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Shorting lets you take the opposite side of a market by selling a yes contract without owning it. You receive the sale price immediately, and margin equal to the full payout value ($1.00 per contract) is locked to cover your potential obligations at settlement. Shorts are created by selling yes contracts and posting $1.00 margin per contract. The collateral requirement is the full payout value ($1.00), not max loss. There is no collateral release from offsets or favorable price moves.

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Trading Examples

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Buying yes at $0.60 (Long Position)

  • At trade: You pay $0.60 per contract. Fiat balance decreases by $0.60, and buying power decreases by $0.60 because cash has been converted into a position.
  • Position value: $0.60 (quantity × last price)
  • If yes wins: You receive $1.00 (P/L = +$0.40)
  • If yes loses: You receive $0 (P/L = –$0.60)

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Selling yes at $0.60 (Short Position)

  • At trade: You receive $0.60 in sale proceeds. Fiat balance increases by $0.60. You must post margin equal to the payout value: $1.00 per contract. The net effect on buying power: +$0.60 (proceeds) – $1.00 (margin) = –$0.40.
  • Position value: $0.40 (quantity × [$1.00 – $0.60])
  • If yes wins: Loss is the full $1.00 payout minus the $0.60 proceeds (P/L = –$0.40)
  • If yes loses: You keep the $0.60 proceeds and margin is released (P/L = +$0.60)

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P/L Summary Table

ActionOutcomeP/L
Buy yes @$0.60yes wins+$0.40
Buy yes @$0.60yes loses–$0.60
Sell yes @$0.60yes wins–$0.40
Sell yes @$0.60yes loses+$0.60

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Short Mechanics

In a “Did X happen?” market, you can express a view by either buying yes (betting the event happens) or selling yes (betting the event does not happen). When you take a short position, you are selling yes without owning it; i.e., expressing the view that the event will not occur. All shorts must be fully collateralized through a margin requirement equal to the payout value ($1.00 per contract), ensuring you can cover potential losses if the market moves against you. For example, if yes is trading at $0.60 and you short 100 contracts, you receive $60 in proceeds from the buyer, but you must also post $100 in margin. Your fiat balance increases by $60, but your buying power decreases by $40 ($60 proceeds – $100 margin locked). Cash flow by position type:
  • Long yes: Fiat balance decreases by the purchase cost, buying power decreases by the same amount (cash converted to position).
  • Short yes: Fiat balance increases by sale proceeds, but buying power decreases by (Payout Value – Sale Price) due to the full $1.00 margin locked per contract.
If you attempt a trade that would cause your buying power to fall below zero, the trade will fail automatically.

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Portfolio Value Calculation

Portfolio value accounts for both buying power and position values: For long positions: Portfolio Value = Buying Power + (Quantity × Last Price) For short positions: Portfolio Value = Buying Power + (Quantity × [Payout Value – Last Price]) Example: You have $5 starting balance and sell 1 yes contract @ $0.70:
  • Fiat Balance: $5.70 (received $0.70 proceeds)
  • Margin Requirement: $1.00 (locked)
  • Buying Power: $4.70 ($5.70 – $1.00)
  • Position value: 1 × ($1.00 – $0.70) = $0.30
  • Portfolio Value: $4.70 + $0.30 = $5.00 ✓

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Collateral Management

Collateral and margin are managed at the clearing level:
  1. You submit a withdrawal (e.g., $100) via Aeropay.
  2. The DCO (Derivatives Clearing Organization) reviews it.
  3. The DCM (Designated Contract Market) denies the request if it would leave insufficient buying power to meet margin obligations.
The same logic applies to open orders: unmatched longs or shorts cannot remain if they would breach margin limits.

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Portfolio Margin

Polymarket US applies portfolio-level margining, meaning margin requirements consider your entire set of open positions rather than treating each market in isolation. You can maintain many open positions across different markets, as long as the aggregate exposure does not exceed your available buying power.

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Reducing or Closing a Short

You can reduce or close a short at any time by buying back the yes contracts you sold. Examples:
  1. Short 1 yes, buy back at a lower price - Your exposure is closed and margin is released.
  2. Short 10 yes, buy back 4 - Your remaining exposure decreases, and proportional margin is unlocked.

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Why Shorting Exists

Shorting lets you express a bearish view on the yes outcome. When you sell yes at $0.60, you’re effectively taking the position that the event will not happen, and you profit if the yes price falls or the event resolves as no. This provides liquidity to the market and allows traders to take either side of a prediction without requiring a separate “no” token.