Intrade is pretty cool

[pelagius]

Originally Posted by jay santos

Yes that was the post that piqued my interest.

Pelagius, what do you think of this strategy?

Take the safe bets that have between 50% and 80% chance.

for example,
Hillary for Dem candidate .58
all three McCain, Guliani, Romney for Rep candidate .80
Hillary Florida .84
Romney in Nevada .85
McCain South Carolina .62
both McCain and Guliani in Florida totals .75

You don't win much after commission, but you keep churning those. Makes me wonder if you could exploit it. Maybe there's a bias towards the crazy bet?

It's possible that candidates with little possibility of winning are trading at too high of prices. There is some evidence in the literature that investors like stocks with positive skewness (the possibility of a big payoff) and hence are willing to pay "too much" for them. But I wouldn't call the evidence overwhelming.

Another thing to do is arbitrage between the Iowa and intrade market. The problem is, of course, the Iowa market. You can't place big bets so you will probably only be able to make like $5 an hour. But there are sometimes/often differences in prices that are big enough to exploit after taking into account transaction costs.