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Trump presidency trading 18c/$ on FTX
- Thread starter moskvich
- Start date
That leaves me with a 3.50 profit if you ignore the 100 frequent flier miles or $1.00 in cash back I get depending on which credit card I use. The bet closes when the 117th congress meets on Jan 3rd, so about 12% of a year away. That gets me an annualized return of 29%, or 37.5% if you count my $1 in cash back from my card. If I was just using funds I kept in my Predictit account to take advantage of these rubes over and over so I didn't really pay that 5% withdraw fee on every transaction it goes up to an annualized return in the 75% range. Keep in mind, we're talking about a time when people are willing to invest in the IB "notes" program for a .5% annualized return!
You won't get anywhere near that kind of annualized return. In order to do that, you would have to find another similar arbitrage opportunity immediately after every settlement. That won't happen as major elections only happen every 2 years in the US. If there was really the potential to make an honest 29%+ annual return, PredictIt would find a way to take advantage of it, even if they had to work with a 3rd party. If you already have money in PredictIt that is not tied up with something else, sure, the arbitrage opportunity in this case makes sense to do. Others might also be able to use PredictIt to get an interest-free cash advance. (Take out a credit card with 0% interest for as long as possible with cash back...deposit funds into Predict, do as you describe and then withdraw the money in a month after settlement. Let the balance run up until the 0% interest period expires and then pay off card.) But these ideas won't make anyone rich. Also, I suspect the default risk is significantly higher with PredictIt than IBKR Notes.
For sure not an exact comparison. But basically there's nowhere in the real market world where anyone gives up double digit annualized returns just to recycle their money early to invest in something else. Kind of blows up the whole time value of money concept, especially in a world where you could just borrow at low single digit rates if you really had another great opportunity.
It also makes no sense to pay 17%+ APR interest rates on a credit card...and yet...people do it all the time...YOLO I guess.
It's not a fair comparison because in the options market there is an ability to hedge using the underlying while in the world of "bets" there is nothing like that.
Hedging only makes sense if you can do size that's relevant to your net risk. My understanding is that predictit has a 1k limit or something like that so what's the point?
Yeah, it's not a full hedge, but it's basically free. I look at these types of bets as purely gambling, but a hedge in the sense that if I lose all the money I'll still be happy with the outcome. I also listed some other hedges on here that I did before the election, notably buying FXI, INDA, and EEM (covered calls actually) which would benefit under a Biden victory. Those did well. UUP short also working too...unfortunately.