Candidate drops out:
- Their shares → $0
- Others increase proportionally
- Opportunity to rebalance

New information:
- Odds shift
- Quick traders profit
- Slow traders lose

Continue Learning:

Markets & Trading - General strategies
Portfolio Management - Track multiple positions
API Reference - Automate trading

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Last updated 1 month ago

Good evening

What are Custom Outcome Markets?

Definition

How They Work

Types of Custom Markets

1. Categorical Markets

2. Range Markets

3. Ranking Markets

4. Time-Based Markets

Trading Strategies

1. Top Pick Strategy

2. Hedging Strategy

3. Value Hunting

4. Arbitrage Between Outcomes

5. Swing Trading

Advanced Concepts

Portfolio Allocation

Expected Value Calculation

Correlation Analysis

Risk Management

Diversification

Position Sizing

Stop Loss Strategy

Real-World Examples

Example 1: NYC Mayoral Election

Example 2: Bitcoin Price Range

Example 3: FIFA World Cup Winner

Market-Making in Custom Markets

Providing Liquidity

Risk for Market Makers

Common Mistakes

1. Ignoring Math

2. Over-Diversification

3. Recency Bias

Tools & Resources

Research Tools

Calculation Tools

Advanced Tips

💡 Tip 1: Look for "Other" Value

💡 Tip 2: Early vs Late Entry

💡 Tip 3: Watch for News