Julia moves the markets

Yesterday’s historic spill had quite an impact on the election betting markets, with the money moving towards Labor considerably. However, it all get’s a little complicated as IASbet closed their election book and hasn’t yet reopened, Sportingbet and Sportsbet both appeared to open new books where prices quickly adjusted once the punters came in- while Centrebet appeared to continue throughout the day. Betfair – being the odd one out in the way bets are made -experienced something rather different, with prices showing substantial volatility on the sell/buy contracts.

If we compare this morning’s prices against last Friday’s, we can see the general zeitgeist of the money, but it only tells part of the story.

While money moved towards Labor and changed each market’s implied probabilities, as you can see, it ranged over a spectrum of between 0.7% and 6.4% of movement – which is a substantial variation compared to what we usually see. The ultimate implied probabilities for each agency came in this morning as this:

Sportingbet and Sportsbet appeared to reset their prices after the Gillard ascension to ALP $1.25/Coalition $2.50, which is a 66.6/33.3 percent implied probability split.

Update: Those initial numbers were out, so we can draw a big line through this:

You also might notice that with those prices, the vigorish – or the size of the profit the agency takes on any bet – was sitting at a massive 120%. For every 120 dollars the agency takes in on those figures, they only expect to pay out $100. Normally the juice on betting agency numbers sits around 6.5% (except for Betfair as it has different mechanics) – meaning that for every $106.50 they take in, they only expect to pay out $100.

As the day went on, the prices at Sportsbet and Sportingbet started moving as the money came in, but what also happened was that those two agencies started reducing their vigorish throughout the day to around their usual 6.5% overround. So what we ended up with was the prices on both the ALP and the Coalition increasing as the vig was reduced on the one hand, but the ultimate implied probability for ALP election victory actually reducing by 2% with Sportingbet, but increasing by 2.2% with Sportsbet.

This makes it all far more sensible since the vig running around was pretty unusual.

Sportingbet opened their new book at ALP $1.50/Coalition $2.50 – giving the ALP an implied probability of 62.5%. The vig was the usual level of around 6.5%. Since the opening, it moved out in favour of the ALP to be the price in the above table early this morning.

Sportsbet on the other hand, informs us that that they actually opened the market immediately after the Gillard ascension with prices of ALP $1.90/Coalition $1.80 – making the Coalition slight favourites.

Nearly $96K came flooding in over the next 10 minutes on Labor, blowing that out to ALP $1.50/Coalition $2.50. The money has kept on flowing in, with Sportsbet currently (as of now) sitting on ALP $1.33/Coalition $3.20 – a 70.6% implied probability of an ALP election win.

With Betfair, the prices on the contracts initially blew out for the Coalition to $3.10 and then to $3.20 – pushing the ALP through the 70% implied probability of victory barrier- before jumping back to $2.76. That is some rather dramatic behavior there, so expect Betfair prices to come back to the field as well.

On the whole, after a quick bit of modeling (modeling mind you that is mostly back of the envelope and filled with assumptions that probably aren’t too flash 😛 ), it looks like the punters believed that Gillard as PM increased the probability of the ALP winning the next election by somewhere around the 6% mark as of early this morning. We’ll be able to tell next week when the markets should have settled.

(Update – that was 6.5% knowing the actual initial market numbers)

Meanwhile, the all agency implied probability chart (where this week’s observation is most likely undercooked for Labor) comes in like this (click to expand):