Good InTrade bets?

I like betting on elections, both because it is fun, and because the chance to profit from them helps distract me from the depressing farce of democracy (a mechanism with some decided disadvantages).  Last election I mostly sold Dem Sweep contracts (Dems win House, Senate, and Presidency), plus the tails of the electoral vote distribution.

In both cases, I thought (without actually finding data to confirm it) that the parlay was fairly independent, and the prices were way out of line from that.  The tails of the vote distribution were much fatter than you’d expect if the states were independent, and DEM.SWEEP was priced around 4-8 when the independent probability was 1/2% based on the prices for House, Senate, and Presidency.  It worked well for me, but since I was selling longshots, that one data point means very little.

But now it’s time to gamble some more, so I wired $20K to InTrade this morning.  Now I need to find something to bet on.  (Have I mentioned I’m a degenerate gambler? 🙂 ).  My current favorite bets are going long GOP (it’s way too early for the incumbents to be a 2:1 underdog, especially when we don’t even know the candidates!) and shorting Ron Paul (it’s a good bet and a hedge!).  I’d love to hear thoughts from y’all about what bets you like.

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  • chuq

    I would short Mike Huckabee for the same reasons you’re shorting Ron Paul. He simply doesn’t have the organizational wherewithal (look at his fundraising stats) to win the nomination. Even assuming the unforeseen implosion of one or more candidacies that are ahead of him, he’s too far back in the queue and too undercapitalized too zoom to the head of the pack.

    The price of his contract is inflated by mushy sentimentalism. Time to take his supporters for all they’re worth

  • Nate

    My first suggestion: please don’t assume independence between states or between categories! There is certainly a coat-tail effect that could bite you next time…

    Trades I like?

    Buy Huckabee to win in Iowa (45) then short Huckabee to win GOP nomination (8) for 6x that volume. (on the grounds that he is indeed a nutcase and will lose gen election no matter what iowa decides…)

    Some people like to short the Clinton conditional probability, meaning buy clinton DEM (72) sell clinton PRES (48). That has a conditional probability of 68%.

    Alternatively, I like buying the obama or edwards conditional probability (they have much lower implied #s of 49% and 41% respectively). Personally, I think Obama has a better than 50/50 chance in general election if he wins the party nomination…)

    Either way, gauge your volumes traded to get the ratio you like.

    Happy trading!

  • http://rafefurst.wordpress.com/ Rafe Furst

    I’ve noticed some arbitrage opportunities if you include other markets like WSEX.com. But since you are a gambler, why not just wait until the Super Bowl winner is determined and you will know whether to bet on Democrat or Republican 😛

  • Lafayette

    “I like betting on elections, both because it is fun, and because the chance to profit from them helps distract me from the depressing farce of democracy (a mechanism with some decided disadvantages).”

    Ah, yes, I see your logic.

    Democracy in America is a farce, so betting on its electoral outcomes renders it acceptable.

    It seems that you are confusing “fun” with “acting responsibly”. Not that it matters, mind you – you’re just another “fun wannabe”. I.e., a refugee from reality.

  • http://www.ogre.nu/ Anton Sherwood

    “Lafayette” implies backhandedly that there’s something irresponsible about betting on events that matter and/or are not governed by chance. I imagine that has previously been debated here and resolved to the satisfaction of those concerned.

  • Patri Friedman

    Lafayette – Democracy everywhere is a farce, in the sense that an individual voter’s actions do not matter, and the system as a whole produces many decisions which are detrimental to almost all of its constituents. See the field of economics called “Public Choice Theory” (wikipedia) for a more detailed explanation.

    I shall wait to respond to your implication that betting on electoral outcomes is unacceptable and irresponsible until you actually advance an argument.

  • http://kenzoid.com Ken Kennedy

    I’m also in the “short Huckabee” camp…I’ve been eyeing the InTrade markets myself recently, but I still haven’t quite nerved myself up enough to jump in. So I just started an account at the “Fantasy ’08” site (http://fantasy08.realclearpolitics.com/, sponsored partially by InTrade), as well as InTrade’s own Play$ site. Of course, play money changes peoples decision-making to a certain extent…but I still see Huckabee as way overvalued in all the markets.