The Limitations of TradeSports

Last week, I wrote

about the TradeSports contract

on whether Alex Rodriguez would stay at the Yankees. It might be "a screaming

buy," I said, but warned that it was very illiquid.

So what has happened to the contract now that A-Rod is known to want to stay

in the Bronx? It’s essentially dried up entirely. Of the six trades in the

contract yesterday, all but one of them had a volume of 1, and the sixth, earlier

on in the morning, had a volume of 11. Right now, the bid-ask spread looks like

the Nile Delta: the contract is bid at 37.2 and offered at 99.5.

In the financial markets, volume normally goes up at inflection points like

this. On TradeSports, by contrast, that doesn’t seem to happen. I’m not entirely

sure why that should be, but it is a problem for anybody with a trading (rather

than buy-and-hold-to-maturity) strategy.

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