How to Bet on Who Will Win the Democratic Nomination

If you’ve found your way here, chances are you already are a PredictIt trader or are curious about betting markets and might become one in the future (if so, please use this referral link which may or may not still be working; if it is working it will match up to $20 of your initial deposit and benefit this blog).  And further, you’re probably curious about the smartest way to trade on who will win the Democratic nomination.  So here are a few thoughts to guide your way:

The Market

Click >>here<< for the most popular and heavily-traded market on PredictIt for the next year.

DNOMss.png

You’ll see a list of contracts for who will eventually win the Democratic nomination; not all candidates are listed but at some point PredictIt will get around to adding them all (hopefully).  For each candidate you can either buy YES shares (that they’ll win) or NO shares (that they’ll lose).  You can of course choose not to buy shares either way for certain candidates.  You can buy YES shares for multiple candidates if you’d like.  You can buy NO shares on multiple candidates (more on this below).  You can sell these shares at any point for profit or for loss.  And come July 2020, any position you still hold will either resolve $1 or $0 per share depending on who wins.

Okay, so how can you make money doing this?  A few simple strategies:

1) Just pick who you like and hope they win

This is probably the most common strategy.  You like Bernie Sanders.  You see that it costs $0.21 to buy a share of Bernie.  You throw down $21 for 100 shares and go on about your life.  If he wins, you get $79 in gross profit less $7.90 in fees (10% of your profit) for a net profit of $71.10.  If he doesn’t win, you lose your $21, or maybe you dump them for pennies at some point next year.

You can make this more complicated if you like of course.  Maybe you think it’s for sure either Bernie or Kamala, so you add $15 worth of Kamala (another 100 shares at $0.15 each).  Now you profit if either wins but not as much as if you had just correctly picked the only one to win.  Or maybe you decide it’s definitely not going to be Andrew Yang, so you bet $88 to win what you feel would be a free $12 on him falling short.  Each contract is its own decision to make.

2) Neg-risk

One of the most popular strategies in these big high volume markets is achieving something called “negative risk”.  You can do this in any “linked” market; if a market offers more than one contract where only one can win then that market can be neg-risked.

What is negative risk?  Neg-risk is achieved when you buy NO shares in multiple contracts.  Because at least one set of your NO shares has to resolve NO, PredictIt will credit you with some money back when you purchase the second or more contract’s worth of NOs (conversely; they will debit you for increasing your risk if you sell them back).  For example, let’s say you bought NO at Joe Biden’s peak of 27c, meaning that you spent 73c per share, and let’s say you’re a relative high roller and spent the most money per contract that you can, $850.  Now say you turned around and also bet the max limit (“maxed”) Bernie Sanders when he hit the same 27c peak.  Your risk table would look something like this:

BernieBidenriskchart.png

You have 1164 shares of both, and the value of your shares is just shy of the $850 betting limit.  Yet the most you can lose if either of them takes the nomination?  $566.87.  That’s because while you lose $849.72 if one of them wins, you also win $282.85 from your NO shares on the other contract winning, meaning your total loss is reduced.  Now let’s continue and say that you’d played the market perfectly after starting just after the midterms last year and maxed every contract at its YES peak (getting the cheapest NO to date for all of them).  Your risk table would look like this:

FullDNOMrisktable.png

Whoa.  Yeah.  The worst you could do?  Win $1039.86.  In fact, PredictIt will have already credited you that amount, so for walking into the game with $850 just after the midterms and patiently (and perfectly) entering each contract, you’d be able to withdraw $1k just like that, with nothing decided and your shares still live.  And if John Hickenlooper wins (not listed yet)?  Well then all your NO shares pay – meaning you get an additional $1100 or so.

If you’d like to play around with this to try different combinations of prices and so on, please feel free to copy from this spreadsheet (hopefully the formulas will copy for you).

3) Flipping and playing the swings

The 2020.DNOM market (here I’m using the ticker name for abbreviation) is the highest volume market on PI.  It routinely trades over 3M shares a week, and that volume is likely to pick up.  Further, you might notice just by following the market a bit that prices move up and down as the hive mind decides who’s winning and who’s losing.  Polls, endorsements, announcements, armies of Yang supporters, you name it.  Anything can move the market.

One way to capitalize on this volume is to simply buy shares at one price and sell them for a teensy bit higher.  Then repeat.  And repeat.  And repeat.  Oh and don’t get caught on the wrong side of a price drift!  With enough volume on your end (and with enough time and patience on your hands) you can slowly accumulate a reasonable profit this way.

This is how I play, and despite doing a rather poor job of it I’ve managed to get up to about $440 in profit in this market alone, most of which has come from that same post-midterm period where the absolute perfect neg-risker could have walked away with $1k by now (and we’ll touch on this below, but getting perfect neg-risk ain’t easy).  Here’s what that kind of grinding looks like (again noting that I consider this to be relatively poorly played thus far):

DNOM trade history through midmarch.png
A crummy $440 in profit on about 77k shares sold (meaning at least that many were bought) so far.  But even with this I’ll eventually pass the best neg-risk position.  Hopefully anyway.

4) Miscellaneous play-style thoughts

  • Not every style works for every trader.  Are you hopelessly addicted to PI and spend way too much time on the website?  You might as well flip shares, or get neg-risk and flip shares within neg-risk.  If you’re low time-commitment, then best to just pick a position and stick to it or enter neg-risk and stand pat.

 

  • What’s your bankroll?  Neg-risk can be a perfect way to build a bankroll up.  If you start with $100 you can probably walk away with $110 by the end of a week if you’re patient.  Then you can take that money and reinvest in more shares until you get all the way up to $850 or more (which you can then go spend elsewhere on the site or withdraw).

 

  • If you do neg-risk, don’t be too much of a perfectionist.  There’s probably always going to be a better neg-risk that you can get later, so don’t be afraid to sell off a position that you think might spike so you can rebuy cheaper (and with more shares).  It’s really really hard to get perfect neg-risk.

 

  • You can stay in neg-risk and still own YES shares, depending on how many and at what price, etc.  Getting neg-risk and then buying a “kicker” is a pretty popular way to play, but your YES bracket(s) will probably end up being very cheap contracts that are unlikely to win.  Then again, if the market really swings enough, you never know what kind of an amazing position you could get.

 

  • You can flip more shares on the YES side, but of course it takes longer and makes you a little less nimble if you need to switch.

 

  • The most money is to be made by making solid predictions about who will move and by how much, maxing, and collecting your profit.  For instance, you could have maxed Bernie at 12c and sold him for 25c already if you correctly predicted that he’d run and show strength early on.  I’m shit at making predictions, but you might be good at them!

 

  • The market won’t be static forever.  (Indeed it’s moved quite a bit, even just this year). If you’re a penny-flipper, like I am, you would be wise to monitor your positions closely during the first debates and as the first post-debate polls come out.  Momentum can shift in the summer, and the market I expect will react – it will take more skill to maximize profit on these swings.  And who knows what kind of boomlets the fall will bring.

 

  • The market will be insane by the Iowa caucuses, and on caucus night.  It’s likely PredictIt’s servers will crash then, so don’t get caught holding shares in someone who will be worthless at the end of the night (Klobuchar, perhaps).

 

  • The market will be virtually over by the end of Super Tuesday (probably, anyway).  But in the event that things continue to the convention (and perhaps past the first ballot) this market will become insanely fun.

 

  • These strategies don’t just apply to DNOM.2020 (see also USPREZ, the Iowa market), but that doesn’t mean they’re all applicable everywhere.

 

Disclaimer: I probably have positions or intend to take positions in just about all the markets I discuss herein.  You should always do your own research prior to making any investment decision. You should consider my advice and knowledge I share to be fundamentally biased in its presentation and selection by my own financial incentives.  While I do not knowingly lie I certainly do knowingly omit information that I think gives me an edge.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s