Shorting

Shorting lets you take the opposite side of a market by selling a Yes or No contract without owning it. You receive the sale price immediately, and margin is locked to cover the maximum amount you can lose at settlement.

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What Margin Means

Margin is the amount locked to cover your maximum possible loss on a short position. Because every contract settles at $1 or $0, the maximum loss is defined upfront.

• If you short Yes at $0.60, your maximum loss is $0.40.
• If you short No at $0.30, your maximum loss is $0.70.

Margin equals your maximum possible loss. Margin is unlocked as you reduce the position and fully unlocked when you close it.

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Short Mechanics

When you short a contract:

• You receive the sale price as cash
• Margin is locked equal to your maximum possible loss
• Your payoff is determined by the fixed $1 or $0 settlement

Example: You short Yes at $0.60.

• Cash received: $0.60 (immediately credited to your account)
• Margin locked: $0.40 (held to cover potential loss if Yes wins)
• Total exposure: $1.00 ($0.60 received + $0.40 locked)

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Payoff Model

Shorting has a fixed payoff because every contract settles at $1 or $0.

• The most you can gain is the sale price you received
• The most you can lose is the margin locked
• Your maximum possible loss is determined when you open the short and only decreases when you reduce your exposure
• Price changes after shorting a contract have no effect on your margin locked

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Buying Power

After you short a contract, your buying power reflects the portion of your balance not locked as margin. You can use it to reduce your short positions or margin, but not to open new positions.

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Reducing or Closing a Short

You can reduce or close a short at any time by buying back the contracts you sold. Examples

1. Short 1 Yes, buy back at at a lower price
   Your exposure is closed.
2. Short 10 Yes, buy back 4
   Your remaining exposure decreases, and some margin is unlocked.

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Shorting vs Buying the Opposite Side

Shorting Yes and buying No express the same directional view but use different cash-flow structures. Both positions have the same payoff because of the fixed $1 or $0 settlement.

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Why Shorting Exists

Shorting lets you express the same market view using different liquidity and pricing mechanics. In many markets, selling one side provides better depth, tighter spreads, or more favorable execution than buying the opposite side.