Silas comments on Buy Now Or Forever Hold Your Peace - Less Wrong
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Comments (58)
Dave_D: The problem with betting against long odds is that InTrade pockets most of the interest (the "float") between when you cover your position and when they pay you. That's how they make a lot of their money. So, let's see, put up $90, then 18 months later, get $100, minus fees. That's about the return you'd get in a money market mutual fund, but the latter would lack the structural risks (InTrade being shut down, unreliable, etc.)
It would be more tempting if you could cover your position by buying a government bond dated at the latest time the contract can expire, but that has lower interest than the equally-reliable MMMFs (and yes, this matters for low-odds bets). Simply crediting you with interest would improve things, but then, who would run the site? ;-)
I say this because I had actually considered doing exactly that.