> For the complete documentation index, see [llms.txt](https://docs.bullpen.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.bullpen.fi/prediction-markets/positions-and-settlement.md).

# Positions and Settlement

How outcome tokens work, including splits, merges, redemption, and market resolution on Polymarket.

## Outcome Tokens

Every prediction market has two outcome tokens: **Yes** and **No**. These are ERC-1155 tokens built on the Gnosis Conditional Token Framework (CTF).

Each token represents a claim on $1.00 if its outcome is correct when the market resolves.

| Token | Pays $1.00 if...      | Worth $0.00 if...     |
| ----- | --------------------- | --------------------- |
| Yes   | Event happens         | Event does not happen |
| No    | Event does not happen | Event happens         |

## Token Economics

The Yes and No token prices always sum to approximately $1.00. This is enforced by arbitrage:

* If Yes + No > $1.00, arbitrageurs sell both and profit
* If Yes + No < $1.00, arbitrageurs buy both and redeem for $1.00

This relationship means:

```
Yes Price + No Price = $1.00
Yes Price = 1 - No Price
```

Buying Yes at $0.60 is economically equivalent to selling No at $0.40.

## Splits (Minting New Tokens)

A **split** creates new outcome tokens from collateral. When two orders match and their prices sum to $1.00:

1. The buyer pays $0.60 for Yes
2. Another buyer pays $0.40 for No
3. Their combined $1.00 is deposited as collateral
4. The CTF contract mints 1 Yes token and 1 No token
5. Each buyer receives their respective token

This is how new shares enter the market. Every Yes/No pair in existence is backed by exactly $1.00 of collateral.

### Split Example

* Trader A: Buy 100 Yes at $0.60 ($60 total)
* Trader B: Buy 100 No at $0.40 ($40 total)
* Combined: $100 collateral deposited
* Result: 100 Yes tokens to A, 100 No tokens to B

## Merges (Burning Tokens)

A **merge** destroys outcome tokens and releases collateral. When you hold equal amounts of Yes and No tokens:

1. You submit both tokens to the CTF contract
2. The contract burns the token pair
3. You receive $1.00 per pair (minus any fees)

Merges can also happen during matching:

* Trader A: Sell 100 Yes at $0.60
* Trader B: Sell 100 No at $0.40
* Combined: 100 Yes + 100 No tokens burned
* Result: $60 to A, $40 to B

### Merge Example

You hold 50 Yes tokens and 50 No tokens in the same market. You can merge them:

* Input: 50 Yes + 50 No
* Output: $50.00 USDC.e (minus fees)

This is useful for exiting a hedged position or recovering capital without waiting for resolution.

## Converting Positions

### Buying Yes vs. Selling No

These are different actions with similar economic outcomes:

| Action  | What Happens                      | Net Effect        |
| ------- | --------------------------------- | ----------------- |
| Buy Yes | Pay USDC.e, receive Yes tokens    | Long Yes exposure |
| Sell No | Give up No tokens, receive USDC.e | Long Yes exposure |

Buying Yes requires USDC.e. Selling No requires owning No tokens.

### Position Conversion

You can convert between positions using splits and merges:

**Convert No to Yes:**

1. Buy additional No tokens to pair with your Yes position
2. Merge them to release collateral
3. Use collateral to buy Yes

**Convert Yes to No:**

1. Buy additional Yes tokens to pair with your No position
2. Merge them to release collateral
3. Use collateral to buy No

## Multi-Outcome Markets

Markets with more than two outcomes (e.g., "Who will win?") use the **NegRiskAdapter**:

* Each candidate is a separate binary Yes/No market
* All markets share a common collateral pool via WrappedCollateral
* Exactly one candidate's Yes token will resolve to $1.00
* All other Yes tokens resolve to $0.00

### Conversion in Multi-Outcome Markets

The NegRiskAdapter enables capital-efficient conversions:

* A No position in one market can convert to Yes positions in all other markets
* This is because betting against one candidate is equivalent to betting for all others

Example with 3 candidates (A, B, C):

* Holding No on Candidate A means you believe B or C will win
* This can convert to Yes positions on both B and C

## Market Resolution

When an event's outcome is determined, the market resolves:

### Resolution Process

1. **Proposal**: Someone proposes the outcome by staking a $750 USDC.e bond
2. **Challenge Period**: 2 hours for disputes
3. **Finalization**: If unchallenged, the outcome is finalized
4. **Redemption**: Winners can claim $1.00 per share

### Disputes

If someone disputes the proposed outcome:

1. The disputer stakes their own bond
2. The dispute goes to UMA's Data Verification Mechanism (DVM)
3. UMA token holders vote on the correct outcome
4. Winner receives the loser's bond as reward

Disputed resolutions can take 4-5 days or longer.

### Oracle System

Polymarket uses UMA Protocol as its oracle:

* **Optimistic Oracle**: Assumes proposals are correct unless disputed
* **Decentralized Voting**: UMA stakers resolve disputes
* **Economic Security**: Bond requirements deter false proposals

## Claiming Winnings

After a market resolves:

### Redemption Steps

1. Visit the market page on Polymarket or Bullpen
2. Click "Redeem" on your winning position
3. Sign the transaction
4. Receive $1.00 per winning share in USDC.e

### Important Notes

* Winning shares: Redeem for $1.00 each
* Losing shares: Worth $0.00, can be cleared from portfolio
* No fee for redemption
* Capital is locked during the resolution period

### Clearing Losing Positions

Losing shares do not automatically disappear. Visit the market page to clear them from your portfolio. This is a housekeeping action with no financial impact.

## Settlement Timing

| Scenario          | Typical Duration   |
| ----------------- | ------------------ |
| Undisputed market | 2+ hours           |
| Disputed market   | 4-5 days or longer |
| Sports markets    | Usually same day   |

Your capital remains locked until resolution completes. Factor this into your trading decisions.


---

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