Make or break for Lay and Skilling

Both contracts have fallen as Lay and Skilling have had charges dropped. With Skilling trading at a lower level than Lay if a trade must be made it is short Lay and long Skilling. Here is an analysis on how them taking the stand will play out from Forbes:

Both Lay and Skilling will take the stand and offer a united front. Lay will put on a folksy show, maybe using a bit more twang than colleagues remember. He'll tell the jury that he was originally a "pipeline man" who built the company not with a ledger and a pen but with hard work and determination. He'll remind the jury that he never sold Enron stock and never once thought collapse was imminent.

Skilling will discuss how all the financial decisions he made were vetted through an army of attorneys, accountants and consultants. He will communicate his disgust at former protégé Andrew Fastow in an attempt to empathize with the jury and will say that he delegated the running of the off-book partnerships to subordinates.

NCAA Tournament: UConn - Loved by Alumi, Hated by Bettors

UConn advances, besting Washington despite sloppy play. The Tradesports spread of 5.5 was covered by a last second three pointer (chart) but with most sports books quoting 6.5 it wasn't enough to break the not covering streak. "...Connecticut`s close play cost bettors their sixth-straight payday, failing to cover the 6 1/2-point spread."

Housing Hedges Hit The Big Time

Now trading on multiple exchanges, housing hedges are going to be mainstream. Expect to see much more about these contracts in the next year. This is a mention from the news letter of the brilliant Dennis Gartman who has forgotten more about trading than I'll know in a lifetime.

Simply put, the new futures market (which will trade
off-floor on the GLOBEX platform) will trade relative to an
index of property values put together over the past twenty
years by Professors "Chip" Case of Wellsely College and
Robert Schiller of Yale, known until earlier this week as the
Case-Shiller Home Price Index. Henceforth, however, with
the endorsement of Standard and Poors, the Index shall be
known as the S&P Case-Shiller Index. What Professors
Case and Shiller have done is measure, to the best of their
ability of the years, actual sales of houses in ten major
metropolitan market: Boston; Chicago; Denver; Las Vegas;
Los Angeles; Miami; New York; San Diego; San Francisco
and Washington D.C. [Ed. Note: Please, do not ask us
why the professors chose those markets, and why the
South seems to us to have been left out; and please do not
ask us any of the particulars of the markets chosen. Those
questions can be answered best by the CME's marketing
people.]. There will be a composite index upon which a
futures contract will trade, and there will be ten individual
futures markets on the component geographies involved.
The "spread" trading possibilities are obviously myriad.

Why the Cheney Resigning Contract Trades so High - Assassination Politics??

The last trade on the CHENEY.RESIGN.DEC06 was at 17 with the market giving close to a 1 in 6 chance of it paying off by the end of this year. With nearly no blowback from the shooting incident and no support for resignation why is this contract trading at its current level?

It is essential to note with this contract that it can be triggered by reasons other than resignation. From the Rules the contract will expire at 100 if, “There is an official White House announcement reporting the resignation, retirement or departure of the named individual from his current position by the time/date specified in the contract or if the individual has factually departed his current position noted above.” If he leaves the office for any reason this contract will expire at 100.

If there had been a contract for all 46 US VP’s for the full term, this contract would have paid off 18 times or nearly 40%. The most common reason: Nine succeeded to the presidency (after the president died, was assassinated, or resigned). The next most common reason that it would have paid off is the seven times that sitting Vice Presidents have died in office. Only two Vice Presidents have ever resigned, the last being Spiro Agnew in 1973 and before that John C. Calhoun who left to achieve power and prestige by becoming a senator.

The contact shouldn’t just be viewed as the chances of Cheney resigning, but of Cheney resigning, Cheney dying, or Bush dying since any of them will trigger the contract. 17% still seems high, but if Cheney has another heart attack I recommend putting your best clients on it.

NCAA Betting - Upsets and Point Shaving

Early Round Upsets and Championship Blowouts

"In equilibrium play of a two-round tournament we find that underdogs exert more effort in the opening round while favorites save more effort for the final. Ability differences between players are therefore compressed in the opening round so upsets are more likely, and amplified in the final so blowouts are more likely."

Point Shaving: Corruption in NCAA Basketball

"Point-spread betting on NCAA basketball yields incentives for players and gamblers that are both asymmetric and highly non-linear, thereby encouraging mutually beneficial effort manipulation through "point shaving". This paper assesses game outcomes and point spreads from over 40,000 games between 1989 and the present, finding that there exists a "prima facie" case that point shaving is surprisingly widespread."

Essentially games early in the tournament with wide point spreads are less likely to cover than ones later in the tournament. Both are interesting papers but especially with the Point Shaving paper difficult to make money on.

PS3 Update

If you follow the contracts you've already seen it, P23 not coming out till November at least.

Enron Contracts Back Up

The Lay and Skilling Guilty contracts both fell yesterday but are back up to their pre-Fastow testimony levels this morning.

Enron Contracts See Some Movement

"In connection with stealing from Enron," Ramsey asked, "you were just looking Mr. Lay in the face and telling him a lie?"

Fastow has admitted stealing millions of dollars from Enron for himself, partners and a family foundation through a string of schemes he hid from his bosses.

"Yes, I was not loyal to him or Enron when I committed those crimes," Fastow said."

Although the numbers on advanced charting haven't updated it looks like someone came in and swept the market.

Lay's Guilty contract is down 23 with the last trade at 47.5.
Skillings last trade was at 60 a nearly 10 point drop.

The spread is massive but after this it will likely fill in lower.

Fastows statements seem to touch all of Key Lays criminal charges especially 27-30. If the jury finds him not guilty on these, the contract will not pay off. This is the first time since the trail started that they contracts have moved so much. Fastow will not be back but we will update as it happens.

Horseshoes and Hand Grenades…

…are the only places where being close counts. But definitely not on tradesports and $5,995/theater is not the 6,100 we would have needed to get paid off. The Hills Have Eyes ended up grossing 15,708,512 and not beating the $16 m benchmark. All we can do it acknowledge we’re wrong and acknowledge that it will likely happen many more times in the future. With proper risk management no one trade or idea will cause us to deviate from our overall trading strategy.

Betting the Box Office - The Hills Have Eyes

The Box Office Receipts contracts aren't very active but opportunities do present themselves. One that looks good is The Hills Have Eyes to beat $16 million at the box office, a buy at 60. The movie has no competition in the genre and comparative films have shown that this can beat.

Here are the posted predictions:

BoxOfficeReport - $21m
BoxOfficeMojo - $18m
BoxOfficeGuru - $17m
BoxOfficeProphets - $15m

BoxOfficeMojo is the most trusted one, and BoxOfficeProphets seems to lowball as compared to all the other sites.

With the movie opening on 2,260 theaters, The Hills Have Eyes will have to hit $6,110 per theater to beat the number. Some comparative films in the genre:
Hostel - $8,909
Saw - $7,895
Saw 2 - $10,758
Texas Chainsaw Massacre - $9,315

Even without the LionsGate magic, the good buzz should carry this one to beat. The Trade: Buy up to 70 (60 offer is available now). There is very little liquidity on all of these unfortunately. Shaggy, even with Disney marketing, looks like it will miss but with a 20 bid its not worth the risk.

Enron Contracts Update

Fastow says he has, "no record of conversations in which he says he and former chief executive Jeffrey Skilling made secret side deals that helped the company manipulate its earnings."

Skillings contract moves down slightly to 70.

NCAA trading info is coming soon.

Something definitive on the PlayStation 3 US Launch?

Not yet, but now we have a time line when we will. At the Game Developers Conference starting March 20th Sony will have new information about the release. It is widely rumored (and never officially confirmed by Sony) that their planned spring release will not happen. At this point May is nearly impossible and October is floated as a more likely date for the US release. The carry on the May contract means you will need a higher price than the real odds to take a position. It's too late to short now because there is almost no market being made. Unless you already have a position or want to go long, it will be best to stay away.


http://www.ps3focus.com/archives/193

The Smartest Guys in the Room Pt. 1 - Where We Stand

The Latest:
The Enron trial is going to have an interesting couple of days with Andrew Fastow on the stand. The former CFO has already pleaded guilty, is the government's star witness and under intense pressure to make the case against Skilling and Lay. Skilling's lawyer was able to discredit a previous witness Kevin Hannon on the stand (this did not move the contract) and will be ruthless in going after Fastow. Fastow was the key architect in all of the SPE's that eventually caused the demise of Enron.

The Contracts:
Lay is facing seven criminal charges and has to be convicted on at least four for the contract to pay off. The wild card charges are 38-41 in the indictment (bank fraud and false statements); these will be decided in a bench trial and are unrelated to the collapse of Enron. They they also have no bearing on the contract so we can ignore them.

Skilling is facing 31 charges and the contract pays off if he is convicted of at least sixteen.

Only the first charge of conspiracy to commit securities and wire fraud is shared by both men yet the contracts so far have moved almost in tandem. This is where the opportunity will eventually present itself as the Lay charges are considerably weaker than the ones facing Skilling (more on this later).

The Lay Guilty Contract hit 72.9 today, a new high, from a low of 46.1 at the beginning of February. The contract, including today's high, it up 8 points since the trial started.

We'll be watching this one. The Trade: Flat for now.

Polls That Don't Matter

This Quinnipiac University (link goes to The Washington Post "National Thermometer" poll got some ink today. It showed that Rudy Guiliani was leading for "feel" with the respondents. How does this translate into electibilty? Well according to the market it doesn't, the Guiliani contract traded down slightly to 12.1 on the bid. Allen, who is trading second behind McCain didn't even register. Barak Obama is right behind Guiliani's Qunnipiac numbers, but his contact is trading at .7 down .2 for the day.

It seemed to be the equivalent of a Top Ten Song list, a meaningless conversation piece. If the market doesn't care, then neither should we. The only interesting thing about the piece was this quote, "Giuliani's first marriage was annulled after 14 years when, he says, he discovered he was married to his second cousin." Whoops!

A Bi-Weekly Update on the 2008 Election Contracts

Undoubtedly these will get much more interesting as the event draws near. A two year float is huge, even with a margin account I wouldn’t touch these. This is site does a great job of tracking the contracts. HeavyM does not seem to trade but it is still a great page

Intrade Wrapup: 24 Months From Super Tuesday '08

The Awards That Matter

Do not miss The Chris F. Masse 2005 Awards List:

http://www.chrisfmasse.com/2/2006/2006-03-06_prediction_markets_awards.html

Mandatory for even a casual observer.

How Wrong I Was...

The economic numbers contracts are posted today. Why they weren't posted yesterday I do not know. Not a single trade has been placed yet.

No More Economic Number Contracts

The Trade Sports Economic Number Contracts are down to only year end Fed Funds rates.

Previously they had contracts for all the major fundamental releases. No more. This week they didn't post new contracts for any of them. With the importance of the once mighty NFP severely diminished and with serious traders trading NFP contracts on the CME, it is unlikely that Trade Sports will bring them back.

Only One Upset - Crash over Brokeback

Buying the favourites and selling the longshots worked on every single category except Best Picture. Crash was solidly trading in the 20's with Brokeback in the mid 80's which made the category a big upset.

Tradesports was slow in settling the contracts which kept margin tied up for much longer than necessary, but only overlapped tradable categories once.

A boring show but great trading.

Oscar Bets

The best paragraph I've seen so far on Oscar predictions from the New York Times:

A big fat caveat before we get to the picks for nine major categories (after which you're on your own): Although the Oscars have all the trappings of an election, there is no polling. The only people who actually know what is on the minds of the 6,000 or so members of the academy are the accountants at PricewaterhouseCoopers, who hand-count the ballots at a secret location in the days running up to the Oscars. While there is a not-so-mini-industry of Oscar pundits, blogs and predictors, nobody knows anything — all the declaratory talk of this film "gaining momentum" and that one "weakening" is mostly conjured baloney pushed along by spinners for the respective films.

Having said that, the trickiest bet looks to be Best Picture, with LA centered Crash gaining on Tradesports. PSH is a lock for Best Actor, the idea that Heath has a chance is ludicrous. Felicity Huffman, not a chance! Reese is a sure thing.

Sunday should be especially good for heavily fading the long shots, no need to worry about margin issues.

Oscar night: Cashing in all around

"Stephen Roman, 24, a recreational trader and an analyst for a currency trading firm, explained how futures work.

“Let’s say Brokeback Mountain is trading at 80,” Roman said. “That means the market thinks it has an 80 percent chance of winning. So you can buy or sell. If you think the picture has a 50 percent chance of winning, you can sell at 80 and then buy it back once the price lowers to 50, and close out the trade with that profit.”

http://www.naplesnews.com/news/2006/mar/02/oscar_night_cashing_all_around/?neapolitan


Let me assure you, I've already heard every possible joke related to this movie.

Bush vs Osama

The Bloomberg headline:

Bush Makes Surprise Afghan Trip, Says Bin Laden Will Be Brought to Justice

The Market Responds (with a yawn)

Put Your Money Where Your Mind Is

A site that I've been reading more and more, TCS Daily had this article, Put Your Money Where Your Theory Is (borrowing Tradesports' tagline). The writers' idea is that academics that back up their predictions in cash will either be more accurate in their predictions or more moderate in predicting worst case scenarios to avoid the embarrassment of being so wrong. This one is worth a skim.

http://www.tcsdaily.com/article.aspx?id=030106E

"Moreover, prediction markets are non-ideological: the future happens the way it happens. Thus although Julian Simon beat Ehrlich, there are now scientists concerned about global warming who want global warming skeptics to put their money where their mouths are." - This would be entertaining.

"Will teen pregnancy be higher in 2010? Teens are apt to have better information about this than sociologists." - This example seems to be plain wrong. From a bettors perspective I'm not sure if I would be willing to trade based on the "inside tips" and four year predictive powers of my 15 year old cousin.

The market can restrain people since their predictions would be backed up with cash but the real incentive would be accuracy. For reasons of practicality (carry costs, liquidity) the bets will be made for prestige not profit.