Every contract in this module—binary, categorical, scalar, spread, prop, conditional, tree node, or bundle—is a promise to pay at a clock event. Traders who master expiration keep capital working; traders who confuse close, determination, and settlement eat stale marks, voids, and frozen wallets.
Three clocks, not one
Expiration (or trading close) is when new risk typically stops or liquidity thins. Determination is when the outcome is selected under the rulebook—official data feed, race call per rules, oracle assertion. Settlement is when winners receive $1 (or proportional scalar pay) and losers zero, minus fees.
“Expires Friday” might mean no more trades Friday but payout Tuesday after revisions. On-chain venues add a challenge window between determination and redeemable cash—selling at 97¢ before dispute can beat waiting for $1 uncertain.
Binary settlement recap
YES wins → $1 per share; NO wins → $0 for YES holders. Void or invalid may refund entry per rules rather than forcing a side to lose—model that tail in expected value, not only win/lose.
Hold return is (payout − entry − fees) / entry. At open you use forecast edge; near expiry variance collapses toward 0 or 1.
Categorical, scalar, and bundle payoffs
Categoricals pay $1 on the winning label only. Scalars pay full or partial per band or formula—read whether settlement is stepwise or linear. Bundles often pay all-or-nothing on AND structures; one ambiguous leg can void the ticket.
Illustrative scalar: you hold the center CPI bracket bought at 62¢; the print lands in band → $1 payout, 38¢ profit per share before fees. Wrong band → $0, lose 62¢.
Early clinch and determined-early trading
When math or official calls make an outcome nearly certain, price may pin near 99¢. Media excitement is not exchange determination—rulebooks specify the data source. Exchanges sometimes halt trading; sometimes you can still sell at 98¢ and recycle capital. Fee on exit versus wait for final credit matters; dispute tail on ambiguous props can make certain less than $1 rational.
A Fed cut on announcement day might trade 99¢ while settlement waits for the official statement window—know which clock you are on.
Collateral lock-up
Regulated USD wallets release after exchange settlement rails. Crypto markets hold USDC in contracts until redemption clears challenges. Market makers on AMMs lock liquidity until resolution; CLOB makers may offset faster if they can trade out.
Tree positions settle legs on different dates—capital strands on slow children while fast legs already paid. Bundles pay at the slowest leg’s timeline.
Worked timeline in dollars
Buy 100 YES at 55¢ on “Fed cuts by September” with 1¢ illustrative round-trip fee. July open: cost $55 plus fee. September determination YES: mark nears $1. Sell at 97¢ versus hold to $1—$97 now versus $100 later minus fees. If a challenge window exists on-chain, 97¢ certain can dominate $100 uncertain.
Partial settlement and pro-rata
Ambiguous resolution may trigger void all refunds. Delisted markets may force exit at last trade. Academic-style caps historically delayed settlement—time value of locked capital is part of return.
One leg of a bundle failing ambiguity may void the whole combo—read combo rules before tying up bankroll.
Tax and reporting awareness
PnL often realizes at settlement, not open. Regulated venues may issue tax forms. Crypto redeem is a taxable event in many jurisdictions—flag for your accountant when scaling; this is not legal advice.
Platform rhythm
Regulated U.S. exchanges emphasize fast USD determination on listed feeds. Crypto-native markets tie determination to oracle assertion plus challenge bonds. Decentralized reporting adds invalid as a frequent outcome on bad design. Speed and dispute exposure differ; payoff algebra does not.
Post-close trading illusions
After trading halts, last marks may sit at 99¢ while you cannot exit. News can still change dispute risk before settlement. Do not redeploy capital marked as free until wallets credit.
Mark-to-market before settle
Last trade before halt may be 99¢ while you cannot exit. Marks are not cash. Tree legs settling on different nights strand capital on slow nodes while fast legs already paid.
Scalar partial payouts
Linear scalar settlement pays fractions inside bands—your PnL is not only zero or one. Read the formula before holding through the print.
Bundle slow leg
AND bundles settle when the last leg determines. Your capital follows the slowest clock in the package.
Logging for calibration
Brier and log scores use settled truth. Record settlement date and whether the market voided—forecast quality is measured on final outcomes, not on pre-dispute headlines.
Core concepts to remember
Expiration, determination, and settlement are three clocks. Void and invalid are real outcomes. Tree and bundle capital follows the slowest leg. Selling at 97¢ can beat disputed $1.
Common mistakes
Treating 99¢ as risk-free before official determination. Forgetting void on cancelled props. Assuming instant wallet credit on headline day. Redeploying while dispute bonds lock collateral.
What comes next
Settlement should be the last chapter of a trade—unless someone argues the outcome does not match the rules.
Next: How Disputes Are Handled (Centralized vs. Decentralized)