TradeSports markets closing with website

[Bill Dozer]

I expected a mess with these markets closing prematurely but so far so good...Here is one question J7 took:

Tradesports (TradebetX) has closed. They graded the wagers based on their subjective evaluation of their current market value on November 21st. I placed a wager on the Green Bay Packers total regular season wins at "Over" 8.5 ("To Win" approximately $440) . They graded the wager as a win, giving me approximately 10% ($51.00) of the "To Win" amount.

This is not a fair grading of the wager. They currently have 5 wins. For the six remaining games on their schedule they will be strong favorites in 3 or 4 of those games and small underdogs in the remaining games. I should receive no less than 75% ($330) of the "To Win" amount.
Respectfully,

Justin:
GB has the following games left:
@NO
CAR
HOU
@JAX
@CHI
Det

Here's the odds I give them of winning each, just off the hip:
.49
.55
.70
.48
.4
.92

GB is expected to win another 3.2 games.... I'm surprised they paid you anything - if I were settling it, I'd say GB is more likely than not to go UNDER 8.5 wins. Their settlement corresponds to a 56% of GB covering. I'd make it closer to 44%, so I can't say they treated you unfairly.


Justin

[Ganchrow]

Here's the odds I give them of winning each, just off the hip:
.49
.55
.70
.48
.4
.92

GB is expected to win another 3.2 games.... I'm surprised they paid you anything - if I were settling it, I'd say GB is more likely than not to go UNDER 8.5 wins. Their settlement corresponds to a 56% of GB covering. I'd make it closer to 44%, so I can't say they treated you unfairly.

Justin, your math's a bit off.

Based upon the probability estimates you've provided, the probability of GB winning the specified number of additional games would be as follows:

Games	Prob.
6	3.33%
5	16.52%
4	32.01%
3	30.45%
2	14.48%
1	3.03%
0	0.17%

(See the =P2L() function in my Simple VBA Sports Betting Functions Template for Excel.)

Hence, GB's probability of winning 4 or more additional games would be about 3.33% + 16.52% + 32.01% ≈ 51.87% (and FWIW, would be expected to win 3.54 more games).

Furthermore, if my understanding of standard Tradesports settlement is correct, the 44 contracts with a notional value of $10 each would expire at $0 were GB to win fewer than 8.5 total games and at $440 were to GB win more than 8.5 total games.

If this is indeed accurate, then based on your estimated probabilities this would put fair value on the 44 contracts at roughly 51.87% * $440 ≈ $228.21.

[Santo]

Contracts expire at 0 or 100.. he presumably has 4.4 of those contracts.

You also need to consider he would lose $x if they lost, so presume he bought at ~50 on the contract, you can't just say 50 odd % of the profit, but 51% of the way between -400 and +440 for example.

[Ganchrow]

Contracts expire at 0 or 100.. he presumably has 4.4 of those contracts.

A single contract expiring at 100 on Tradesports was worth $10 (that's 10¢ per point). That'd be 44 contracts. Either way of course, it's six of one, half dozen of the other.

You also need to consider he would lose $x if they lost, so presume he bought at ~50 on the contract, you can't just say 50 odd % of the profit, but 51% of the way between -400 and +440 for example.

That's a sunk cost as I read it. Were the contracts to lose, he'd be out his initial investment (the price already paid for the contracts), were they to win (and go to expiry) he'd collect the full notional.

He paid some unspecified $ amount (it could have been 1%, 17%, 50%, 84%, or they could have been bequeathed to him in his great aunt's will) for the supposedly binary contracts when they were initially obtained, and upon expiry (had it gone that far) they'd either be valued at 0% (for a loss) or 100% (for a win) of notional.

With the early (mandatory) expiry, he instead received $51/$440 ≈ 11.59% of notional, irrespective of entry cost, which to represent true fair value would need to correspond to the expected win probability.

Now admittedly, I could be misreading the initial post and in fact complainant received a total of $51 on top of his unspecified acquisition cost, but based upon Tradesports contracts' apparent grounding in the binary options market that seems neither likely nor implied.

Indeed, according to the Tradesports closure announcement:

The expiry price set for each contract will be the last closing price set by the Exchange but cross-referenced with a number of independent other sources to ensure there has been no price manipulation leading up to the expiry. All contracts will then be expired at a representative closing price.

You'll note that this makes no mention of cost basis. As such, the issue at hand for complainant is the extent to which the "last [representative] closing price set by the Exchange" was suitably "cross-referenced ... to ensure there has been no price manipulation".

[Santo]

My reading of it was slightly different (probably because of the mention of tradebetx, which acted more like a regular sportsbook than the contracts exchange), perhaps Justin can clarify..