Talking stocks, trading, and investing in general

[brokencycle]

Iowa Electronic Markets

iemweb.biz.uiowa.edu

There might actually be an arbitrage opportunity since PredictIt has a lower gap between the two. Not sure how it works out after fees though...and given the $500 max position on IEM, there's limited upside in total dollar terms evein if ROI is good.

Although IEM might let you offset positions. so if you are buying on one side and selling on the other, you might be able to establish a sizable arbitrage trade before you hit the $500 limit.

I'll have to think a little more. There have been papers written about arbitrage opportunities in these markets, but often the problem is that they are eaten away by profit fees (charged by PredictIt) or not worth it due to position size limits...but that is usually more about totals not adding up where you can eek out a few % return from mispricing within a single market.

Right now, there's more like a 15-20 point spread between the markets...and since Biden and Trump are really separate contracts, that's two convergence plays (and as I mentioned, you may be able to offset the positions since each convergence would go in the opposite direction)

Figure it out and PM me the steps. I'll give you a finder's fee.

 

[HRoi]

His fee happens to be one dollar more than the amount of arbitrage

 

[Omega Male]

TLDR: Treasuries suck now.

In New 60/40 Portfolio, Riskier Hedges Are Displacing U.S. Debt

The hunt for new hedges is in full gear.

www.bloomberg.com

 

[venividivicibj]

Iowa Electronic Markets

iemweb.biz.uiowa.edu

There might actually be an arbitrage opportunity since PredictIt has a lower gap between the two. Not sure how it works out after fees though...and given the $500 max position on IEM, there's limited upside in total dollar terms evein if ROI is good.

Although IEM might let you offset positions. so if you are buying on one side and selling on the other, you might be able to establish a sizable arbitrage trade before you hit the $500 limit.

I'll have to think a little more. There have been papers written about arbitrage opportunities in these markets, but often the problem is that they are eaten away by profit fees (charged by PredictIt) or not worth it due to position size limits...but that is usually more about totals not adding up where you can eek out a few % return from mispricing within a single market.

Right now, there's more like a 15-20 point spread between the markets...and since Biden and Trump are really separate contracts, that's two convergence plays (and as I mentioned, you may be able to offset the positions since each convergence would go in the opposite direction)

You can easily bet at offshore sportsbooks. They have overall (nationwide) and state by state bets. Some of the closer senate races are also available (ex - BetOnline)

 

[PhilKenSebben]

Think of your e-bros with no jobs this Xmas. Me and OM could use some help.

You needing some stimulus this holiday season?

 

[otc]

Ugh. I think it could work except:

Predictit apparently caps the number of people who can participate in a market.

Looks like you can enter only if another trader completely closes out their position. Tempted to throw in some money and hope for an opening.

Seems like a no brainer.

EDIT: ignore all of this and just read my next post.

Spoiler

Buy trump to win on IEM for 20, sell trump to win (buy trump to lose for 60) on predicit.
Sell biden to win for 20 on IEM (you buy both sides and sell back the biden to win for 80, leaving you invested 20 and holding a trump to win--basically a short) and the buy biden to win for 60 on Predictit.

Your outlay is 20+60+(100-80)+60=160

Trump wins:
IEM contract pays off for 100 for trump winning and 100 for biden losing. The predictit contracts are worth zero. Total income = 200, profit = 40.

Biden wins:
Predictit contracts pay off 100 for trump losing and 100 for biden winning. The IEM contracts are worth zero. Total income = 200, profit = 40.

So without fees it is a risk-free 25% return over however long it takes to decide the election (so much higher annualized).

IEM charges no fees but Predictit looks like they charge 10% on profit and 5% on withdrawls.
Trump win: no fees.
Biden Wins: Profits are 80 minus 10%= 72 so your total income is 192, minus 5% to take it out = 182.4 which still leaves you with a profit of 22.4 (14%)

The max investment on predictit seems to be 850 and IEM caps you at 500 (assume that factors in the structure of hte short). That means you should be able to buy 708 sets of this contract for a total cost of $991.20 with a total payoff of $1,239 if Trump wins or 1129.97 for Biden.

That's a lot of work to make $200...but it is risk free. Maybe similar spreads exist on the unregulated sportsbooks where you could make more bets.

 

[otc]

I'm dumb. The two markets are binary (well, the spreads aren't perfect, but basically)...you don't need a complicated arbitrage scenario where you are shorting in one market and long in the other and repeating that for both assets.

Just buy Trump for 20 on IEM, buy Biden for 60 on PredictIt. You have only paid 80 to place a bet that covers 100% of the outcomes.

Trump wins, you get 100 from IEM. Biden wins, you get 100 from Predictit. Either way, you make $20.

Easy play.

 

[jcman311]

Think of your e-bros with no jobs this Xmas. Me and OM could use some help.

I’ll donate some foreign fire glass to you.

 

[HRoi]

Or just put it all on Trump. No ever lost money betting on Trump amirite!!

 

[PhilKenSebben]

You have only paid 80 to place a bet that covers 100% of the outcomes.

Easy play.

My write in campaign for @Piobaire might surprise a few people

If this were a true arbitrage situation, players with large money would be making huge buys which I assume would shift odds right? I assume the markets are weighted?

 

[otc]

My write in campaign for @Piobaire might surprise a few people

If this were a true arbitrage situation, players with large money would be making huge buys which I assume would shift odds right? I assume the markets are weighted?

Yeah, Limited entry and limited payoff kind of kills the invisible hand.

People do make money arbing these things, but it is not like you can lever up and keep trading until the price discrepancy is gone. Once you have bought a few hundred bucks worth, you are out. And in the case of predictit, which caps how many people can enter, your can't even tell your friends about it and let them earn.

If the 5000 people who already own contacts are too stupid to see the free money on the table (or have already invested the max), then the market will never correct.

 

[HRoi]

Wouldn’t this be like a sports betting line which would move when all the money gets put on the arb opportunity

 

[PhilKenSebben]

Wouldn’t this be like a sports betting line which would move when all the money gets put on the arb opportunity

See my exact same question above. Otc make a good point that in a closed and capped system prevents money from changing the line too much

 

[otc]

Yes? I'm not so familiar with sports betting, but the opportunity should narrow as people exploit it.

But stocks are really the best equivalent since these are traded contacts complete with a bid/ask spread and market depth.

Right now, you could buy 10,263 Trump loss contacts at 61, but if you needed more, the price would go up. Maybe you could time your buys to avoid moving the market, but eventually pressure from the arbs will narrow the spread between IEM.

That's how an efficient market should work. If something is trading higher in London than NYC, traders will buy in NYC and sell in London until the prices equalize. Since you can use leverage in financial markets and transaction fees are low, even a 1% risk free arbitrage is enticing.

But purchases are capped in these novelty political markets... So a single arb wouldn't move the price at all. They could buy the maximum position at 61 and there would still be thousands left for someone else. Closed and restricted markets are inefficient.

 

[otc]

Dammit.

I thought I had a workaround to still place my bet. Predictit has a "Will a woman be elected VP" contract, which is basically a biden contract and trades at about the same price.

So I go to make an account on IEM to place the other side of the bet and I get this:

WTF is this? In order to participate in the Iowa Electronic Market, I have to mail them a god damn check?

Now I understand why these markets are so inefficient.

Maybe I could fedex them a check before the odds shift?