mac5155 wrote:Isn't all this assuming O wins?
No, the beauty of the strategy (called "arbitrage" in finance) is that you end up with positive (sure) profits regardless who wins. As I wrote above, if Romney wins:
1) My Obama contracts on Intrade will go worthless, but
2) I'll still keep the $1,000 from the SALE of Obama contracts on Betfair, and will have no obligation to pay anything to whomever bough the contract on Betfair from me.
Ultimately, in case Romney wins, whenever the winner is certified, I'll have
$1,000 from the sale, less 5%*1,000 (Betfair's cut from all the winnings), less 914.40 (what I spent on Obama's contracts on Intrade) = $36.60 sure profit
Edit: BTW, the "arbitrage" strategy is no rocket science. What we are doing is simply selling the relative overpriced Obama contracts on Betfair (odds 1.44 imply 69.44% chance of Obama victory - so you have to pay a lot to get little), while simultaneously buying the relatively underpriced (at 63.5%) contracts on Intrade.
Note that in the real world, very few "arbitrage" opportunities should exist. Even in our case, we can be profitable only temporarily - our sells on Betfair would drive Obama value down, whiile our buys on Intrade would drive the Obama value up - precisely until the contract values would be equal in both markets.