2011 Intrade fee changes, or, Intrade considered no longer useful for LessWrongers

For some time now I’ve traded on In­trade af­ter some suc­cesses on the IEM. Re­cently, In­trade an­nounced a new fee struc­ture—in­stead of pay­ing a few cents per trade, one has free trad­ing but your ac­count is charged $5 ev­ery month or $60 a year (see also the fo­rum an­nounce­ment).

Ini­tially, this didn’t seem so bad to me, but then I com­pared the an­nual cost of this fee to my trad­ing stake, ~$200. I would have to earn a re­turn of 30% just to cover the fee! (This is also pointed out by many in the fo­rum thread above.)

I don’t trade very of­ten since I think I’m best at spot­ting mis­pric­ings over the long-term (the CA Propo­si­tion 19 con­tract (WP) be­ing a case in point; de­spite be­ing ul­ti­mately cor­rect, I could have been mauled by some of the spikes if I had tried only short-term trades). If this fee had been in place since I joined, I would be down by $30 or $40.

I’m con­fi­dent that I can earn a good re­turn like 10 or 20%, but I can’t do >30% with­out tak­ing tremen­dous risks and wiping my­self out. So this new fee struc­ture means that I am ba­si­cally go­ing to do a lit­tle trad­ing in Jan­uary, since I’ve already been charged the first $5, and then will cash out at the end.

And more gen­er­ally, as­sum­ing that this isn’t raid­ing ac­counts* as a pre­lude to shut­ting down (as a num­ber of fo­rumers claim), In­trade is no longer use­ful for LessWrongers as it is heav­ily pe­nal­iz­ing small long-term bets like the ones we are usu­ally con­cerned with—bets in­tended to be ed­u­ca­tional or in­for­ma­tive. It may be time to in­ves­ti­gate other pre­dic­tion mar­kets like Bet­fair, or just re­sign our­selves to non-mon­e­tary/​play-money sites like Pre­dic­tionBook.com.

* When I sub­mit­ted my with­drawal re­quest for my bal­ance, I re­ceived an email offer­ing to in­stead set my ac­count to ‘in­ac­tive’ sta­tus such that I could not trade but would not be charged the fee; if I wanted to trade, I would sim­ply be charged that month’s $5. I de­clined the offer, but I couldn’t help won­der—why didn’t they sim­ply set all ac­counts to ‘in­ac­tive’ and then let peo­ple opt in to the new fee struc­ture? Or at least set ‘in­ac­tive’ all ac­counts which have not en­gaged in any trans­ac­tions within X months?