Free money (for now)

Over at www.tradesports.com, the Dallas Mavericks, while down 3-2 in a seven-game series, are still favored with a contract trading in the 53-55 range.

Comments

Dallas Mavericks as the NBA's Moneyball team-- http://www.blogmaverick.com/entry/1234000790025973

And what Mark Cuban will be doing to help equity market efficiency-- http://www.forbes.com/business/healthcare/feeds/ap/2006/06/13/ap2813217.html

I don't see how this is free money - even if only for now. Since you can't trade the underlying security, the contract would have to be trading at either 0 or 100 at this point to ensure non-negative payoffs in every state.

Tyler, I can't find the data, but if we assume that historically the home team wins about 70% of games in the NBA finals, then that money is nowhere near free.

Years ago I did a story for Forbes about a sports betting
arbitrageur in Las Vegas. He and his colleagues monitored the
various "sports books" and when the line on a particular game
varied from one joint to another, they would bet both sides.
Usually it was a wash minus the juice but apparently the outcome
landed in the middle often enough to make things profitable. Now
that's free money! Of course they worked for it, serving a useful
function in the local (and who knows, global) betting market,
although this was pre-Internet. Heck, this was pre-cellphone!

Tradesports is rarely as inneficient as you may think at first glance. As pointed out above, Miami has a very poor road record, especially at Dallas. Also, Dallas is cementing a reputation as having the most powerful home court in the league. If you factor in the current odds of Dallas winning's tonight's game (~76%), this contract seems fairly priced.

Tyler wasn't right, if you bet on 13 on the roulette wheel and win, is it
free money?

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