Looking at DemfromCT's post about today's tracking poll and the InTrade and Iowa Electronic Markets rates got me curious about how the global betting market is handicapping the race. I'm not endorsing wagering (especially from the USA as online betting is illegal), but if you are willing to wade into the crazy futures markets, or happen to be outside of the US and are looking for the best Obama rates, follow me down...
InTrade right now (10 am Eastern time, 10/5/08) has Obama at 65.3, and McCain at 35.9. Using traditional betting line odds, this puts Obama at roughly 1/2 and McCain at 2/1 -- or, a $1 Obama bet would pay out $1.50 and a McCain $1 bet would pay $3.
IEM (their futures contracts are based on the party, not the person) right now has Obama at 73.7 and McCain at 26.9. Or, if you prefer, Obama is at roughly 1/3 and McCain is at 3/1 ($1 Obama bet pays $1.33; $1 McCain bet pays $4).
So InTrade is offering much better odds on Obama, as they have all election cycle. But how do the global betting sites compare? Who's right?
William Hill: Obama 1/3, McCain 9/4. This means a $1 bet on Obama would pay $1.33, or, a $1 bet on McCain would pay $3.25.
Ladbrokes: Obama 1.25, McCain 3.75. This means a $1 bet on Obama would yield $1.25, while a $1 McCain bet would pay $3.75.
Betfair (works as an InTrade-style trading market; numbers change constantly): Obama 1.35, McCain 3.9. $1 Obama bet pays $1.35; $1 McCain bet pays $3.90.
888 Sport: Obama 1/4, McCain 11/4. $1 Obama bet pays $1.25; $1 McCain bet pays $3.75.
Bet365: Democrat 1/4, Republican 11/4. As with IEM, Bet365 is voting by party instead of candidate, which allows you to hedge against catastrophe. Same payouts as 888 Sport.
Blue Square: Obama 1/4, McCain 11/4. Same payouts as Bet365 and 888 Sport.
The conclusion that we can make is that, even when accounting for the traditional spread on which bookmakers make their money, none of the major bookmakers come anywhere near the InTrade return on Obama. The crazy Freeper who's manipulating InTrade has given all of us a great opportunity to make money here -- don't be alarmed about it, take advantage of it! Eventually either the idiot will run out of money before the election and stop, at which time you can sell the contract at rates more in line with IEM, or the contract will pay out at 100% after 11/4 and you'll have made a very handsome return anyway.
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To summarize the answers to the all-important question: "how do I make money on this?"
- If you want to maximize returns strictly on Obama, as I say above, InTrade is your best bet. With a current price of 65, InTrade would provide a greater than 50% return on your money with an Obama win.
- If you want to maximize returns strictly on Obama through the UK sites, BetFair's current 35% return is highest among the sites I reviewed.
- If the trade markets scare you and you want to bet with a more standard bookmaker, William Hill offers a 33% return on Obama.
- If you want to hedge against a McCain upset and still make money, you can. The most efficient way in the US is to buy Obama from InTrade and McCain from IEM at equal rates. Here's an example of how this would work (values are in generic currency):
-- Obama's trading at ~65 on InTrade, a better price than IEM's 75. Buy 100 Obama contracts on InTrade.
-- McCain's trading at ~25 on IEM, a better price than InTrade's 35. Buy 100 McCain contracts on IEM.
-- Your total cost is (65 x 100) + (25 * 100) = 6,500 + 2,500 = 9,000.
-- If Obama wins, your InTrade contracts pay out at 100 x 100 = 10,000 while your IEM contracts are worth 0. You made 1,000, or an 11% return on your original investments.
-- If God forbid McCain wins, your IEM contracts pay out at 100 x 100 = 10,000 while your InTrade contracts are worth 0. You still made 1,000 -- again, an 11% return.
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Good luck to all investors!