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

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Continue Learning:

• Markets & Trading - General strategies

• Portfolio Management - Track multiple positions

• API Reference - Automate trading