# ๐Collateral return

Collateral return is a mechanism that affects trading in mutually exclusive market groups.

A hypothetical example of a mutually exclusive market group is โWho will be confirmed as the Secretary of State?โ with the markets:

โWill Hillary Clinton be confirmed as Secretary of State?โ

โWill Rex Tillerson be confirmed as Secretary of State?โ

โWill John Kerry be confirmed as Secretary of State?โ

There can only be one confirmed Secretary of State, so there are only four possibilities at settlement: exactly one of the three markets resolves to Yes, or all three markets resolve to No. You buy No in โHillary Clintonโ for 60ยข and No in โJohn Kerryโ for 70ยข. You've invested a total of $1.30, but you'd be guaranteed to be paid out $1 by at least one of your positions:

If Hillary Clinton is confirmed, your John Kerry position will be correct.

If Rex Tillerson is confirmed, both your positions will be correct.

If John Kerry is confirmed, your Hillary Clinton position will be correct.

If none of the three are confirmed, both your positions will be correct.

Therefore, the maximum amount you could lose at settlement is $1.30 - $1 = $0.30. Instead of taking the full $1.30 of your available funds, we take only $0.30 and mark down your position value by the returned $1, leading to an invested value of $0.30. If you hold both contracts until settlement, then you will receive $1 if both your positions were correct (neither Hillary Clinton nor John Kerry is confirmed) and $0 if one of them is.

Itโs important to remember that collateral return applies only to trades involving the non-mutually exclusive sides of mutually exclusive multi-market events. In the above examples and in most cases youโll see on Kalshi, it would apply only when buying and selling No positions.

Have questions or need help? Send us a message here: support@kalshi.com

Last updated