Sample Odds

Chances of some future events, from Intrade.com:

70-71% Republicans win US House in 11/2010
42-47% California legalizes marijuana in 11/2010
6-16% California credit default by 2011
10-20% US overt strike on N. Korea by 4/2011
24% US or Israel overt strike on Iran by 2012
10-19% US Sup. Court bans med. mandate by 2012
16-18% Palin is Republican nominee in 2012
11-30% Japan says it has nuke by 2013
45-48% US Cap & Trade system by 2013
12-14% China war act on Taiwan by 2013
15-38% Higgs Boson seen by 2014

If you think any of the above in error, please do go get paid to correct the error.

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  • William

    Any tips on getting money into an Intrade account?

    • Doug S.

      What he said.

      My father’s bank rejected his credit card transfer…

    • gwern

      I’m trying the old-fashioned approach of mailing them a personal check. Turns out postage to Ireland is only $1! Seems like quite a bargain considering what it costs to mail anywhere in the US.

      • anon

        I mailed them a check and they sent me an email a few days later saying they had received it. Apparently, “this check is subject to the standard ten-business day clearance period enforced by [Intrade’s] bank”. So, unless something goes wrong, I think the check strategy does work, it’s just slow.

      • gwern

        Update: the check route worked, and I’m trading now.

        Like others, I am discouraged from the small-probability markets by how much margin Intrade requires. What’s the point of forcing the North Korea strike down some percents if I have to lock up my full $200 to do so?

  • q

    “12-14% China war act on Taiwan by 2013”

    Huh that seems a little high given all the vested interests in making sure it doesn’t happen.

  • Michael Kirkland

    I wonder how the various anti-gambling laws affects them. It’s hard to see this as anything other than bookmaking with an idiosyncratic odds setting mechanism.

  • JRF

    Two questions.

    Roughly how much would someone have to disagree to make betting a better option than investing in the next best option?

    How much stupid money could somebody reasonably expect to match his bets?

    To me it seems that these sort of markets just lack the profit potential to be worth bothering with.

    • Dan

      That would suggest that the markets are roughly efficient.

      • anon

        No, it could also be that there is simply too little market volume, which is in fact the case for many of InTrade’s listings. Just because an idiot standing on the street corner gives you even odds on a penny that the World will end tomorrow doesn’t mean that it’s an efficient market.

  • Robert Koslover

    One problem, if I understand what they do there correctly (and I may not), is that you can’t simply and directly bet *against* one of their statements. That is, the only way would be to buy shares in the proposition while/if it is too low, wait/hope for it to increase in value (aka popularity among buyers) and then sell it because you think it is overpriced. But if you always think the price is “too high” for a particular event, you can’t make any money off that fact, since you presumably won’t buy any shares. Right? If not, I encourage knowledgeable In-traders to explain my error.

    • Doug S.

      You can buy a “short” position, I think…

    • Jess Riedel

      Doug is correct. There is actually perfect symmetry between being able to bet for or against future outcomes.

      (Intuitively, to bet against the outcome, you just “sell” shares without owning any, so you own a net negative number of shares. If you win, you just keep the money you sold them for, If you lose, you must “buy” shares–which are now values at the full amount the shares pay out–to cover your debt. But this is all handled seamlessly by the Intrade interface.)

  • http://sebastianmarshall.com Sebastian Marshall

    > 10-20% US overt strike on N. Korea by 4/2011

    How would I take the bet against that? I’d wager $1000 to win $200 if the system is reliable for getting paid and not too much hassle.

    • Jess Riedel

      If you want to bet against a strike on North Korea, you’d have to sell shares to the person who bid at 10 points (i.e., the 10% chance, not 20%), and they are only willing to buy 5 shares. So the most you could win is $5 (and you stand to lose $45).

      Intrade suffers seriously from a lack of volume right now. I assume that’s why Robin Hanson is advertising it.

      • http://sebastianmarshall.com Sebastian Marshall

        Thanks for the feedback. At first I thought, “That isn’t worth the hassle,” but now I thinking I’ll do it just to learn about the experience. Is there a good guide to getting started, and how easy is it to cash out?

      • http://hanson.gmu.edu Robin Hanson

        You could also post your own offer between the 10-20 spread in the hopes that some trader on the other side will accept your offer.

  • vozworth

    ok, I’ll bite.

    Whatsa Higgs Boson?

  • gwern

    Some of those odds strike me as nuts.

    Palin is republican nominee is pretty bad, as is bombing N. Korea (although I wonder if I’m biased by the fact I think it’s a terrible idea).

    I’d have to say the Japan declares nuclear status is the worst one, though. That is just all kinds of crazy; as well assign 11-30% odds to Israel officially declaring its nukes!

    • Peter St. Onge

      @gwern,

      keep in mind the spread, transaction costs & capital carry. Sell Japan and you’re making $11 on $100 committed, minus capital costs for 2.25 years (at least 6.5% per year, say the rate of investor mortgages), minus transactions for intrade (?2-5%), minus your genuine probability (?1%). So you’ll lose at least 17% or so on those.

      at 30% it’s a good sell. at 11% it’s a good sell only if 2013 were maybe a year away. not two-plus.

      • gwern

        Yeah, with Intrade it’s always the details that kill you. I’d note that you might not take the hit of the Intrade transaction fees, since you wouldn’t be buying at the current offer (or whatever the terminology is); Intrade rewards price-movers. But that’s small potatoes.

        I suppose it’s not that bad compared to a lot of investments (put it into stocks and see no gain? CDs or Treasuries at 1%? 30 year mortgages are going for 4-5%, but how does a small investor get in on that? etc.)…. Still, it’s really frustrating to see an insane price but for a market too small to be worth correcting.

    • Peter St. Onge

      @gwern,

      That’s right, forgot about the pricemaking discount.

      On ‘too small to correct’, it’s a bit of ‘if only i knew about this arbitrage when i was in high school’ 🙂 Anyway it is a valid point on ideas futures if the biggest (generally, wisest) players find it not worth their time.

      Anyway betting on imminent events avoids the carry, generally the biggest costs, so there’s still room to play on intrade. Then there’s always gold…

  • Peter St. Onge

    I think the Japan nukes number is high.

    However, all of my Intrade money is already committed to other trades. Therefore, I face a price inclusive of transaction costs, credit card APR if I bump the liquidity, and indeed bounded by the profits on alternative Intrade opportunies. As in, I’d only play Japan if GOP House Nov offers less. Which it doesn’t, time-adjusted.

    Maybe I’ll play Japan after midterms, but in the meantime my wisdom lies fallow, unexpressed but in this august forum. I suppose I could become a middle-man, an Intrade hedge fund. Or I could seek one out, pace search costs.

  • Justin

    The idea of the U.S. striking North Korea overtly and setting off a huge war in barely more than half a year seems over priced, though I’m not in the business of picking up pennies in front of steamrollers, even slow moving ones.

  • Nathan

    China-Taiwan odds seem too high. 3% is my best guess.

  • http://www.danexpol.pl Jack Dotacje

    The most funny is “California legalizes marijuana” heh, I don`t think so : ) How intrade.com made this plan?
    I`ll made myself:
    Tomorrow i win lottery: 50%
    today I`ll meet incredible beutifull woman, and she ask me about life with me: 25%
    11.2010 I will have the best holiday ever: 50%
    12.2013 I`ll have 5 children, and that children will have 5 moms : )

    • kevin

      Right now the measure to legalize cannabis is ahead, albeit narrowly.

  • dave

    Most of these contracts are thinly traded.

  • http://t-a-w.blogspot.com/ Tomasz Wegrzanowski

    12-14% China war act on Taiwan by 2013

    Low volumes, transaction costs, and margin requirements make it impossible to make money of that even if you knew it to be 0%.

    Intrade is only useful for predicting American elections, it has too little volume for anything else.

  • http://www.alexander-unzicker.de Alexander Unzicker

    The probability of the Higgs boson discovery is much lower – the last traded contract corresponds to a 15% chance.
    http://www.bet-on-the-higgs.com explains how to bet and offers US$ 100 monthly to those who believe in the Higgs discovery.