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Comment by function_seven | Hacker News Reader

> not including 5% withdrawl fee

This withdrawal fee they have is a confounding variable to interpreting the prices of the options on Predictit.

I've seen many slam dunk contracts trading at $0.96 or $0.97 a share. At first I thought it would be a good idea to buy as many as the platform would allow me, and get the guaranteed 4ish% percent return. But then I remembered the withdrawal fee and realized I'd still lose. And then realized that any other potential buyer would do the same.

I suppose if you already have money deposited there, and don't know where else to park it, then buying these contracts would be the in-universe equivalent of "parking it in treasuries." But I'd expect the pricing to become more accurate if that 5% transaction cost was eliminated.

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Right, the 5% withdrawal fee only applies when you withdraw, meaning you could still make a profit continuously buying 95%+ markets.

The real reasons I think these often don’t follow what you expect is:

- Lots of people set sell orders at 90-99 since closing times are often uncertain and there are other opportunities that at least appear to be more profitable. - As you diverge from 50/50, it gets cheaper and cheaper for crazy people to buy up the other side of a bet. This is not always unprofitable too; they just have to sell it to a greater fool. This is with PredictIt’s $850 limit at least.

I should add to my comment, a lot of the markets I was looking at (months ago), were based on this election. So once I bought in, the money would be tied up for months. Even when I won, after taking into account the withdrawal fee, it would have been a loss. (EDIT: Assuming I deposited the money for that specific market, and it wasn't already on the platform facing down a future 5% fee)

If there are $0.95 markets that resolve in the near future, then yeah, I'd roll my money from one to the next. But now I'm wondering if those are more likely to be correctly-priced. (Because other "investors" are thinking the same thing, right?) So now I'm just picking up nickels in front of a steamroller.

I can't remember the exact markets when I saw all these 95 cent shares, but the odds of them failing were far below 1/20. Things like Hillary Clinton wining the Democratic nomination, or California voting for Trump. These are the same markets that, within a month of closing, were at 1Y/99N.

So any market that's going to resolve very soon, and is still at 5/95, probably represents closer to a true 1/20 odds, and now it's just regular old gambling :)

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