# What can we learn from Betfair and Intrade being out of line from one another? **URL:** \ **Category:** Politics & Elections\ **Created:** [September 16, 2012, 4:46pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885 "2012-09-16T16:46:23Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [September 17, 2012, 4:03am UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/21 "2012-09-17T04:03:05Z")
> [@](#): > > Quoth **Measure for Measure** : > > There are $20 and 100 quid notes laying on the sidewalk. They shouldn’t stay there for long. Therefore, if one notices $20 bills laying on the sidewalk day after day, one should conclude that they’re somehow being continually replenished. And once you’ve established that, then the logical question becomes who’s replenishing them, and why. Enter **Simple Linctus** ’ idea. ---
**Author:** ![don\_t\_ask](https://avatars.discourse-cdn.com/v4/letter/d/e68b1a/32.png) [@don\_t\_ask](https://boards.straightdope.com/u/don_t_ask)\ **Post date:** [September 17, 2012, 5:03am UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/22 "2012-09-17T05:03:02Z")
I can’t imagine that it would happen at all to any significant effect. The actual costs of betting with Betfair are 5% on winning bets. This is of little concern when arranging an arbitrage within Betfair because the charge is levied on the net result. So if the equivalent prices, 1.51 and 1.41 were available at different times in Betfair the punter would pay 5% of the $47 collect. Since this is not the case in the OP the 5% would be levied on the $709. Further while betting both sides of a proposition on Betfair your account is maintained so that only money at risk is unavailable for betting. In the circumstances of the OP the total funds for both bets would be tied up until next year, half of it subject to exchange rate fluctuations. As a punter this all sounds like far too much downside when there are literally thousands of markets to bet on every day. No sensible punter would tie up funds that could be working on such a skinny proposition. ---
**Author:** ![gamerunknown](https://avatars.discourse-cdn.com/v4/letter/g/6bbea6/32.png) [@gamerunknown](https://boards.straightdope.com/u/gamerunknown)\ **Post date:** [September 17, 2012, 8:26am UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/23 "2012-09-17T08:26:40Z")
> [@Measure for Measure](#): > > There are $20 and 100 quid notes laying on the sidewalk. Funny thing actually, the Bank of England doesn’t print £100 notes, but [other UK countries do](http://en.wikipedia.org/wiki/Banknotes_of_the_pound_sterling). > [@don't ask](#): > > No sensible punter would tie up funds that could be working on such a skinny proposition. Could be a wealthy democrat playing 11-dimensional chess. You know, fomenting the revolution by advancing the class interests of the patricians. ---
**Author:** ![tim314](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tim314/32/3468_2.png) [@tim314](https://boards.straightdope.com/u/tim314)\ **Post date:** [September 17, 2012, 8:47am UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/24 "2012-09-17T08:47:37Z")
> [@Simple\_Linctus](#): > > No informed person thinks commodity markets are efficient (that doesn’t rule out republicans though, lol). Unlike stock markets where there is a pay off for making the market efficient, commodity markets can only have the traders who would make the market efficient if they’re inefficient, curiously enough. This is why trend following strategies so simple they can even be made into indecies show results. Can you explain this a bit more? I am not an “informed person” on these matters, but am curious. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [September 17, 2012, 3:35pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/25 "2012-09-17T15:35:48Z")
As others mention, tied-up money and fees are a problem, as is the inconvenience of whatever cross-Atlantic channel may be needed, but I think there is a bigger problem. (I _think_. To be sure, we’d need to study the trading volumes at Intrade and Betfair.) _ **Large bets will change the payouts.** _ Right now you can buy _Democratic Party candidate to win 2012 Presidential Election_ at $6.64 at Intrade, but there are only 9 shares available at that price. If you inject a fair amount of money to arbitrage, you won’t get the posted odds. The same principle applies in the stock market. Even li’l 'ol Septimus identified some trivial arbitrage opportunities on the NYSE, back in the 20th century. For a specific example, consider the closed-end funds BCV and ECF. (Googling now, I see they still exist.) They are managed by the same firm and have very similar portfolios; yet [right now](http://www.davisdinsmore.com/BEnav.htm) their discounts differ: 14.7% and 15.3%. It’s been almost two decades since I checked those discounts; in the past the differential was often much more than 0.6%. If the difference were 2% you could effectively make that in profit, by buying one and selling the other. But the funds are low-volume; if you try to make more than $1000 or so on this play, the discount relation will reverse. ---
**Author:** ![don\_t\_ask](https://avatars.discourse-cdn.com/v4/letter/d/e68b1a/32.png) [@don\_t\_ask](https://boards.straightdope.com/u/don_t_ask)\ **Post date:** [September 17, 2012, 4:06pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/26 "2012-09-17T16:06:22Z")
On Betfair there has been $400,000 bet in the last 5 days, $300,000 on Obama who is now $1.37 from $1.46. So there was an opportunity there to back him and now lay the whole lot off and watch for free. ---
**Author:** ![BigAppleBucky](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bigapplebucky/32/178_2.png) [@BigAppleBucky](https://boards.straightdope.com/u/BigAppleBucky)\ **Post date:** [September 17, 2012, 4:27pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/27 "2012-09-17T16:27:44Z")
> [@Simple\_Linctus](#): > > No informed person thinks commodity markets are efficient . . . Or, as the old expression goes, “You can’t beat the locals.”. ---
**Author:** ![That\_Don\_Guy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/that_don_guy/32/538_2.png) [@That\_Don\_Guy](https://boards.straightdope.com/u/That_Don_Guy)\ **Post date:** [September 17, 2012, 8:06pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/28 "2012-09-17T20:06:25Z")
> [@Chronos](#): > > Meanwhile, of course, the fact that a guaranteed-profit arbitrage opportunity can exist unexploited for so long pretty well skewers the notion that markets are inherently efficient, which is I believe a central tenet of what purports to be Republican philosophy. Guaranteed profit? Where do you get that? Intrade is bet 662 against their 338. Betfair is bet 100 against their 41, which is bet 662 to win 271.42. Don’t assume that Intrade is offering shares on Romney at 33.8, or Betfair’s odds on Romney are 3.44 (bet 41 against their 100). ---
**Author:** ![Simple\_Linctus](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Simple\_Linctus](https://boards.straightdope.com/u/Simple_Linctus)\ **Post date:** [September 17, 2012, 9:22pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/29 "2012-09-17T21:22:01Z")
> [@tim314](#): > > Can you explain this a bit more? I am not an “informed person” on these matters, but am curious. I am also not an informed person and have nothing to do with anything like this, but as BigAppleBucky alludes to, the existence of dodgy as fook locals basically guarantees inefficiency in the very short term with their stop catching and other such things. But on a longer time scale, almost all ready liquidity in the commodity markets comes from speculators of one kind or another. Speculators would not play these markets for very long if they couldn’t make money relatively easily (but of course it can’t be too easy either otherwise everyone would play and make the market more efficient). If the markets became so efficient that speculators couldn’t make money, then they would pull out and so the markets would become less efficient again (as there’s no reason for them to stay efficient). Basically the efficiency stays balanced against the expected returns. Quite nifty when you think about it. This is NOT the case with stocks because you earn a return just for owning stocks, and so there is always an incentive to look for inefficiently priced ones. Commodity markets need at least somewhat predictable prices therefore, while stocks don’t. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [September 18, 2012, 5:08am UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/30 "2012-09-18T05:08:19Z")
I’m converging to Simple Linctus’ point of view on this particular betting market, but I disagree with him with regards to commodity markets. They are comparable to stock markets in terms of efficiency in my view, possibly more so. Specifically, I’m guessing that speculative bubbles afflict asset markets more than typical commodities. (Precious metals straddle the 2 categories.) ---
**Author:** ![BigAppleBucky](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bigapplebucky/32/178_2.png) [@BigAppleBucky](https://boards.straightdope.com/u/BigAppleBucky)\ **Post date:** [September 18, 2012, 5:55pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/31 "2012-09-18T17:55:16Z")
[http://electoralmap.net/2012/2008\_election.php](http://electoralmap.net/2012/2008_election.php) They were very close. Of course, it was done on election day. Scroll down to see their poll rankings. Top five pollsters were Rasmussen (A- ), Ipsos (B+ ), CNN (B+ ), Fox (B) and Pew (B- ). Worst, by far, was Reuters, but CBS, Gallup, ABC, Marist and IBD were bad as well. Overall Poll Score Grade Accuracy Consistency Rasmussen Reports 91% A- 92% 86% Ipsos/McClatchy 89% B+ 92% 79% CNN/Opinion Research 88% B+ 92% 77% Fox News 84% B 92% 61% Pew 83% B- 92% 56% I tried to get this to line up. Sorry if it didn’t. ---
**Author:** ![Simple\_Linctus](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Simple\_Linctus](https://boards.straightdope.com/u/Simple_Linctus)\ **Post date:** [September 18, 2012, 11:22pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/32 "2012-09-18T23:22:04Z")
> [@Measure\_for\_Measure](#): > > I’m converging to Simple Linctus’ point of view on this particular betting market, but I disagree with him with regards to commodity markets. They are comparable to stock markets in terms of efficiency in my view, possibly more so. Specifically, I’m guessing that speculative bubbles afflict asset markets more than typical commodities. (Precious metals straddle the 2 categories.) I had a friend give me the content for this: Take a look at the research referenced in amongst other popular books “Evidence Based Technical Analysis” - while that book mostly focusses on showing stock markets to be reasonably weak form efficient, it also in passing references a number of times why commodity markets are susceptible to reasonably simple technical trend-following systems - in effect they can be explained as compensation/risk premium for as I said before offering a hedging service to commercial hedgers. If may make a quick quote from it: > [@Book](#): > > If a risk-transfer premium is a valid explanation of trend-follower returns, then trend following in stocks should not be as rewarding as it is in the commodity futures markets. A trend follower in stocks is not providing a risk-transfer service. There are data suggesting that trend following in stocks is indeed a less rewarding enterprise. > > Lars Kestner compared the performance of trend-following systems for a portfolio of futures and a portfolio of stocks. The futures considered were 29 commodities in 8 different sectors. The stocks were represented by 31 large-cap stocks in 9 different industry sectors, and 3 stock indices. Risk-adjusted performance (Sharpe ratio) was computed for 5 different trend-following systems,106 over the period January 1, 1990 through December 31, 2001. The Sharpe ratio averaged over the five trend-following systems in futures was .604 versus .046 in stocks. These results support the notion that futures trend followers are earning a risk premium that is not available to trend followers in stocks. The Kestner reference is to “Lars Kestner, Quantitative Trading Strategies: Harnessing the Power of Quantitative Techniques to Create a Winning Trading Program (New York: McGraw-Hill, 2003), 129-180.” btw. And now back to me: Fuck all this financial shit, it’s the betting that matters. I haven’t checked if this dislocation still exists and will do after posting this - I guess given the last 48 hours maybe it doesn’t cause frankly there’s more chance of Biden being the next president than there is Romney - so that could make the hypothetical rich Republican withdraw… or it could mean them doubling up! ---
**Author:** ![don\_t\_ask](https://avatars.discourse-cdn.com/v4/letter/d/e68b1a/32.png) [@don\_t\_ask](https://boards.straightdope.com/u/don_t_ask)\ **Post date:** [September 18, 2012, 11:52pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/33 "2012-09-18T23:52:45Z")
Betfair latest - another quarter of a million on Obama in the last 24. Most recent matched bet was set at $1.30. ---
**Author:** ![DJ\_FC](https://avatars.discourse-cdn.com/v4/letter/d/b3f665/32.png) [@DJ\_FC](https://boards.straightdope.com/u/DJ_FC)\ **Post date:** [September 25, 2012, 10:48am UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/34 "2012-09-25T10:48:03Z")
Hello all, I found this thread on Google and this is my first post. I live in London and trade for a living (for a fund). I’ve already put well over $200k of my own money into this trade and as far as I can tell it really is free money. As I see it if Romney wins the election I’ll be up $13k and if Obama wins I’ll be up $20k. I represent almost 4% of the open interest on Intrade and yet I cannot make this spread move. It really feels like somebody on Intrade is fighting back… Ask me anything ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [September 25, 2012, 1:12pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/35 "2012-09-25T13:12:50Z")
It wouldn’t surprise me. If DJ FC is for real and $100k is 4% of the InTrade market, it would be trivial for Romney backers to keep the spread down a little. Obviously eventually they won’t be able to, but that’s like 2 TV spots. Considering the campaign’s obvious interest in fighting back against the “we’re losing” meme it seems like a no-brainer to drop a little cash in the only betting market that US news interests ever talk about. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [September 25, 2012, 3:41pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/36 "2012-09-25T15:41:24Z")
Hello, **DJ FC**. Do you bet persons or parties? If persons, aren’t you worried about circumstances leading to, say, Biden victory? Do you think there are many others making similar plays? ---
**Author:** ![Merneith](https://avatars.discourse-cdn.com/v4/letter/m/57b2e6/32.png) [@Merneith](https://boards.straightdope.com/u/Merneith)\ **Post date:** [September 25, 2012, 5:21pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/37 "2012-09-25T17:21:51Z")
Spam reported. I’d be ok with Biden victory. He’s not my first choice but more opportunities for the Onion is always a good thing. ---
**Author:** ![DJ\_FC](https://avatars.discourse-cdn.com/v4/letter/d/b3f665/32.png) [@DJ\_FC](https://boards.straightdope.com/u/DJ_FC)\ **Post date:** [September 26, 2012, 7:14am UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/38 "2012-09-26T07:14:37Z")
> [@septimus](#): > > Hello, **DJ FC**. Do you bet persons or parties? If persons, aren’t you worried about circumstances leading to, say, Biden victory? > > Do you think there are many others making similar plays? We are doing as vanilla as possible… Buying Obama to win on Intrade and selling Obama to win on Betfair. ---
**Author:** ![Simple\_Linctus](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Simple\_Linctus](https://boards.straightdope.com/u/Simple_Linctus)\ **Post date:** [September 26, 2012, 5:20pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/39 "2012-09-26T17:20:05Z")
DJ you don’t happen to trade at that sports arcade in canary wharf do you? ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [September 26, 2012, 5:52pm UTC](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885/40 "2012-09-26T17:52:19Z")
It would appear that the money that Republicans are funneling into Intrade to keep up the appearance that Romney is not tanking… Is going to end up in the pocket of a trader in London. I find this amusing. [Previous page](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885.md?page=1) [Next page](https://boards.straightdope.com/t/what-can-we-learn-from-betfair-and-intrade-being-out-of-line-from-one-another/634885.md?page=3)