Tuesday, November 6, 2012

Money for nothing

Here's the item I wrote for the crikey.com.au website (the one that pays to keep me eating) this morning:

A cup day bet that cannot lose. It is a punter’s dream bet — back all the runners and win whatever wins. And as I write this at 11.30am on Melbourne Cup Day you can still guarantee yourself a profit on the US presidential election. All you need is an account with Betfair in Australia and Intrade in Ireland and you can wager on both Barack Obama and Mitt Romney and win. Invest $91.40 and you’ll get back $100.
Here’s a summary of the markets on the three betting exchanges I combine to create the Crikey Presidential Indicator:

When the percentage chances add up to less than 100 you can back both runners and win and by combining Intrade and Betfair prices that’s exactly the case. So go to it. Being a sporting fellow I’ll leave the profit to my readers.
And a note for those not skilled in these gambling ways you will find that Betfair provides information as a price like in a tote dividend. To convert it to a percentage divide 1 by the price (eg. this morning you could back Romney on Betfair at $4.40 - 1/4.40 = 22.7).
The verdict of the Crikey Indicator. There’s no doubt in my mind that this wonderful arbitrage opportunity comes about because of a weird desire among Republicans to have their man Romney appear as a winner. The publication by Real Clear Politics of the latest Intrade prices showing Obama as a clear favourite clearly annoyed some people with money to spare. For what was a small outlay compared with the $6 billion being spent on this US election campaign they kept the Obama advantage from seeming too great.
On the other exchanges manipulation is not as easy. The Betfair market is used by the world’s major bookmakers as well as ordinary punters and thus a much greater outlay would be needed to affect it. And the Iowa Electronic Market limits the amounts that any individual participant can play with. More importantly neither of these two has its prices published by Real Clear Politics.
And so to the final indicator before tonight’s voting.

Even after giving the Intrade market a one third weighting it shows Obama as the likely winner.
 Since then the markets have changed slightly. Intrade has moved from 68.7% to 70% for Obama but Romney has gone from $4.40 to $4.70. The guaranteed profit has increased. Hence two investments that use up my available cash:

  • $280 on Obama to win at 70% on Intrade for a potential return of $400
  • $77 on Romney at $4.70 on Betfair for a potential return of $361.90
Only a small return on an outlay of $355 but criminal not to take it when there is no risk at all. A $45 profit if Obama wins and a profit of $6.90 if Romney does.

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