There’s a brilliant article on potential arbitrage in the betting market for the new Pope.
Yesterday, you could buy Cardinal Lustiger at 5.3 and sell “generic Frenchman†at 6.0. That’s a sure thing profit as it only loses you money if Lustiger wins, but isn’t French, and he is. That’s gone today, but a new one has shown up; you can buy Cardinal Rodriguez Maradigia at 8.0 and sell him at 8.5 in his other description as a national of Honduras; he’s the only Honduran cardinal
Read more in Papal Betting Update.
I read your article with great interest as I am/was the Market Maket for Intrade.com’s Papal markets. As Market Maker I was able to trade all the papal markets without fees in exchange for placing continuous two sided markets of 100 contracts.
Aside from the first few days of the market when I did not have my spreadsheet running yet, there were very few real arbitrage opportunities in this market for clients to take advantage. I took advantage of pleanty of opportunities myself as I had the ability to trade without fees. If you saw an arb opportunity, it was only because I was not at my computer 24/7. Dude, I have a life fercrissakes. As soon as I booted up excel, the inefficiency would vanish. The Lustiger/ Frenchman arb was a nice one.
Another thing:
-Zero inter-market consistency? Totally false. I spent hours arbing intrade against the other markets although i did not use paddy power due to #1) the time consuming nature of grabbing data from another platform and sifting it and #2) the fact the PP had some real unadvantageous prices which were only one-sided to boot #3) Transaction costs/ capital costs associated with funding an account at another platform which has mile-wide bookie implied spreads and #4) most of my arbing occured late in the market due to the lower opportunity cost of capital of arbing nearer to expiration.
-The Italian Outsider situation was due to #1) Martini not being listed and mainly #2) that fact that the Italy contract was very expensive to hedge becuase in order to hedge I had to tradea all the individual cardinals. Countries with many cardinals had a much higher price elasticity than countires with only a few cardinals. Italy therefore had the highest price elasticity of them all and that’s reflect in the fact that it traded between high 40s and high 20s.
-At times I would not bother arbing out a internal Intrade discrepency of 0.1 or 0.2 because the margin requirements of Intrade aren’t so smart to have the arb relationships built in. It’s sad but true but really no big deal is it?
-Also note that I could only trade fee-free on intrade, on other platforms I do have to pay fees, fees which were structured in a very different manner than intrade’s so the fees themselves had to be modelled.
-Ludicrous spreads? HA. Spreads were consistant with the risk of Adverse Selection. I got picked off pleanty of times as cardinals moved in price and still managed to make some profits. Let me just say that Intrade clients made about 12 thousand dollars net from the papal markets.. this is how much money I earned in my hedging on other platforms. So who had the more predictive prices? The empirical evidence suggests Intrade did.
-you “guess is that the Paddy Power odds are going to be better than the Intrade prices” I laugh at that after you slammed me for “Ludicrous spreads”. Paddy Power’s implied spreads were 8 points per cardinal, mine were between 4 and 1.5. Dude, enter reality here my friend.
-Olubumni Okogje had just as much chance of being pope as Arial Sharon.
-No other market had country of origin and region of origin markets. It was my idea to list these. If the bid on Region was 101.5, that would have been eliminated once I booted up excel. Unfortunatly my system is not smart enough to trade without manual observation. And this market was just not big enough to justify me spending the time to get it here.
- I do not claim that Intrade is a “prediction market”. I have no interest in such academic tripe. All i want to do is arb the thing for profit, which I did to the maximum extent that transaction costs and opportunity costs (of capital and labour) allowed.
In conclusion I scoff at your monday morning quarterbacking but I do appreciate your feedback. Please feel free to check out my other Intrade markets in the UK Election, the Canadian Election, the FA Cup and the EU Referendum in France. I look forward to more feedback.
Open and account here: http://partners.tradesports.com/adclick.php?zoneid=2196&bannerid=3 (yes, it’s an affiliate link; so what?)