A favorite can lose everything committed
In a fully paid purchase of a simple binary contract, a losing outcome can consume the entire purchase cost and fees. A high price leaves relatively little possible upside while much of the purchase price remains at risk.
For example, a 95¢ purchase can earn 5¢ at winning $1 settlement or lose 95¢ at losing settlement before fees. A high implied probability should not be confused with a capital guarantee. Leveraged or more complex products require a different loss analysis.
Many positions can share one risk
Ten different market titles do not necessarily create ten independent exposures. Multiple contracts may depend on the same election, weather system, data release, or economic development.
A useful hypothetical stress test is to change one underlying assumption and inspect every affected position. Counting contracts alone can hide concentration. The combined result matters more than the number of rows in a portfolio.
Your exit may be unavailable
A plan to sell later depends on trading access and willing counterparties. Kalshi’s member agreement describes electronic trading failures that can prevent order entry, modification, cancellation, or access to data. It also warns about a lack of bids and offers.
A limit controls an acceptable price if it executes. It cannot guarantee a willing buyer. A displayed mark should not be treated as cash already available for withdrawal.
The operating system matters
Separate event risk from the infrastructure holding or moving funds. Read the actual custody arrangement, withdrawal rules, dispute terms, and account security requirements. For a blockchain product, understanding the token, wallet, network, and redemption process is part of understanding the instrument.
An operational failure and an incorrect forecast are different problems. Both can affect the money ultimately recovered. Platform documentation is the starting point for identifying how each is handled.
Keep uncertainty visible
Record the rule you relied on, your reasoning, the price actually paid, and total costs. Reviewing that record after settlement can distinguish a mistaken forecast from misunderstood rules or poor execution.
The CFTC advises using risk capital and being alert to pressure, unrealistic payoff claims, and counterfeit apps. Educational examples here are intended to make uncertainty easier to understand; they do not identify suitable trades for an individual reader.
Sources & further reading
- Kalshi — Member agreement and electronic trading risk disclosure
- CFTC — Customer rights and risk considerations
- Polymarket — Resolution and redemption
Platform terms and rules can change. Check the linked primary sources and the specific contract before relying on a detail. How we work →