Tuesday 1 November 2011

All in a day's trading

iPredict's seen heavy action on the Prime Ministerial contracts today. The first push looked to be from a novice trader either trying to manipulate prices to make Labour look good or who believed Labour's price to be understated. That trader pushed Labour briefly up to $0.23 without knocking the National contract back to $0.77. Novice traders will run the order book without looking to complementary markets. His run burned through a reasonable amount of my free cash as I'd seeded the order book a bit at disequilibrium prices in case of movements like this.

Here's Matt's graph of subsequent movement:
The trader succeeded in momentarily raising the price of Labour to 23 cents, up from 10 cents at the start of the manipulation attempt. The contract reached 23.2 cents at 13:09, where it remained there for exactly 26 seconds, before another trader stepped in to sell. Another 26 seconds later another trader had stepped in, and the contract price was back to 12.6 cents exactly 52 seconds after the peak. (The chart does not show the 23 cent price, what is plotted is the weighted average price of each trade, comprising multiple orders of varying prices: among the orders filled at 13:09 were some at 23.2 cents).
In all, the trader bought a total of 3000 shares in Labour to win at an average price of 14.2 cents.

Prices stabilized around the $0.13 mark for Labour and $0.87 mark for National. $0.87 isn't a crazy price point - it's the price implied by the vig-adjusted odds over at Centrebet, where you have to pay $0.926 for National and $0.135 for Labour. They've since gone back to the status-quo ex ante: 90/10.

Why today? If I had to guess, somebody wanted to create the impression of strong market movement with National's announced plans for welfare policy.

Here's my last two-days' trading (accumulated weighted averages):

October 31: + 486 National at $0.88
                   -  389 National at $0.92

November 1: +66  National at $0.87
                    -727 National at $0.91
                    -1449 Labour at $0.13

So I gained a 885 net pro National position at a total cost of $683, or $0.77 per contract. I need to clear some of that out as I'm accumulating an uncomfortably large net pro-National position. If anybody's interested in the 500-unit order on Labour at $0.09, and the subsequent 500-unit orders at $0.08 and $0.075, please help me clear some of this accumulated position.

It is worth seeding the order book at disequilibrium prices; you never know when a partisan stalwart will come in and do something stupid. I really really wish I'd had some of the orders in that were filled at the $0.23 mark. Alack, alas. But leaving standing orders does leave you vulnerable to real world events that move against you.


  1. Probably more likely to see this sort of thing now there is a 'TV' show.

  2. I've a thousand in free cash waiting for more bargains....