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I am a British citizen living in Germany.

I do not know the odds of any particular outcome of Brexit (and I'm not sure how to calculate any odds, as I don't have any relevant expertise in politics or economics).

Nevertheless, I wish to defend myself financially against the more severe consequences that roughly half the UK thinks likely, irregardless of if the real odds of any of them is (say) only 5%. Is it possible — or sensible — to insure myself against various outcomes by placing bets that they will happen? My mental model here is to use a political gambling website based outside of both the UK and the EU.

Note that I have never gambled for fun, so I don't even know if "20/1" odds would mean "we will pay you 20 times your bet if you win" or "we will pay you 1/20th of your bet if you win".

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Future political events are very hard to hedge against because you don't know what the decision will be nor do you know if the reaction to the decision will be mild or severe.

Any money thrown at the outcome will be a binary bet rather than a hedge. Betting sites tend to offer poor odds and many are sketchy, at best. Currency pairs might work but they might not correlate with your holdings.

I think that a better approach would be to determine your exposure as well as your risk tolerance. Then with that in mind, hedge directly in those underlyings. Options would be a way to achieve this but it's far from a simple concept since there are a variety of approaches. If you are willing to accept a limit on your upside gains then low/no cost long stock option collars would be a good way to go. You could hedge individual positions that concern you or globally with index options on the SPY, FTSE or whatever.

Plan B might be to wait and see the outcome and then react accordingly. The risk in that is a gap down and a big hit before you can exit or adjust.

  • Half of that's above my level, but noticing that it's above my level is essentially an answer in itself — that I need to keep my actions simple, and bets aren't simple enough to get right. So thank you :) – BenRW Feb 6 at 20:26
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    You're welcome. You shouldn't go near anything that you don't understand. Anything that you do requires a clear view of the risk, the potential rward and the cost. Here's a link about option collars with an example of a position. It's for informative purposes in case you don't know what collars are. investopedia.com/terms/c/collar.asp – Bob Baerker Feb 6 at 20:37
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Most political wagering websites are not very liquid. A major bookmaker company might be a better source for a political wager.

Or hedge political events with leveraged currency positions. A currency position is a currency-pair with one currency set against the other. Then the position can be opened as buy-side or sell-side.

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