Prediction Market Inefficiency (or ping: Quicksand)

[Barkeep49]

So the market over at PredictIt for the Republican nomination for President is widely inefficient. Since there can only be 1 GOP nominee for President, in theory the chances of all the candidates should add up to about 100% (that is the Buy Yes). At the moment it's 269%.

So the good news is that you can also short sell (Buy No). Clearly you want to short sell all of the candidates as you will make more money from collecting on all your Nos that come true than on the 1 that doesn't. However, you are limited to $850 in the market. Ignoring how fees impact the decision, what is the profit maximizing route?

Hope I've explained it OK. I'm already invested money, but am very unsure that I did it the right way and thought that this might be a good place to discuss the right approach.

[panerd]

Well I would load up on Fiorina, Trump, and Carson as No's. I would also look into some of those who didn't make the cut for the first debate for a chance to sell later. Maybe Jindal and Santorum? I noticed Romney is on there, did he declare? Seems like another no but I guess with the limits you would make very little money on him.

[QuikSand]

Hmm... wasn't aware of the site. Will check it out, but your math makes me skeptical, of course.

[QuikSand]

Okay, with your initial question - I think rather than profit-maximizing, what you really want is risk minimization here. Ideally, you'd like to lock up your account to ensure a winning total position. And betting against the whole field in varying amounts seems like the way to do that most readily, with the absurd odds and narrow buy/sell spreads that they currently show.

My first thought is basically to bet enough to profit basically the same total amount from each candidate who loses.

[Barkeep49]

Originally Posted by panerd

Well I would load up on Fiorina, Trump, and Carson as No's. I would also look into some of those who didn't make the cut for the first debate for a chance to sell later. Maybe Jindal and Santorum? I noticed Romney is on there, did he declare? Seems like another no but I guess with the limits you would make very little money on him.

This would be good if not for the fees (which I admittedly said to ignore originally). They charge 5% to withdraw money so you have to make more than 5% on a bet to come out ahead. Because it won't pay out for a year I also didn't want money tied up without doing anything so I ended up investing in the 9 candidates who I could get shares at .89 or less. Still should give me enough spread to minimize risk while also making sure my money isn't wasted or money losing.

Originally Posted by QuikSand

Okay, with your initial question - I think rather than profit-maximizing, what you really want is risk minimization here. Ideally, you'd like to lock up your account to ensure a winning total position. And betting against the whole field in varying amounts seems like the way to do that most readily, with the absurd odds and narrow buy/sell spreads that they currently show.

My first thought is basically to bet enough to profit basically the same total amount from each candidate who loses.

That's what I ended up doing. The reason I questioned myself is because my results vary widely based on whether Bush wins or loses since I have the most shares of him since his Buy No was the cheapest. I view the whole thing as entertainment but entertainment in the way poker is - it's for fun but the goal is to win money.

[QuikSand]

I'm surprised this site hasn't made more of a splash. Maybe the money limit is the reason? Anyway, documenting the pricing as of tonight:

RNOM16 Latest Buy Yes Sell Yes Buy No Sell No
Marco Rubio
Marco Rubio

RUBIO.RNOM16
38¢ 1¢ 38¢ 36¢ 64¢ 62¢
Ted Cruz
Ted Cruz

CRUZ.RNOM16
35¢ 1¢ 35¢ 34¢ 66¢ 65¢
Donald Trump
Donald Trump

TRUMP.RNOM16
24¢ NC 24¢ 22¢ 78¢ 76¢
Jeb Bush
Jeb Bush

BUSH.RNOM16
8¢ 2¢ 9¢ 8¢ 92¢ 91¢
Chris Christie
Chris Christie

CHRISTIE.RNOM16
7¢ 1¢ 8¢ 6¢ 94¢ 92¢
Rand Paul
Rand Paul

PAUL.RNOM16
3¢ 1¢ 3¢ 2¢ 98¢ 97¢
Mitt Romney
Mitt Romney

ROMNEY.RNOM16
3¢ 1¢ 4¢ 2¢ 98¢ 96¢
John Kasich
John Kasich

KASICH.RNOM16
2¢ NC 3¢ 2¢ 98¢ 97¢
Ben Carson
Ben Carson

CARSON.RNOM16
2¢ NC 2¢ 1¢ 99¢ 98¢
Carly Fiorina
Carly Fiorina

FIORINA.RNOM16
2¢ 1¢ 2¢ 1¢ 99¢ 98¢

Sorry for crappy foratting.

[Barkeep49]

And even better now when you've hedged the market so effectively that you're going to make money they give you your money up front. I am successfully up in both RNOM16 and USPREZ16

[QuikSand]

Okay, so here are the "overnights" from the debate:

RNOM16 Latest Buy Yes Sell Yes Buy No Sell No
Marco Rubio
Marco Rubio

RUBIO.RNOM16
36¢ NC 37¢ 36¢ 64¢ 63¢
Ted Cruz
Ted Cruz

CRUZ.RNOM16
33¢ 3¢ 34¢ 33¢ 67¢ 66¢
Donald Trump
Donald Trump

TRUMP.RNOM16
26¢ 1¢ 27¢ 26¢ 74¢ 73¢
Jeb Bush
Jeb Bush

BUSH.RNOM16
8¢ NC 9¢ 8¢ 92¢ 91¢
Chris Christie
Chris Christie

CHRISTIE.RNOM16
6¢ NC 7¢ 6¢ 94¢ 93¢
Rand Paul
Rand Paul

PAUL.RNOM16
2¢ NC 3¢ 2¢ 98¢ 97¢
Mitt Romney
Mitt Romney

ROMNEY.RNOM16
2¢ NC 3¢ 2¢ 98¢ 97¢
John Kasich
John Kasich

KASICH.RNOM16
2¢ NC 3¢ 2¢ 98¢ 97¢
Ben Carson
Ben Carson

CARSON.RNOM16
2¢ 1¢ 2¢ 1¢ 99¢ 98¢
Carly Fiorina
Carly Fiorina

FIORINA.RNOM16
1¢ NC 2¢ 1¢ 99¢ 98¢


I'm a little surprised to see Christie down a penny. My first instinct during the debate last night might have been to buy him at 7.

[albionmoonlight]

I've got some money on Christie. Seems like good value right now. There's a real lack of Establishment candidates in the race. If Rubio goes down, isn't Christie suddenly the next in line?

[BishopMVP]

Originally Posted by albionmoonlight

I've got some money on Christie. Seems like good value right now. There's a real lack of Establishment candidates in the race. If Rubio goes down, isn't Christie suddenly the next in line?

I know his body language is brutal, but has Jeb Bush really fallen that far? Forget Christie being from the Northeast, or fairly non-religious, dude's fat (even post-surgery). I also think that all the other non-Paul candidates are so similar in their "views" on what should be Christie's strengths that he won't get the spotlight or achieve separation on that issue, but I've never considered him viable due to looks alone.

[QuikSand]

RNOM16 Latest Buy Yes Sell Yes Buy No Sell No
Ted Cruz
Ted Cruz

CRUZ.RNOM16
32¢ NC 33¢ 32¢ 68¢ 67¢
Donald Trump
Donald Trump

TRUMP.RNOM16
31¢ 3¢ 32¢ 31¢ 69¢ 68¢
Marco Rubio
Marco Rubio

RUBIO.RNOM16
29¢ 3¢ 29¢ 28¢ 72¢ 71¢
Jeb Bush
Jeb Bush

BUSH.RNOM16
8¢ 1¢ 9¢ 8¢ 92¢ 91¢
Chris Christie
Chris Christie

CHRISTIE.RNOM16
8¢ NC 9¢ 8¢ 92¢ 91¢
John Kasich
John Kasich

KASICH.RNOM16
2¢ NC 3¢ 2¢ 98¢ 97¢
Mitt Romney
Mitt Romney

ROMNEY.RNOM16
1¢ NC 2¢ 1¢ 99¢ 98¢
Paul Ryan
Paul Ryan

RYAN.RNOM16
1¢ NC 2¢ 1¢ 99¢ 98¢
Ben Carson
Ben Carson

CARSON.RNOM16
1¢ NC 2¢ 1¢ 99¢ 98¢

[digamma]

Arb away:

Who will win the 2016 Presidential Election?
BUY CLINTON 58

Will the next elected President be a Woman?
BUY YES 63

Which party will win the 2016 election?
BUY DEMOCRAT 71

[BishopMVP]

Clinton's amazing value there.

[albionmoonlight]

I don't think that I'm willing to put in the time to do it, but I have to think with how much the current POTUS likes chaos, there's value in hitting wild swings in some of the current markets.

There's value to be found in volatility.

[albionmoonlight]

Rumor mill says folks have spotted U.S. Marshalls outside of Hardiman's house.

Not gonna move on it myself, but thought inquiring minds would want to know.

[QuikSand]

Gorsuch up to 80c now.

[sooner333]

Originally Posted by albionmoonlight

Rumor mill says folks have spotted U.S. Marshalls outside of Hardiman's house.

Not gonna move on it myself, but thought inquiring minds would want to know.

U.S. Marshals are in charge of the protection of all United States judges. I doubt that he would have home protection regularly, but the fact he was rumored to be in the running might have spurred some extra protection. Obviously, it was not a tell for the nomination.

[digamma]

Interesting PredictIt thing happening now. There's been a market on the number of GOP seats in the Senate. It had centered on 53 (duh!), but the market doesn't close until the start of the next session of Congress on January 4. So, here's the wrinkle. Rick Scott is the governor of Florida until the state inauguration on January 8. He won't be seated as Florida's senator until that date. A bunch of people have taken the position that that means the senate will have 52 Republicans at the start of the Congress, when the contract ends. They are both trading at about 50 cents on the dollar right now. Step up and make your bet.

(I can argue both sides of this one due to the wording of the rules, which says the number of republican senators at the start of the congress who were elected. So for 53 you argue that Scott was elected, just not seated. For 52, you argue that he is not a senator yet and the rules clearly say senator.)

[QuikSand]

I have signed up for Kalshi, and am fiddling with their markets. Regulated under the CFTC in the US, similar to PredictIt, wide variety of economics-based stuff there now.

There's a market for where the NASDAQ ends the week. NASDAQ is at 12,073 (and rising?) as I type.

The markets right now are centered on roughly 12,600. I don't get it. I'm buying the lower ranges but feel like I must be missing something here.

[QuikSand]

BTW, anyone interested in starting with Kalshi, drop me a PM with your email address, I will send you a referral -- you get $30, I get $10 I believe. Why not?

[QuikSand]

seriously, this market sits at 12,070 right now, it closes for the week in under three hours...



make it make sense

[QuikSand]

grrrr...image failure

Pasteboard - Uploaded Image

[QuikSand]

Either I am missing something and am blundering semi-badly in doing so...

...or I'm going to pocket some semi-meaningful cash here today.

[QuikSand]

ok, got it

they're measuring the NASDAQ 100, I've been watching the NASDAQ composite

rookie mistake here, move along

[flere-imsaho]

Do you think this is more the House not understanding how the stock market works, or a lot of bets placed on the over by people earlier in the week that's not going to pan out?

Edit: I wrote this before your latest post (post # 24).

[albionmoonlight]

Originally Posted by QuikSand

ok, got it

they're measuring the NASDAQ 100, I've been watching the NASDAQ composite

rookie mistake here, move along

Are you going to make anything? Or is it all an expensive lesson?

[QuikSand]

no, i mis-interpreted the market... a semi-expensive lesson to RTFM

[QuikSand]

Sounds like PredictIt just got its get-out-of-jail-free card cancelled, and will likely shutter by early next year.

PredictIt

[QuikSand]

I think my total run with PI will have netted four, but not quite five, figures. Nice little side thing while it lasted.

On to Kalshi, I suppose. They've actually got a CFTC license, not just a handshake letter. Seems like they are playing close to by-the-book.

[albionmoonlight]

Originally Posted by QuikSand

I think my total run with PI will have netted four, but not quite five, figures. Nice little side thing while it lasted.

On to Kalshi, I suppose. They've actually got a CFTC license, not just a handshake letter. Seems like they are playing close to by-the-book.

I lost pretty much my entire PI stake betting against Trump getting the nomination in 2016.

[larrymcg421]

I have a great chance to end my PI run with my biggest score ever. I bought 843 shares of Dems win Senate at 24 cents. The current price is 54 cents.

[QuikSand]

Originally Posted by larrymcg421

I have a great chance to end my PI run with my biggest score ever. I bought 843 shares of Dems win Senate at 24 cents. The current price is 54 cents.

nice play

not sure how much ~$200 means to you, but it would tempting to sell some now and cover your investment

[albionmoonlight]

I don't know if it is low volume or what, but the Kalshi markets still seem pretty out of whack.

There are a fair number of markets where the YES and the NO are both priced > 70%

If you hunt, you can still find some good marginal deals, but a lot of times I look around and things are a pretty easy stay away.

[QuikSand]

agreed on Kalshi, it's thin in many places

they seem to get action on the simple economic predictions, but i dint find a ton of weakness in those markets

i have turned a lot of 60-80c bets into a dollar there, but nothing really remarkable thus far

[larrymcg421]

Originally Posted by QuikSand

nice play

not sure how much ~$200 means to you, but it would tempting to sell some now and cover your investment

I did not end up hedging, so it's $778 or nothing for me tonight.

[larrymcg421]

I did finally sell off about 200 of the shares when it got to .85

I figured that was a great price due to uncertainty in GA and NV

[larrymcg421]

Took the money I got from hedging and put it into Kari Lake NO when it was at .45

It's currently at .79

Why is this website going away once I finally seemed to have figured out how to make money on it? Oooof.

[QuikSand]

Originally Posted by larrymcg421

I did finally sell off about 200 of the shares when it got to .85

I figured that was a great price due to uncertainty in GA and NV

great play, congrats

[QuikSand]

Is this the spot now?

https://polymarket.com/

[molson]

Originally Posted by QuikSand

Is this the spot now?

https://polymarket.com/

Can make some nice money there if you want to go all in on definitive proof of the Super Bowl being rigged coming to light in the next 2 weeks.

[flere-imsaho]

This is one of those things where those who know are not really betting on outcomes, but looking for inefficiences caused by other people betting on outcomes, right?

[QuikSand]

Originally Posted by flere-imsaho

This is one of those things where those who know are not really betting on outcomes, but looking for inefficiences caused by other people betting on outcomes, right?

pretty much my angle with all these things, yes

[albionmoonlight]

I'm out of this game.

But Trump is currently at 55c on PredictIt to not win the presidency.

His first criminal trial is supposed to start Monday.

If there is going to be some sort of significant event (health issue preventing him from attending, leaving the country, etc) that could panic the market it will be in the next 72 hours or so.

And if nothing happens, the price won't move much.

If I were in the game, I'd be tempted to buy up some Trump No today and hope that something panics the market between now and Monday.

[QuikSand]

I am fully out from PredictIt now, as well.

However... their fee schedule makes this king of small-margin play troublesome. They take out 10% of your gains as a fee, but then another 5% at the time of deposit.

So, let's say I wanted to hit this market hard. I buy up $1,000 worth of 55c "Trump No" shares, still the current price. And let's say there's some short term news that moves the needle a fair bit. A pretty good hit here is, say, moving that number to 65? That's a big move.

Now, if the "buy" price for "Trump No" moves to 65, that means the sell price trails it a bit, let's optimistically say it's 63. I sell all my 1,818 shares at 63 cents, yielding a gross of $1,145. I lose 10% of my gains immediately, so that's down to $1,131. Now I go to cash out, and... they pull a full 5% from that, and I cash out with $1,075.

Now, I'm not sneezing at a 7.5% ROI in a week or two. When I was locked into the site, I tried to make moves like that a lot, but... yeah, that's a lot of overhead to clear and this is forecasting this as a pretty solid HIT.