I\u2019ve spent more than a decade building analytical tools for options traders. Over the past year, I\u2019ve turned that same lens on prediction markets. What I see is an asset class with extraordinary potential that\u2019s moving fast but still has meaningful gaps to close before it can serve the full range of strategies that options markets support.<\/p>\n
The good news: the exchanges are aware of most of these gaps, and there\u2019s clear evidence that solutions are in development. The prediction market ecosystem is evolving at a pace that few new financial markets have matched, driven by strong institutional interest, growing regulatory clarity, and billions of dollars in investment.<\/p>\n
Here\u2019s what the market needs, and where I think it\u2019s headed.<\/p>\n
For background on prediction market mechanics: What Are Prediction Markets? A Guide for Investors<\/a>. For how they compare to options: Binary Contracts vs. Puts and Calls<\/a>. For why they\u2019re not gambling: Are Prediction Markets Gambling? Why the Framing Is Backwards<\/a><\/p><\/blockquote>\n
Term Structures<\/h2>\n
If you trade options, term structures are part of your daily workflow. You can trade weekly, monthly, and quarterly expirations on the same underlying. The term structure itself contains information: the relationship between short-term and long-term implied volatility tells you something about market expectations for upcoming catalysts, seasonal patterns, and structural risk.<\/p>\n
Prediction markets have some early term structure for recurring events. You can trade Fed rate contracts across multiple upcoming FOMC meetings simultaneously. But the depth and continuity lag far behind options. There’s no equivalent of the weekly\/monthly\/quarterly expiration series that options traders use for calendar spreads and term structure analysis. You get a handful of discrete event dates, not a rich multi-expiration curve to analyze.<\/p>\n
Where it\u2019s headed<\/h3>\n
This is a natural next step for exchanges competing for institutional volume. Kalshi and Polymarket are both expanding their contract offerings rapidly. Recurring economic events like monthly inflation readings, quarterly GDP reports, and regular Fed meetings are obvious candidates for rolling contract series. Some early versions of this are already visible in how both platforms handle sequential economic data releases. As the volume of available contracts grows, the ingredients for meaningful term structures will fall into place.<\/p>\n
Scalar Markets: Beyond Binary<\/h2>\n
Today\u2019s prediction markets are almost exclusively binary: will this happen, yes or no? This is powerful for directional views on specific events, but it limits the expressiveness of the instrument compared to options, where the payoff varies with the magnitude of the underlying\u2019s move.<\/p>\n
This will change. Both Kalshi and Polymarket have built support for scalar markets into their exchange architecture. Scalar markets ask \u201cwhat will the value be?\u201d rather than \u201cwill this happen?\u201d and allow contracts across a continuous range of outcomes. A scalar prediction market on the S&P 500\u2019s year-end level would create a probability distribution across outcome ranges. It would look remarkably like an options chain, but with direct, transparent probability pricing instead of implied volatility calculations.<\/p>\n
Scalar market types already appear in exchange APIs, signaling clear directional intent even if the timeline for full deployment remains uncertain. Given the pace of development at both major exchanges and the clear demand from institutional participants, scalar markets are a \u201cwhen\u201d not an \u201cif.\u201d And when they arrive, they fundamentally expand what\u2019s possible\u2014bringing prediction markets much closer to the expressiveness that options traders need.<\/p>\n
For how binary payoffs currently compare to options payoffs: Binary Contracts vs. Puts and Calls<\/a><\/p><\/blockquote>\n
Rolling and Continuous Strategies<\/h2>\n
Many popular options strategies depend on continuous execution across multiple expirations. The \u201cwheel\u201d strategy, income-focused premium selling, and systematic rolling programs all require a continuous flow of expirations with adequate liquidity.<\/p>\n
Prediction markets can\u2019t fully support this today. The contract lifecycle is typically a single event with a single resolution.<\/p>\n
Where it\u2019s headed<\/h3>\n
As term structures develop, rolling mechanics should follow naturally. If monthly contracts exist on the same theme, the basic ingredients for rolling strategies are in place. Exchanges could even build explicit roll functionality that automatically transitions a position from one contract to the next, similar to how futures platforms handle contract rolling today.<\/p>\n
For more on what works today for income-focused investors and what\u2019s coming: Income Strategies in Prediction Markets: What Works Today and What’s Coming<\/a><\/p><\/blockquote>\n
Contract Granularity and Event Types<\/h2>\n
An options trader on a major stock can choose from hundreds or thousands of strike-expiration combinations. Prediction markets currently offer a fraction of this granularity.<\/p>\n
The market has evolved beyond simple yes\/no propositions into several structural varieties: single-outcome, multiple-outcome, categorical, range, cumulative, and spread events. Each type creates different analytical opportunities.<\/p>\n
Cumulative Thresholds as a Bridge to Scalar<\/h3>\n
Cumulative markets deserve special attention because they\u2019re the closest thing to an options strike chain available today. Contracts like \u201cFed funds rate above 3%\u201d, \u201cabove 4%\u201d, and \u201cabove 5%\u201d on the same event create a de facto strike chain. You can build vertical spreads, sell the tails for iron condor-like structures, and construct defined-risk positions that feel familiar to options income traders. When these cumulative thresholds exist across multiple settlement dates, you get something approaching an expiration cycle.<\/p>\n
Cumulative markets are a meaningful bridge between today\u2019s binary landscape and the full scalar market future. They\u2019re tradeable now, and they reward the kind of spread analysis that options traders already do.<\/p>\n
For specific strategies using cumulative thresholds: Income Strategies in Prediction Markets: What Works Today and What’s Coming<\/a><\/p><\/blockquote>\n
Spread Events and Pair Trading<\/h3>\n
Spread markets, currently most common in sports, compare two outcomes directly: \u201cWill Team A beat Team B by more than 7?\u201d Conceptually, this is pair trading\u2014a direct relative-value bet without needing to construct a long\/short position in separate instruments.<\/p>\n
The interesting possibility is extending spread markets beyond sports. A contract like \u201cWill Stock X outperform Stock Y by more than 500bps this quarter?\u201d would offer direct, transparent relative value without the complexity of constructing a long\/short equity position. This is speculative, but the structural framework already exists and the extension to financial markets is natural.<\/p>\n
Where it\u2019s headed<\/h3>\n
Scalar markets will be the biggest driver of improved granularity. But even within the current framework, both Kalshi and Polymarket are steadily increasing the number of contracts and thresholds available per event. Each quarter brings noticeably more markets with finer-grained outcome ranges. The trajectory is toward the kind of contract richness that supports nuanced multi-leg positions.<\/p>\n
Cross-Event Portfolio Analytics<\/h2>\n
Most prediction market platforms treat each market as an island. There\u2019s no built-in framework for understanding how your positions relate to each other or whether you\u2019re inadvertently concentrated in correlated outcomes.<\/p>\n