[Ganchrow]

It seems like every year wagering on the outcome of American Idol grows in popularity (at least if the press is to be believed.)

So ... anyone with a more musical ear than I have any angles or opinions?

[imgv94]

Have a ton don't know where to start..

[Korchnoi]

I was pretty big into AI betting last season. I made most of my money market making and trading baskets of male/female candidates against the "gender to win" bets.

There was also some good live trading during the finals. I would say I don't have much fundamental skill in determining a good performance, but some patterns emerge. Every time a contestant performs (usually by the end they're all pretty good) that contestant always gets bot up a few ticks just b/c people are more likely to buy a contestant than sell him/her and they do this when the candidate is performing. Usually selling into this will be the good side.

Also towards the end, any good performance by a candidate will have a large impact on the "gender to win" bets and these tend to be relatively slow adapting to the new information. Even during the shows, there are tons of orders out there. It isn't like a live sporting event that has a market maker constantly refreshing his markets.

There's also a free service called "Dial Idol" or something that uses some sort of computer program to call up and "vote" on different lines to determine how long it takes to get through. They use some statistical formula to determine the likely % of vote a contestant is receiving based on how hard it is to get through to vote for him/her. They did decently well last year, but it's by no means a sure thing. (Or maybe it is a sure thing, and AI is rigged. Either way, enough people follow Dial Idol for you to need to be aware what it’s saying).

Lastly, the new fee structure at TS makes it tough to market make. To sell the field, you need 109 to break even (b/c 9/10 of the contracts you sell are "winners" and get charged .10 expiry fee).

[Arilou]

Matchbook has lines up, and presumably their fee structure makes it much easier to MM than TS does; however, it's necessary to have critical mass of traders and I have no idea if that's in play there. I've never bet on Idol, although I've bet on The Apprentice and Survivor.

I like a lot of the ideas Korchnoi points out; they seem like good, solid ways to take advantage of market inefficiencies. The other question to me is whether they're pricing large underdogs reasonably corectly. My guess is that they are not. I've never watched in a previous year, but right now it seems to me like many of the remaining 20 candidates simply don't have the voice necessary to win - it would require all of the top tier to collapse, and with a par of 19:1, laying 50:1 or even 100:1 isn't that bad if you can avoid tying up money that way...

[Korchnoi]

I agree with Arilou that MatchBook's fee structure is much better for market makers on events like these. You can still do well with TS, but you have to have sufficient volume so that even if you wind up paying expiration fees on a few hundred contracts, you've traded a few thousand so your fees per contract traded are still low.

Some dogs may be priced too high, I don't know. As I've said before, I'm not a fundamentals guy. But if you want to make a play like that, you're probably best to buy a few solid favorites (5-10) than to short a bunch of dogs (20+). You're making the same "bet" either way, but buying the favs is probably a better strategy when you take expiration fees and liquidity into account. Volume on the main guys will be sufficiently high for you to get in and out of a pretty decent sized position no problem.

Another trading strategy I forgot to mention that was probably my most profitable for live trading is this:

Say it's the results show. There's a market on who will be eliminated. A is about 60%, B is about 20%, C-F are about 5%. In the show, they will tell you who is safe in either groups or 1 by 1. Obviously there's a lot of info given away. I set up a spreadsheet to automatically re-calculates the FV of people being eliminated given a contestant is said to be safe.

In this case, if they told you contestant A is safe the new mkts should be roughly:
B = 50%, and C-F = 12.5%

If you already have FVs calculated you are likely to be able to pick people off before the mkts re-establish themselves. I could easily see someone wanting to sell A for 40% b/c it feels too high, but you already know you're getting the best of it paying 40.

[Arilou]

Neat idea. One thing I have to wonder about is "editing" of reality shows in this context. Again, fundamentals, but could be worth thinking about. For example on Survivor, there will be an 'explanation' phase, where they look into what caused a team to lose and who might be in trouble, and then there will be a 'mislead' where they establish another possibility whether there is one or not, if they can come up with something, and often you can read that it is fake.

In the case of Idol, the order of people on stage seems (I've only watched one results show so far, so I could be wrong) to be important. So does who is in each group of people. Amy proved that you don't HAVE to knock out one of those in the group, but it's probably more likely than random chance would indicate, and they probably tend to give the exit late in the process and proceed in a certain order based on the line, plus you know that certain people are safe (market is at 0 or 100) so them being there means at some point they have to go through them and confirm their status.

In general, the fact that someone on stage knows the result, and isn't the world's greatest actor (shall we say), plus the fact that the choices and editing that they use are designed for the public and not to be sufficiently random to hide information from gamblers. This would be the next level up from Dial Idol, in terms of using show biz info against them.

The issue with betting on favorites vs. betting against dogs is that the markets are not going to add up properly. In general, people don't bet against, they bet for. There was one instance in the Kentucky Derby where you could literally hit Pinnacle's no side on every horse if you could confirm they would all start - you're much more likely to bet +2000 on Long Shot than lay -2400 against Won't Ever Win. In general, favorites are priced reasonably well and underdogs are underpriced. Imagine being able to lay odds against the bad teams in March Madness...

[Korchnoi]

>One thing I have to wonder about is "editing" of reality shows in this context. Again, fundamentals, but could be worth thinking about.

I think these shows do aim for shock value, so very little is "random." I don't think this editing/shock-value effect would make that mini-model I made less useful.

I so remember that last season they bunched contestants together and, I believe, two/three of the contestants were safe. So if they bunched someone initially trading at 40% with someone initially trading at 20% and another trading at 2%, you could do a quick back-of-envelope calculation and figure the new mkts should be around 66%, 34% 0%.

I don't remember how many contestants they eliminated per show, but I do remember getting valuable info from groupings in at least a few of the shows.

>general, favorites are priced reasonably well and underdogs are under priced.

This is probably a more likely scenario in parimutuel pools, like for horse racing. TS clearly displays the sum of the bids and the sum of the offers. People do pay attention to this, although the mid market is almost always greater than 100.

It's common to see the bids add up to 100 and the offers to 120. In this case you may be better off selling the dogs than buying the favs (if you think the dogs are trading too high relatively). If the bids add up to 90 and the offers add up to 102 (which is pretty rare), you'd probably be better off buying the favs than selling the dogs (assuming you think thte dogs are trading too high relatively).

The new fees format is gonna make the market bids even higher than before. You need to buy the field for less than 99.0 to make a profit, but you need to sell the field (assuming 10 contestants) for 109 or more to make a profit (b/c you pay the extra dime 9 times if you're a seller, only once if you're a buyer). If there are 30 contestants, the fees are totally cost-prohibitive.

[the_fredrik]

I just wanted to share an amusing (and obvious!) case of inside information trading:

I had been betting heavily on a swedish reality show (at odds +500) on one of the remaining two candidates (at Betfair)

I was watching both the market and the final live tv show where the winner would be announced shortly. You can vote up until just a few minutes before they announce the winner.

Candidate A (my bet) was trading initially at +100 but went slowly lower during the show, was trading around -150 when there was 15 minutes left and then I started to sell more and more of my position.

They announced "no more votes". Still at -150, I was selling a bit more.

"We are now counting the votes".

Then suddenly the market went down very quickly to -400! I instinctively clicked the first click to sell the remaining 60% of my position at what I considered a dream price, basically locking in most of my win.

Then I paused. What was really going on?

The market continued to drop at high volume. -600. -800.
Looking closer, I saw there were no sellers at all, only byers at larger volumes!

A few minutes later they announced candiate A as the winner.

[Korchnoi]

Fredrik,

Are you certain that those trades happened before it was announced on TV (after factoring in the delay live shows usually have, plus more delay if you're running cable)? I could see people trading in the live audience on their PDAs as soon as it was announced.

[Arilou]

Betting on something that has already happened seems highly dangerous by definition. American Idol is relatively safe, but I'm still not that big on the idea of wagering on votes already cast.

[Doug]

There seems little accountability for the voting results on AI.

I wouldn't consider votes in a US presidential election to be at all beyond tampering, so certainly AI can't be held to a much higher standard.

The guy eliminated last night ( Chris Sligh) was bet down to about -600 to be eliminated, sounds like an info leak to me.

[Korchnoi]

anyone following DialIdol's predictions for this season?

[the_fredrik]

Fredrik,

Are you certain that those trades happened before it was announced on TV (after factoring in the delay live shows usually have, plus more delay if you're running cable)? I could see people trading in the live audience on their PDAs as soon as it was announced.

No I cannot be certain, but it happened around 3 full minutes before they announced it which seems like a large lag for a "live" TV show.

[Korchnoi]

No I cannot be certain, but it happened around 3 full minutes before they announced it which seems like a large lag for a "live" TV show.

I agree.

I remember a few seasons back the winner of "The Apprentice" became clear through (insider?) trading in various betting markets. These bets were taken down from sportsbooks I believe weeks before the winner was announced.

[Arilou]

The winner was not known, because it was not yet decided: Trump decides on Finale day which of the final 2 wins. What was decided, as I understand it, was who the final 2 were, and that was known well in advance. Intertops for their part put up a who-will-last-longer between the two finalists in waiting.

The problem is that Apprentice tasks are done in public so in terms of keeping security on the final 2 you're drawing dead. However the finale takes place live and is one man's decision, so that is much safer. I won a bunch on Season 3.

[Korchnoi]

The winner was not known, because it was not yet decided: Trump decides on Finale day which of the final 2 wins. What was decided, as I understand it, was who the final 2 were, and that was known well in advance. Intertops for their part put up a who-will-last-longer between the two finalists in waiting.

The problem is that Apprentice tasks are done in public so in terms of keeping security on the final 2 you're drawing dead. However the finale takes place live and is one man's decision, so that is much safer. I won a bunch on Season 3.

I stand corrected.