3 ms·
As somebody who made a decent chunk of change (enough to get a 1099 from PredictIt in 2020 and 2021) off the situation... long shot bets are almost always overp
by rspeele 3y ago
As somebody who made a decent chunk of change (enough to get a 1099 from PredictIt in 2020 and 2021) off the situation... long shot bets are almost always overpriced on PredictIt.
PredictIt specifically encourages these long shots to be over weighted thanks to their $850 risk limit in any given market. If one long-shot bettor places a max buy order for YES at 10c per share, the order book has 8500 buys at that price point. I can come along, see that what they're betting on is absolutely nuts and max out NO... but at 90c per share I can only fill 944 of those orders before I'm maxed out at my $850 risk limit. I might be supremely confident and WANT to bet $7,650 on this but I simply am not allowed to. So it takes eight more people like me to come along and plunk that money down before we're moving the needle on the order book.
In the 2020 election they somewhat mitigated this by making a dozen markets that were all basically the same question: Is Trump going to succeed at overturning this? They had markets for each state, plus combo markets they added like "Will Trump win any of AZ, GA, PA", plus the electoral college markets, the margin-of-victory markets, etc. But it was still way more effort to go in with a big chunk of change and manage spreading your bets out across all those different markets to max your $850 caps as efficiently as possible.
This is in addition to the other factors, that it is simply more FUN for people to gamble on long odds because it's like buying lottery tickets (who wouldn't want a 10:1 return?). And that, when you factor in fees, opportunity cost (I could have this money in the S&P 500), and counterparty risk (how long will my money be tied up if PredictIt gets shut down), it's really not very attractive to put money in shares in the $0.90-0.99 range unless A. you already have the cash sitting in your PredictIt balance and B. the end date of the market is known and approaching rapidly.