25August2008
Posted by QuikSand under: Prediction Markets.
While we have up to this point focused on current events markets, by far the most widely watched areas for event-wagering are sports. The World Sports Exchange (WSEX) offers an array of such markets (in addition to their limited forays into curretn events and non-sports arenas) and they offer a substantive alternative to the model used by InTrade, and their affiliated sports site, TradeSports.
To reinforce the differences discussed earlier at this site, I did a side-by-side analysis of the two sites’ markets for Superbowl futures. While I still believe that the WSEX offerings are worth monitoring for value (for specific reasons) the simple fact of the matter is that in nearly every case, the TradeSports offerings are the better value. Some supporting observations:
-Among 32 NFL teams, the BUY price in the championship markets are LOWER in 31 teams, and the same in only one. There is no team where the WSEX buy price is lower than that at TradeSports
-The differential is especially acute among the relative longshot teams. WSEX offers an “entry” bid at $2 for its ten lowest-priced teams, while TradeSports offers a BUY price at $2 or less for nearly half the NFL. TradeSports uses a 10-cent increment, and lets the value float to wherever the market dictates — thus the willingness to offer shares at 40 cents and up. If your target team is the Oakland raiders, the price differential is massive — 70 cents at TradeSports compared to $2.00 at WSEX.
-The intra-site price differential, in a fairly robust market like this promises to be, is also far more favorable at TradeSports. Even right now, the splits between BUY and SELL prices at TradeSports are miniscule — in nearly every case less than one dollar. WSEX builds in a substantial split between the BUY and SELL prices (that’s their profit margin in their pseudomarket) making the ability to “flip” shares pretty limited. If the TradeSports market remains healthy all season, then this differential itself makes it by far the preferred choice for overall investments.
We will continue to monitor any price differentials between the two markets, searching for opportunitites to play them against one another. As of this writing, the most promising front seems to be with the San Diego Chargers, who are priced at 10.00/11.20 at TradeSports, and 7.00/10.00 at WSEX — meaning right now there’s an essentially even-money proposition between buying and WSEX and selling at TradeSports. If that ratio turns positive, it could spell a can’t lose opporutnity for a liquid investor.
22August2008
Posted by QuikSand under: Prediction Markets.
At inTrade, there was a fleeting “lock” play available for under two hours today. In two separate sets of mini-markets, the rise of Texas Congressman Chet Edwards as a dark horse created an imbalance. For a time, he was listed individually in the we’ll-add-anyone market, with a SELL price getting as high as about $12. Meanwhile, in a separate set of markets including only a pre-defined group of VP candidates (not including Edwards) the “field” bet (all candidates not listed) was availabe to BUY at 6.50. For at least an hour, the “Sell Edwards, buy the field” combination was available fairly deeply at around a 9.00/6.50 split — if you were liquid at this exchange, that’s a pretty reasonable free money opportunity.
22August2008
Posted by QuikSand under: Prediction Markets.
On July 25, we reviewed inTrade’s various state-by-state presidential markets, searching for value — notably among states where the sum of the D and R buy prices wasn’t far above 100. My comments landed on Virginia, summarized here:
Virginia: (D) 63.9 (R) 39.5 Σ=103.4 (538 says D=46%)
If there’s a standout opportunity here, this has to be it. Current polling says a GOP victory is a 55% likelihood… inTrade mini markets say the Democrats are the sizable favorites. If you like the general notion that the GOP is undervalued in these markets, then you should *love* the price on a republican win in Virginia, a possible running mate selection on the (D) side notwithstanding.
As I write today, less than a month later — the prices for Virginia have altered dramatically:
Virginia: (D) 53.0 (R) 49.3 Σ=103.3 (538 says D=46%)
If you moved in on GOP shares in July - and locked in that buy price of $39.5, you may now cash out your profits with a fairly deep sell price of $46.3 today. That’s a one month return of more than 17% already in the bag, and cashing out just before an expected bump from the Democratic convention seems awfully sensible to me.
Ring it up!
22August2008
Posted by QuikSand under: Prediction Markets.
With Senator Obama essentially setting the exact timetable for the unveiling of his VP choice — is there a chance to beat this market after all?
He has announced that he and his running mate will appear together Sturday in illinois. Presumbaly there are legions of reporters who are camped out at the driveway of Joe Biden and the other top candidates for the slot. If Biden drives to the airport Friday evening, we’re going to hear about it, right? Will there be any sort of clear signal from that sort of new media culture? It certainly seems possible.
Last year (this sounds like a tangent, but it really isn’t) there were active prediciton markets for college football teams to win the national championship. For a while, it was uncertain who would play Ohio State in the championship game — but the internet was rife with number-crunchers who indicated that it was guaranteed to be LSU (and it was). Buying shares of LSU that day, and selling then that night once they were officially announced as the title game competitor (and favorite) turned out to be a **very** worthwhile play — nearly a 30% return in one day just for having better information than the markets.
I don’t know how much I trust an internet rumor that Tim Kaine (or whomever) has just headed to the airport at 6PM Friday… but it’s at least conceivable that a bit of web sleuthing could give us a temporaryily large advantage on these still-modest markets. There are a lot of contracts hanging otu there for sale at inTrade on all the top candidates. If we get word suggesting that someone is actually heading for Chicago… a quick reaction could turn a tidy profit.
21August2008
Posted by QuikSand under: Prediction Markets.
The Obama campaign has let word go forth that its VP selection is forthcoming in the next few days. Markets in that field have been awfully shaky… Senator Joe Biden saw his price (at inTrade) roll all the way up to $50 on Monday, but has since calmed down to a buy price of around $37. Prices on other top contenders like Indiana Senator Evan Bayh ($24) and Virginia Governor Tim Kaine ($18) ahve been inching upward.
This relatively dry market looks like it is heating up as th event approaches… hard to know if there’s adequate data or trends at work to make a real judgment on whether the market is beatable.
Any takers out there? ANyone think Biden has become a good value now? Like the price for Kaine?
19August2008
Posted by QuikSand under: Prediction Markets.
With a post less than two weeks ago detailing the GOP candidates for running mate, I thought it might be worth revisiting that market. I essentiually rejected the market as a fertile one for a “beat the market” play, but it’s still good sport. Here are the revised buy prices for the top GOP candidates from August 7 and now as of today:
Romney 35.9 –> now 32.3
Pawlenty 24.5 –> now 30.0
Ridge 17.9 –> now 18.0
Crist 14.9 –> now 11.5
Palin 14.0 –> now 9.8
Giuliani 10.0 –> now 5.7
Cantor 10.0 –> now 8.6
So, what’s going on here? Basically, the drop in most of these figures is really just a reflection that this market is getting more serious. I commented a while ago that the sum of the buy prices was so extraordinarily high as to render this market absurd and probably un-playable. Now, with most of the individial candidates coming down, it’s getting more reasonable — but is still far from inviting.
If this market has any predictive value, however, it shoudl be telling us that the one major candidate who has gained meaningfully in the prices while all others have dropped is Governor Tim Pawlenty of Minnesota. I think he’s a pretty strong candidate for the job, but I have no metric upon which to base any judgment about the $30 buy price ad high or low, so I’ll sit this one out. (And I do still like Cantor here, with a buy price getting well under $10)
18August2008
Posted by QuikSand under: Prediction Markets.
inTrade is really trying to serve all people with their array of mini markets. I previously posted about their markets for each individual state’s outcome in the US presidential race — where some of the mini markets seem fairly robust, and others mostly mundane.
How about scientific achievement? Any takers there?
Higgs Boson Particle to be observed on/before 31 Dec 2008 - BUY at 21.8
Higgs Boson Particle to be observed on/before 31 Dec 2009 - BUY at66.0
Higgs Boson Particle to be observed on/before 31 Dec 2010 - BUY at77.0
I claim zero insight into the likelihood of this particular discover along any timetable. Likely, even this small a market know better than I would. The “terraced” nature makes me again point out that it seems intuitive to me that the chance of this even taking place *exactly* within the 12 month period between the first and second betting units seems overblown — a 45 point gap, really?
I have no idea if there really are informed people participating in a market like this — but ideally, this sort of offering should serve (ir nothing else) as a belweather for an impending major announcement like this.
7August2008
Posted by QuikSand under: Prediction Markets.
The US presidential election is bearing down on a much-watched pivot point for each party — the selection of a running mate for the vice presidential position. True to form inTrade is offering markets on who will be selected. Is this a fruitful market to try to exploit?
Here are buy prices for the top several listed candidats to be the Republican running mate:
Romney 35.9
Pawlenty 24.5
Ridge 17.9
Crist 14.9
Palin 14.0
Giuliani 10.0
Cantor 10.0
Okay — right away, we shoudl note a contrast with the markets that I have detailed here before. Just consider these top several candidates (not an exhausitve list by any means — they offer a market for at least ten more named people), and look at the sum of the buy prices. To cover just these top seven candidates would cost around $125, and you’d still not be assured of winning the $100 payoff.
Back to the previously-detailed concept of “Sum under 100″ — this is the reverse. This is “Sum way the hell over 100″ and represents a market for gamblers, not for analysis.
That’s not to say there can’t be an opportunity here. (If anyone on this list, I think Virginia Congressman Eric Cantor, who might actually be under priced at only $10) But this is not the lean prediction market that we have seen hosted at inTrade — this is essentially like playing a set of future bets, where the house has comfortably stacked the prices in their favor to practically ensure a healthy profit.
There has to be a better spot to strike than this, unless you have some insider information. And, to be honest, with this sort of thing (that can’t be analyzed coldly through real data, and is derived from solely intangible factors) everyone thinks he has some insider information and rarely does.
31July2008
Posted by QuikSand under: Prediction Markets.
Latest pricing from inTrade:
Obama: BUY at 59.8 SELL at 59.7
McCain: BUY at 38.8 SELL at 37.6
The national markets have definitely moved toward McCain. If you bought in when we discussed this earlier, you have already cleared a pretty solid profit — and I think there’s more to come.
Interestingly, we’re still in a Sum < 100 situation, too.
25July2008
Posted by QuikSand under: Prediction Markets.
Yesterday, I made an offhand comment that the total buy prices of the (D) and (R) outcomes in Ohio was around 105, making that a market with a built-in house edge not really to my liking. Today, I thought I’d look to see if we can do better, still at inTrade. For this analysis, I will assume that no third party has any chance of actually winning a state — a conjecture I feel very comfortable with.
Here are some states where the (D) + (R) buy prices sum to something less than 105, and perhaps even into more intriguing territory. Not that these are BUY recommendations on one side or another… just doing a little digging. If you generally believe that presidential elections are national, with some incremental influence dictated by the campaigns’ prioritization decisions, then seeing any one state far out of line with the national consensus looks like a buying opportunity.
Colorado: (D) 71.0 (R) 32.9 Σ=103.9 (538 says D=55%)
Louisiana: (D) 13.0 (R) 89.9 Σ=102.9 (538 says D=1%)
Maryland: (D) 95.0 (R) 8.0 Σ=103.0 (538 says D=97%)
New Mexico: (D) 71.0 (R) 31.9 Σ=102.9 (538 says D=56%)
South Dakota: (D) 19.9 (R) 79.9 Σ=99.8 (538 says D=20%)
Virginia: (D) 63.9 (R) 39.5 Σ=103.4 (538 says D=46%)
So, what do we take from this review? The first outlier looks like South Dakota, where they have a very slight “Sum under 100″ situation — but a comparison to the 538 polling analysis suggests that this fledgling market might not create a major opportunity.
But, what of Virginia? Virginia has supported republicans for quite a few presidential cycles, but recently elected a second democratic senator, and is on the lips of many pundits as a newfound “swing state” for the 2008 election. Rumors of an Obama running mate from Virginia (like Senator Jim Webb) likely fuel this discussion, and the impression represented in the Virginia market at inTrade — putting a democratic victory as a sizably likely outcome. Voters in Virginia have a different idea. Let’s not forget that there’s a lot of Virginia on beyond the Washington beltway…
If there’s a standout opportunity here, this has to be it. Current polling says a GOP victory is a 55% likelihood… inTrade mini markets say the Democrats are the sizable favorites. If you like the general notion that the GOP is undervalued in these markets, then you should *love* the price on a republican win in Virginia, a possible running mate selection on the (D) side notwithstanding.