by lordnacho | 2025-10-21 22:40:51+00:00
Parlays: the problem is really just spread. For every leg, you are going to get a shitty spread, meaning you lose a bit from the "real value" of the trade. Say you are flipping two coins (eg two very evenly matched games) and so the outcomes should be 50-50. Well, if the market ends up showing 48-52, you are losing two points in edge. Compound it and you are losing even more.

The great thing about parlays is that when people win, they win by a big multiple. So they feel they have won. But when they win, they are actually getting less than they should have gotten on their winner. The example above should 4x your money since the real chance is 25%. You punter might end up with say 3.5x, so even though he feels great when he wins, he isn't winning enough to make up the loss the other times.

Perps: Traditional markets have futures that settle on a specific date. For instance, S&P futures. This presents a couple of issues for the uninformed.

First, the settlement means your bet ends on a certain date. People want to avoid having to sell their position and put it on again in the next expiry. It also just seems like a fee grab by the exchange.

Second, the futures price differs from the index, due to financing rates being different between the assets. Remember a future is a promise to exchange at a later date, so you have to take into account the time value of money, aka interest rates. Well, early crypto didn't have a bitcoin interest rate, and so any gap between the future and the index would be an implied rate that you were punting, which nobody would understand if they didn't work in finance. In any case, there would be questions to the customer service desk about the deviation. Much better to hide the financing rate inside the perp rate adjustment that happens every 8 hours, and presents the price of the perp as more or less equal to the price of the underlying bitcoins. Early Bitmex also had the entertaining wrinkle of not being able to trade against a stablecoin, so actually you had inverse perps that settle against the crypto in kind. This creates a weird non-linearity vs the dollar, but meh whatever, number go up. These are things that the market maker understands, but the public doesn't.

Third, the automatic settlement and liquidation system is actually pretty innovative. You can give people massive leverage because you know exactly who has what position at the exchange level, in real time. Traditional markets still settle on a daily cadence (often T+2/3), meaning you could do funny shit that your PB would have to build a system to look at.

0 days: Just another way to get fleeced on spreads. There are models that estimate how likely some price is to be over a line at the settlement time. You definitely want to use statistics to determine this kind of thing, but people think they are smarter. The market maker isn't going to care terribly much, as long as he is reasonably hedged. There are well-known ways to spread your risk across options, and that's what the market maker does.

Leverage is the common denominator here. These are all bets where you can make a lot of money with a little bit of capital. It's an age-old story that people will blow themselves up with leverage. After paying fees to put on a bad bet.