The idea of how Robinhood prediction market fees work isn’t that hard to understand. As the site runs on a flat fee, the latest updates change up what you can expect from the site.
With the use of a probability-weighted fee based on the price of a contract and your commission level, the prediction market computes the market fees. In this guide, we’ll break down how you can exactly find the fee based on the contract price that you trade for. Let’s discuss this further and get into the details.
How do Robinhood prediction market fees work?
Whether you’re trading on Robinhood sports contracts or any of the other hundreds of markets available, you’ll need to pay fees on your contracts. Robinhood fees used to be like a flat rate, where you’d pay the same no matter what you were trading on. But they’ve recently changed their fee system so now it’s calculated based on a probability weighting.
Robinhood always charges commission on all trades and the size of this commission will influence the overall fees. You can actually pay less commission if you have a Gold subscription for Robinhood, although this is probably only worth it if you’re going to be making lots of trades. The flat rate commission is:
- 10% for most trades
- 5% with the Gold subscription
But the important thing is that this is the same whether you’re trading on commodity prediction markets or another market.
The formula for calculating Robinhood fees
Okay, so let’s take a look at the formula that Robinhood uses for calculating your fees, and then we’ll go through an example or two as well. The formula for fees is:
(k * p (1-p) * c)
K = tier-based constant, so this will be 10% for the Gold subscription members and 5% for everyone else. P = the contract price as a decimal, and c = the number of contracts that you’re trading.
You might think that the higher a contract price is, the higher the fees, but that’s not strictly true. Actually, the closer a contract price is to $1 or $0.01, the higher the fees will be. So if it’s someone in the middle, like $0.55 or $0.50, then the fees will be lower. This is how the fees are calculated and rounded up, and the potential profit you could make.
A real example of how Robinhood fees work
To help make these Robinhood prediction market fees make a little bit more sense, let’s run through an actual example.
Let’s imagine that you buy 100 Yes contracts at $0.90 each and the exchange fees are $0.01 per contract. If you have a Gold subscription, then your fees will be $0.45 based on the 5% commission, and if you have a standard account, then your fees will be $0.90. This is because (10% * $0.90 * (1-$0.90) * 100) = $0.90. And if that wasn’t enough, below are a few examples of how the fees will look for different-sized trades.
| Price per contract | Fees with 5% commission | Fee with 10% commission |
| $0.01 | $0.05 | $0.10 |
| $0.05 | $0.24 | $0.48 |
| $0.20 | $0.80 | $1 |
| $0.75 | $0.94 | $1 |
| $0.85 | $0.64 | $1 |
| $0.90 | $0.45 | $0.90 |
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When are Robinhood prediction market fees calculated?
Well, isn’t this the million-dollar question - well, not quite, but close enough. Robinhood fees are calculated based on the commission level and the price of the contract however, these could change if your trade doesn’t go through straight away thanks to slippage. But what does slippage mean in prediction markets? Well, when an order doesn’t go through straight away, it may be that when it does eventually go through, the contract price has changed.
This is common for geopolitics prediction markets since I can often check a market and in the space of a couple of minutes, the prices have changed. So if this happens, then your fees will change according to the new price of the contract. It’s unlikely to be a dramatic difference, but it’s worth noting anyway.
Pros and cons Robinhood prediction market fees
- Lower fees with Gold subscription
- Probability-weighted fees
- Commission relatively low
- Fees could change after order
Conclusion - Robinhood fees are probability weighted
So, what do you think, is the probability weighted fee system better? I personally think that it is, because it means that you’re not getting hit with huge fees when you’re only making small trades. Also, with the different Robinhood commission levels, you’ve got the option to reduce your fees even further with the monthly subscription. This is quite a good option for frequent trades, but if you’re someone who just places the odd trade, then it’s probably not for you.
Either way, I’d recommend checking out Robinhood as it’s a solid site with fairly reasonable fees. Click on the banners on this page to get started.
Robinhood prediction market fees FAQs
How do Robinhood prediction market fees work?
Fees at Robinhood are worked out a little differently than they used to be, now using a probability-weighted system. This means that your fee will depend on the price of your contract and how many you’re trading.
How are Robinhood prediction market fees calculated?
There’s a whole formula for working out the fees which is: (k * p (1-p) * c). K = tier-based constant, so this will be 10% for the Gold subscription members and 5% for everyone else. P = the contract price as a decimal, and c = the number of contracts that you’re trading. Robinhood will also tell you the fees for each trade before you confirm it, but it can be useful to also work out yourself.
Are Robinhood prediction markets zero fee?
No, unfortunately not. All prediction markets have fees associated with placing trades, and Robinhood is no exception. When I compare Robinhood fees to other platforms, they do seem to be relatively similar. The introduction of the probability weighting fee is great, as it allows much more flexibility in the fees paid.