Definition

The spread in prediction market arbitrage is the gap between $1.00 (the guaranteed settlement value of any binary contract) and the combined cost of buying both sides across two platforms. It represents the gross profit available before fees.

Formula

Gross spread = 1.00 − (YES price on Platform A + NO price on Platform B)

Example: YES at $0.46 + NO at $0.52 = $0.98 combined. Gross spread = $0.02 (2%).

Gross vs net spread

The gross spread is before fees. The net spread (what you actually pocket) subtracts all platform fees:

Net spread = Gross spread − fees on both legs

If gross spread is 2% and combined fees are 1.5%, net spread is 0.5%. Only opportunities with positive net spread are worth trading.

Typical spread sizes

Thin markets: 0.5–1.5% gross spread — often not worth trading after fees
Normal markets: 1.5–4% gross spread — viable after fees
Active periods (elections, Fed decisions): 4–10% gross spread — most profitable

Why spreads exist

Price divergence between platforms is caused by independent liquidity pools, different user bases with different information, and different fee structures affecting where traders choose to place bets. Spreads persist until an arbitrageur closes them — or until one platform's traders update their prices.