Fair Price

Definition

A fair price is the price that corresponds to your predicted probability on the same price scale. If your probability is 0.55, the fair price is 55 on a 0 to 100 scale.

Why it matters

Fair price turns an abstract belief into a number you can compare to the market price. The difference between fair price and market price is your edge, before costs.

Costs and break even

Even if your fair price is above the market price, fees and bid ask spread raise the break even probability. Always check break even when spreads are wide.

Common pitfalls

Comparing across platforms: Fee rules and scales differ.

Ignoring execution: If you trade at ask instead of mid, your fair price comparison changes.