Kelly Criterion Calculator
Find the mathematically optimal bet size for any prediction market trade. Accounts for platform fees on Kalshi and Polymarket.
High Kelly percentage
Full Kelly suggests betting >25% of bankroll. This is very aggressive — consider using half or quarter Kelly to reduce variance and protect against estimation errors.
No Bet
Negative expected value — Kelly says don't bet.
Optimal Bet Sizing
Risk Comparison
| Fraction | Bet Size | Contracts | Growth |
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How the Kelly Criterion Works
The Kelly criterion, developed by John Kelly at Bell Labs in 1956, answers a fundamental question: given a bet with positive expected value, how much should you wager? Bet too little and you leave growth on the table. Bet too much and a losing streak can devastate your bankroll.
The formula finds the fraction of your bankroll that maximizes the expected logarithm of wealth — in other words, the fastest long-term growth rate. For a simple binary bet, the Kelly fraction is: f = (bp - q) / b, where b is the net odds (profit per dollar risked), p is the probability of winning, and q = 1 - p is the probability of losing.
In prediction markets, b = ((1 - price) × (1 - feeRate)) / price. So a $0.40 contract on Kalshi has b = (0.60 × 0.93) / 0.40 = 1.395. If you think the true probability is 55%, Kelly recommends f = (1.395 × 0.55 - 0.45) / 1.395 = 22.7% of your bankroll.
Why Use Fractional Kelly?
Full Kelly assumes your probability estimate is perfectly accurate. In practice, it almost never is. Half Kelly (betting half of what Kelly recommends) achieves about 75% of the optimal growth rate but with significantly less variance. Quarter Kelly is even smoother. Most professional traders use half Kelly as a baseline and adjust down for uncertainty.
Frequently Asked Questions
What is the Kelly criterion?
The Kelly criterion is a formula for optimal bet sizing that maximizes long-term growth of your bankroll. It tells you what fraction to risk on each bet given the odds and your estimated probability of winning, balancing growth and risk of ruin.
Should I use full Kelly or fractional Kelly?
Most professionals use half or quarter Kelly. Full Kelly maximizes growth but assumes your probability estimates are perfect. Half Kelly gives ~75% of the growth rate with much lower variance and is the most common recommendation.
How do I apply Kelly to prediction markets?
The contract price determines your odds. A $0.40 YES contract gives net odds of (0.60 × (1 - fee)) / 0.40. Estimate the true probability, plug in the values, and Kelly tells you what fraction of your bankroll to risk. Account for platform fees — Kalshi charges 7% on profits.