Understanding ranges

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Buckets and the curve

A market splits its outcome into buckets of equal width. Together the buckets form a distribution: the market’s current view of where the number will land. Buying a bucket raises its share of the curve and its price; the rest adjust so the curve always sums to one. You take a position on one bucket or a band of adjacent buckets. The band is your range.

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Payoff scales with precision

The tighter your range, the larger the payoff, because fewer outcomes pay it. At a uniform prior:

• 1 bucket of 10 pays 10x.
• 2 buckets of 10 pay 5x.
• 5 buckets of 10 pay 2x.

Payoff = N / k, for k of N buckets, at uniform prior. As others trade, the prior shifts away from uniform and the live payoff moves with it. The app always shows the live number before you confirm.

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Reading the distribution

A tall bucket is where the market expects the outcome. A flat distribution means low conviction; a peaked one means the crowd agrees. Your edge is a range you believe is underpriced relative to where it will actually land. See reading the curve.