Wednesday, October 05, 2011

Fredo's Mad Money Challenge '12, Part 1

For round 1, you get $20 to pick all the contracts you want in the first four primary/caucus states. You can pick as many or as few contracts as you want in any primary. You could bet all your money on one race. You could bet all four races. You could play multiple candidates in the same state. You could play the same candidate in every state. The choice is yours.

Remember, each contract pays off $10 if it ends "in the money" (i.e., if the candidate wins that primary), $0 otherwise.

Best of luck, gentlemen! I'll go first in the comments, but I think it's best if you make your picks looking at mine, so we don't end up gaming each other picks. That would give the person who goes last an advantage over the person who goes first. Try to make your picks ASAP so the later pickers don't get the advantage of more info.

I'll provide an example below:

Joe Schmo could buy:

NH Romney x 1 (@ $7.79) = $7.79
SC Cain x 2 (@ $0.98) = $1.96
SC Bachmann x 2 (@ $0.35) = $0.70
SC Romney x1 (@ $3.00) = $3.00
NV Romney x 1 (@ $6.55) = $6.55

$20.00 and he's tapped out.

At the end of the first four primaries, Joe could win as much as $40. If Romney wins NH and NV, Joe gets $10 for each of those. If Cain or Bachmann win SC, Joe would get an additional $20, since he bought two contracts for each of the candidates.

Round 1: The First Four

Here are the Intrade prices for the first four GOP contests:


Rick Perry $3.09
Mitt Romney $2.00
Ron Paul $0.60
Michele Bachmann $1.45
Herman Cain $0.90
Rick Santorum $0.09
Newt Gingrich $0.08
Jon Huntsman $0.04
Field $0.24

New Hampshire

Mitt Romney $7.79
Rick Perry $0.60
Jon Huntsman $0.60
Ron Paul $0.40
Herman Cain $0.20
Newt Gingrich $0.10
Michele Bachmann $0.20
Rick Santorum $0.02
Field $0.30

South Carolina

Rick Perry $3.75
Mitt Romney $3.00
Ron Paul $0.60
Jon Huntsman $0.20
Rick Santorum $1.20
Herman Cain $0.98
Michele Bachmann $0.35
Newt Gingrich $0.13
Field $0.60


Mitt Romney $6.55*
Rick Perry $4.00
Ron Paul $1.20
Michele Bachmann $0.45*
Jon Huntsman $0.45*
Herman Cain $0.30
Newt Gingrich $0.10
Rick Santorum $0.10
Field $0.01*

All contract prices are shown are "last executed price", except for those noted with "*", in which no contract has yet changed hands. In this case, the price above is the midpoint between the bid and ask price.

Round 2 will be the next batch of primaries (if the race is not settled), and Round 3 the Veepstakes.

First place in each rd gets 5 points
Second place 3 points
Third place 2 points
Fourth place 1 point

Highest point total after all 3 rounds wins Fredo's Mad Money Challenge!


dark commenteer said...

I will make an effort to do this if I can figure out the damn rules--I slept thru Economics and this is all making my head spin.

But I do promise to try.

Fredo said...

Here are my buys:

6 x Romney/SC ($18)
1 x Romney/IA ($2)

dark commenteer said...

10 x Romney/IA ($2)

And boom goes the dynamite!

dark commenteer said...

Looks like it's gonna be you and me, Hoss.

Fredo said...

Yup. You stand to win $80 if Mitt wins IA. I stand to win $60 if Mitt wins IA and SC. I stand to win $40 if Mitt wins SC and not IA.

So basically, I need Mitt to win SC and not IA. You need Mitt to win IA and it doesn't matter what happens in SC.

If he wins neither state, we done got a draw.

ManBeast said...

Ok. I'll get in on this. To be fair, I'll use current Intrade prices since a lot has changed. Here's my pick:

Hermain Cain - SC - all in. I don't know which price Fredo is using, but the highest bid is $1.70.

I'll put the rest on Newt in SC @$0.30

Cain(SC) x 11 = $18.70
Newt (SC) x 4 = $ 1.20

Fredo said...

Nice value play, Beastie. A little information advantage for you, but I'll rule it as still reasonable.

Max winning for Beastie on a Cain win in SC: $90. On a Newt win in SC: $20.

ManBeast said...

The informational advantage is why I went with the current prices rather than the original you posted. For Cain it's $1.70 vs. $0.98. I figured it would make it fair.

Fredo said...

The informational advantage is the result of the fact there is less time for variables to affect the outcome between now and the vote, vs. two weeks ago. Hence, current Intrade prices are a better indicator of the ultimate outcome than older Intrade prices.

That said, you also aren't betting favorites, and the "time value" component of the option is still fairly large proportion of total value... Hence me saying it's still reasonably fair.

Don't make me go Black-Scholes on your *ss.


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