How One Trader Turned $400 into $400k with Political Futures

Augur Weekly | A Look at the Week in Political Betting, Augur News, and More

$400 to $400k

No, that’s not a typo.

As we enter the home stretch of the 2020 General Election, it is a good time to study the techniques of some of the most prolific political traders.

In pursuit of that endeavor, the Political Trade Podcast (PTP) has our back. The new audio show from Luckbox Magazine and TastyTrade sits down with some of the more public-facing political traders to glean insights on their strategies.

In the past few weeks, the PTP spoke on several occasions with Derek Phillips, a PredictIt trader who has more than 100x’d his initial deposit:

Here at Augur Weekly, we’ve distilled the highlights of the strategy and tactics Phillips reveals in the episodes.

Penny Flipping

Phillips deploys an HFT-like strategy of eeking out a high volume of small wins by capitalizing on other traders’ impatience

I find high volume markets...(like the) Democratic Nominee market or the 2020 Presidential

Winner market…and what I’m doing is I’m just getting in line at the ‘buy’ price and waiting my turn

until my orders get filled. Then when those orders get filled I just sell them for 1c more.

He’ll get as many shares as possible, often maxing PredictIt’s $850 limit per contract. He’ll then repeat this process as much as 100s of times per day.

For a low contract price, 5c, I can sell it for 6c…get 5000 shares and make about $50 (in an hour)

When identifying these markets, Phillips considers a ‘high-volume’ contest to be one that is big-ticket, or discussed in the news; like the Democratic Nominee or the General Election. One would also want to identify markets with stable price outcomes by looking at the order book to see if volume is on the buy or sell side and the price history to determine the trajectory.

Breaking the ‘iSavage Rule’

In terms of following the ‘iSavage Rule’; always selling shares when they reach 90c per share (named after famed PredictIt trader, iSavage); Phillips takes the stance that observance should be more situational than hard-and-fast.

There’s always opportunities where you know when a market is (over) and if you sell at 90(c),

you’re giving away 10% value…there’s no sense in giving away money like that. I even buy at 90

sometimes if I feel there’s a better than 90% chance

Betting Against Things Happening

Otherwise known as ‘laying’ the bet or selling short. Newer traders and political bettors are typically familiar with ‘backing,’ or betting that things will happen. With the advent of exchanges where individuals can buy and sell outcome positions throughout the term of the market, it’s possible to be net short, and effectively bet against things happening.

Mechanically, this is done by buying ‘NO’ or selling ‘YES’ in the particular market that you’d like to bet against. Phillips’ utilization of this strategy is straightforward enough, buying ‘NO’ when he believes outcomes are overbought.

Social Feature Game Theory

Phillips also mentions the utilization of comment sections and Twitter to extract sentiment and other information.

There is a sort of gamesmanship to what’s going on on the comment boards. Some people refer

to it as ‘pumping’…It’s a lot like in poker, for instance, you have people bluffing. You have people

showing strength in their hand, when in reality they have nothing…Trying to manage the

personalities on the board and trying to understand what people are communicating or

suggesting that may or may not be true is one of the big challenges…(I) use my personality and

use these comments as a means of getting information from other people, seeing what other

people are thinking about what’s going to happen…understanding what’s forming this market…

what everybody on the comment board is thinking is going to happen

Bonus: 3 Trade Recommendations from Derek Phillips

  1. Who will win Oregon Primary? Joe Biden

  2. Recession in Trump’s 1st Term? Yes

  3. Party to win Minnesota in 2020? Democrats

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Further Reading, Listening, Watching, and Discussing:

  • Election Profit Makers

  • Can Prediction Markets Fight Coronavirus? - Old Bull TV

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