The last frenetic week of election betting could be described as contrarian to conventional wisdom.
Previously, with reference to Betfair Exchange’s database from previous elections, I noted how this year’s odds diverge wildly from both current polls and historic betting trends. The mismatch has become more stark than ever.
Two weeks out, Biden’s 8/13 odds imply a 62 per cent chance, down from a peak 71 per cent nine days ago. The FiveThirtyEight estimate is 88 per cent.
Whether poll-sceptics or believers are ultimately proved right, the Trump effect creates unprecedented opportunities for the sharp trader. He drives volume like no other candidate. Around 75 per cent of bets across the industry are for Trump. The effect drives his odds for the most popular market down.
However that dynamic is far less prevalent in the vast array of side markets – whether that be key states, electoral college and winning margin, vote share or tally.
These attract much less volume and more expert, engaged players. The odds between these options do not always correlate.
Here’s how to exploit them and create ‘value’ positions. The idea is to build positions supporting both candidates that either wholly or partly counter-act one another’s risk, whilst leaving open the possibility of both bets winning.
The election winner must accumulate 270 electoral college votes (ECVs) from winning states. Trump beat Clinton 306-232 in 2016. Most states won’t change and only a few are even competitive. We know which will be decisive and how many ECVs they provide.
If Biden wins Michigan (16 ECV), Wisconsin (10) and Pennsylvania (20), it is almost impossible to see Trump winning. The challenger is rated at least 87 per cent for each state by Fivethirtyeight. Trump’s odds in each are 5-2 (29 per cent).
Note that 29 per cent is cheaper than 38 per cent for Trump to win outright. Yet no serious analyst believes Trump can win without Pennsylvania – generally agreed to be his best chance of the three.
Alternatively, Biden has alternative routes without Pennsylvania. Assuming he holds all the states won by Clinton, then Michigan, Wisconsin, Arizona (11) and Nebraska-2 (1) gets him to 270. Win Florida (29) and numerous permutations get it done.
Here’s an example. The combined stake is 29 units. The first position returns 32.6. The second 31.5. A small profit on either side but if both win, the profit is 35 units.
Back Biden for presidency 20 units @ 1.63
Back Trump for PA 9 units @ 3.5
Another example involves North Carolina, where Trump is a 5/4 (45 per cent) chance. Ranked fifth or sixth on his target list, Biden winning here signals at least 305 ECVs and probably 334 plus.
Therefore, if we back Biden for the presidency at 8/13 and Trump for North Carolina at 5/4, any Biden victory that doesn’t involve that state lands both bets. The maximum risk is just 2.5 units for a maximum profit of 31.25 units.
Back Biden to win presidency 20u @ 8/13 = 32.50 return
Back Trump to win North Carolina 15u @ 5/4 = 33.75 returns
This scenario is fairly likely. The ‘correct’ odds are probably 4/1. We’re getting 12/1 plus. It isn’t a rare anomaly.
Betfair Exchange also offers various handicap options on the electoral college margin. To beat the -48.5 line, Biden requires 295 ECVs. For the 100.5 line, the target is 320. Using the six different handicap bands, key states and ECVs markets, it is possible to engineer value odds about various ‘middles’, crossing a range of results.
Next a simpler trade: Trump won 63m votes in 2016 but, with weaker third parties and a much higher improved turnout expected, he’ll need many more.
150m plus is widely touted as the total figure. If so, he’ll need to win 70m at minimum, a 4/1 chance, that equates to 46.7% of 150m – a share that would probably still produce a Biden landslide.
In this example, one winner earns 6 units profit, both yields 38 profit.
Back Biden for presidency 20 units @ 1.62
Back Trump to win 70m+ 6.5 units @ 5
To reiterate, these are just a few examples among many. There are similar angles to exploit any potential scenario from Trump victory to Biden winning by margins not seen since the 1980s. Thanks to Trump’s presence and all the speculation and emotion generated, the next fortnight is the trading opportunity of a lifetime.
Odds were correct at the time of writing, check Betfair Exchange for the latest US election odds. 18+ please gamble responsibly