# Proposition Bets, Markets, and Suckers, from Jeff Watson

April 26, 2008 |

When I was a kid, I was always looking for an easy way to make money. My dad used to point out laborers working in the hot sun, explaining that "Those guys were the ones who didn't care about their grades." As always, my dad was 100% correct, and I didn't want to end up like that, preferring to make money in an easier manner.

Since I liked to play games as a kid, I tried to get as good as I could at whatever game I could master, then play it for cash. I found limited success, but after awhile, my friends avoided playing against me like the plague. During high school, I used to spend a lot of time playing poker in various places that would be considered to be shady, but those games were out of the orbit of my friends and presented opportunities to make money. I played a pretty tight- mechanical game those days, and observed the sharp type of guys, and how they operated. It was in those games, from those guys, that I discovered the beauty of proposition bets. A proposition bet is one of those "I'll bet you that….." followed by what would seem to be an impossible outcome, and a guaranteed win for anyone who would take the bet. Of course, the person taking the bet would be opening his wallet right after he lost. I watched those guys making different prop bets, then filed them away for further use. Since I was rather studious, I went down to the library and found volumes upon volumes of ideas for proposition bets. By the time I was in college, I had a repertoire of at least a thousand different bets, plus variations on each of those bets. I had so many bets tucked away in my brain, and also in my journal, that I could come up with a bet in almost any situation. My immediate friends stopped betting with me after awhile, and I had to find places where greedy people congregated, such as the track, poker games, bars, and the exchange. People would take my silly bets and be surprised that I could really tie a cigarette in a knot without breaking it. They would be amazed that Jackie Robinson wasn't the first black baseball player in the majors, and they would literally fall flat on their face when they found out that George Washington wasn't the first president of the US. The best people to pitch the proposition bets to were the greedy, gamblers, sportsmen, and speculators, as they would think they had an edge when in reality they had no edge at all. Gamblers were great, as I devised little card games that looked like a certain loss for me, when I really had a 4% edge. I'd play those card games with a freeze out condition, guaranteeing my 4% grind. If I lost on those games, I paid with a smile. Some of my little card games like "Face-up poker" offered me a 100% edge. Sportsmen were great, especially when they found out that I could tee off with a driver, and make that golf ball go a mile on a flat surface(OK, I did that one the day the lake froze over with sheet ice which happens to have the lowest coefficient of friction in nature). Speculators took my bets with glee, as they didn't think I could really throw a pumpkin across the trading floor…after market hours, of course. I made a lot of money off of those bets over the years, and the people I considered to be suckers were paying my bills I would allow myself to be the victim of a prop bet (after getting the price as low as I could), and would use that bet later and eventually make a profit.

The market offers a thousand prop bets a day, with millions of suckers waiting to be fleeced. A few months ago, a fraternity brother of mine who's a broker called me offering me a great investment priced at 98. I hit the offer, and later in the day saw the great investment (I won't say what it was, it was so bad), offered at 90. Even though I was angry, a little voice in my head told me that I shouldn't have whacked him so hard in college betting him that he couldn't fold a sheet of newspaper in half 11 times in a row. I made 20 bucks on that silly bet in college, and lost a thousand times more on that slam dunk investment. I guess that suckers come in all shapes, sizes, and colors and that at one time or another, we're all suckers.

Nowadays, I don't do prop bets, but will bring them out at a party and show them for free. People will be amazed at my cleverness, and be mildly entertained. I do see that gleam in some eyes that tell me that someone's going to get fooled or taken for a lot of cash the next day.

As far as winning money. There is a great line from the movie Rounders. Matt Damon quotes Canada Bill Jones one of the great characters in the world of gambling. "Some people think it a crime to take money from people, I consider it a crime not to."

Some other famous quotes from Bill Jones were:

"A fool and his money should have never gotten together in the first place."

"A Smith and Wesson beats four of a kind."

There also is the old story of Canada Bill playing in a crooked faro game in New Orleans. It was in the back room of a barbershop. One of his associates, George Devol found him there and saw immediately that the dealer was cheating using a "two-card" (rigged) box. He begged Bill to quit the game. "Can't you see this game is crooked?" Devol asked. "Sure I know it, George," sighed Bill with resignation, "but it's the only game in town."

Let me say this about poker. Nobody and I mean nobody ever helped me learn anything about how to play the game. Everything I learned I paid for. I remember a line that an oldtimer used on me that resonates to this day. I was in a pot against the wizened and very seasoned veteran and I put in a healthy raise prior to the last card to come out. After a bit of hesitation my opponent made the call. The last card came and I bet he raised and I called. He turned over the winners. I knew he beat me on the last card. I responded with "How in the world did you make that call with the last card coming?" He looked at me and said "you paid to see my cards, lessons cost extra."

From that moment on, I learned that if I was ever going to get any better it was up to me and nobody was going to give me a get out of jail card free.

After 30 years of buying and selling stocks I have learned one inviolable lesson that the same rule holds true today as it did so many years ago. "Either learn how to play the game or bring more money."

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1. acetrader on April 28, 2008 4:03 pm

I can understand prop bets for grins at parties but to take advantage of people (your friends no less) when you have an edge… I don't know, maybe you were never taught the Golden Rule? In college I enjoyed my friends and worked to make money waiting tables in fine dining establishments, I never loved money so much I would screw a friend over… Sounds like you must have a ton of it.

2. Jeff Watson on April 28, 2008 6:33 pm

The only people who will take the other side of a prop bet, sure thing stock tip, or con are the truly greedy looking for easy money. When there is betting, speculation, or market risk involved, as long as one isn’t cheating, no “Golden Rule” is broken. I trade, play poker, and gamble with my best friends in the whole world. I play as hard as I can against them, and try to win as much as possible, and expect them to do the same to me. I wouldn’t respect anyone who wouldn’t play as hard against me as I would them. . As for screwing people over, I’ve never done that in my life, as my word is my bond and that’s sacred.

Any trade, gamble, or play without a quantifiable edge is plain tomfoolery and that goes for friends or the general public.

While you made a naive speculative comment about my love for money, I’ll offer a bit of speculation myself. I’d be willing to bet you’ve never hung around with a bunch of pit traders, bookies, or heavy gamblers that thought only about action. If you had, you would understand the spirit of my post.

3. manuel bravochico on April 28, 2008 8:46 pm

Ace: if it wasn't an ex Nymex floor trader I would have thought your reply harsh. But since it is…well said!

Jeff; when one of NYMEX's senior management guys gets caught bucketing Nat Gas trades, think of all the other guys that didn't get caught! "a few bad apples", yeah right.

4. Steve Leslie on April 29, 2008 9:00 am

Jeff I say this admiringly what an evil genius you are kinda like Lex Luthor. Talk about a misspent youth compiling over 1000 proposition bets that pay off. What if you had spent that time studying or searching for the cures for dread diseases. Where do you think you would be today.

The least you can do is publish this journal so some of us who enjoy this type of this can read about them. That is of course if there is no "magician's code of ethics" that prohibits you from sharing.

5. Jeff Watson on April 29, 2008 3:11 pm

Steve,

I grew up in a neighborhood where everybody gambled, all the time. I started gambling at the age of four, when we would flip baseball cards. We gambled on everything, and I figured out that I better find an edge if I was to hold my own. Like you, I paid for every lesson, because nothing was taught for free. That environment taught me a lot of lessons, and a way of thinking, that has carried over into my trading today.

If I spent my misspent youth trying to cure a disease, or something like that, I’d be a drone in a corporate lab slowly going insane. I’ll take the freedom of trading over any other path that I could follow. I do support a few causes that are trying to cure some diseases, but writing a check is just as important as actual research.

I’ve been compared to a lot of people in my life, some good, some not so good, but Lex Luthor….that’s a first.

Manuel,

I traded in the wheat pit at the MGEX and Mid-AM, and never traded at the NYMEX in my life. Perhaps your misguided comments should be aimed elsewhere, as I wasn’t the local/broker who bucketed your trades. Bad trades and bad fills are yesterday’s news, and to dwell on the past is very counterproductive. There is also a certain polite decorum that should be observed on this site, and rudeness and ad hominem attacks just don’t work well here. To be taken seriously, play nice.

Jeff

6. manuel bravochico on April 30, 2008 12:24 am

Jeff: Oh, what happened to the "few bad apples" stance from two weeks ago? Now you say you never traded on the NYMEX floor, but in our last exchange you vigorously defended the NYMEX floor. We're confused.Anyone in this room who ever traded for a living knows the games that went on in the NYMEX floor. They made bad fills an art form.I really want to take you seriously, but when I read your term "tomfoolery" I just couldn't stop cracking up. C'mon Jeff, give us a break. We uneducated "savages" just can't keep up with your torrid intellect…

7. acetrader on April 30, 2008 11:47 am

I think Manuel and I both remember your vigorous defense of the NYMEX from previous posts. As a screen trader since '93 I say (again) put 'em next to Sue at the Musuem! (yes, I know the NYMEX is in NYC and not Chi-town!)

8. ThirdEyeTrader » News Wrapup on April 30, 2008 12:45 pm

[…] Proposition Bets, Markets, and Suckers, from Jeff Watson ++++++ […]

9. nathan on April 30, 2008 1:01 pm

Isn’t it possible that many would take the other side of a prop bet just for entertainment value? I would guess a decent prop bet is one that proposes something people would pay to see/be entertained by regardless, not one where people are left genuinely duped. People pay street performers after all, and any such trick could be made into a prop bet where one pays to be amused.

10. Jeff Watson on April 30, 2008 6:19 pm

You really need to revisit that less than cordial exchange that you foisted on me.

Never in my response did I ever make a defense of the NYMEX floor traders, or claim to have traded at the NYMEX. I defended the floor traders at my exchange.

11. Joe Davis on April 30, 2008 8:39 pm

You know, the bad fills argument is interesting.

Now that everything is electronic and instant on most contracts, you don’t hear much about it.

But consider how slow the process was in the good old days. I imagine an order might have taken MINUTES to actually get to the floor.

Who’s to say what a bad fill was , considering what minutes mean in the context of trading?

Having said that , I’s sure the floor took an edge where they could, but I suspect many ‘bad fills’ were really a function of the ridiculous lag from order to execution.

12. manuel bravochico on April 30, 2008 10:10 pm

C'mon Jeff… you actually want Ace and me to believe that you did not defend NYMEX floor practices of institutionalized trickery? You directly implied it, constructively implied it since you want to get technical on me. "Take losses like a man", "bad fills"? Jeff, what does that have to do with getting trades due stolen by a floor trader or maybe as we're learning even a senior compliance officer? You don't read Ace and I's posts. You just respond with some type of reflex gag response. It's good you'll defend floor traders "forever". Once the Feds get the senior compliance guy just convicted to rat out the other guys for a lesser sentence who were also bucketing trades, they too will need your support. Let's face it, I don't see other posts on hear stuffing me, just you. Maybe you should go to that site you were talking about?

13. George Parkanyi on April 30, 2008 10:52 pm

Why are you guys going on about bad fills? If you trade through a brokerage firm, you should take issue with the firm, because they’re supposed to be acting in your interest on the floor. A trader like Jeff was a local - an independent. He’s one of the guys your firm’s floor trader was buying or selling from. What do you expect Jeff to do, write you checks? He’s part of the market. By definition he’s on the other side of your trade, trying to make money.

I traded through Vision LP, and when I had what I thought was a bad fill or error, I’d just call them and calmly ask about it. Mostly there was a reasonable explanation. Calling them once in a while to thank them for a good fill REALLY worked. Maybe twice I asked them to check the time tags on the tickets, and I think once I was right and they fixed it right away. They even busted a trade for me where they noticed an error that I hadn’t. Beat up on your firm if you’re going to beat up on anyone if you don’t like the fills, but its better to get to know the guys that are working for you on the floor.

Cheers,
George

14. Jeff Watson on April 30, 2008 11:44 pm

Manuel,

First of all, I was writing on prop bets when you went off topic about the NYMEX. The subject here was prop bets, not the NYMEX, which is old news.

Jeff

[Edited]

15. steve leslie on May 1, 2008 9:33 am

I agree with Jeff that he posted on prop bets and this disgussion was derailed by people who feel that they get bad fills on NYMEX. Personally, who cares? You got a problem, take it up with them. Keep your darn blogs to yourself. And stay on topic. Or create your own website and whine there. Am I to believe that Manuel Bravochico is a real name? It reminds me of Chad Johnson of the Cincinatti Bengals. I hope this is not the beginning of some cyber hooliganisms because what this will do is force the host to shut down or severely edit this site, which nobody wants.respectfully, sl.

16. Jeff Watson on May 1, 2008 11:21 am

Steve,

Later on this summer, after I get my head together, I’m going to self publish my notes on prop bets. I have enough good material to fill a hefty book. If you, or anyone wants a copy, just let me know. There will be no charge for the book, as that’s my way of “Giving Back” to the community.

My son read your Lex Luthor comparison and laughed his butt off. He found that to be funny, as he thinks that the old man doesn’t know anything….ahhh, to be 19 years old again.

Jeff

17. manuel bravochico on May 1, 2008 1:21 pm

Me too, I'm bored with your "tomfool" posts. Sorry but your post topics are fodder for bullying… as the other bloggers will atest. Waste time, hmmm… about 5 minutes total. Flattered that you spent so much time on us Jeff. What an honor. Over and out.

18. Brad Sullivan on May 1, 2008 7:37 pm

Jeff,

Great post…as a speculator/gambler I have been on the other side of similar wagers, knowing full well I will be the loser - but always within my financial means to make it all fun.

My question is this — how did you phrase the 1st President of the U.S. bet? As we know, the details on this could push the wager to either side.

19. Jeff Watson on May 1, 2008 9:50 pm

Manuel, you’ve said my posts were fodder for bullying, thus explaining your rude behavior. Bullies generally exhibit their anti-social behavior because of low self esteem. You admitted in your post that you’re a bully, so it’s up to you to change.. Generally speaking, people don’t like bullies. Although you have an attitude, you need to suck it up and get some professional help. Who knows, if you were to learn to subdue your emotions, you could probably become a pretty good guy. Please get help before it’s too late. And, as always, good trading to you.

Jeff

20. vniederhoffer on May 2, 2008 12:04 am

Would everyone kindly refrain from invective and hostile behavior on this subject and all others on this site? We are very fortunate to have people here who are interested in improving themselves and the marketplace itself, by deflating ballyhoo, raising suggestive hypotheses, noting areas of insight, and querying whether it's been tested et al. It is inappropriate to bash the persona of someone as multifarious as the chemist, floortrader- speculator and surfer Mr. Watson, and I have been remiss in allowing such diatribe to hit the site. As I used to say about my rackets games, "I may not win, but if I lose, it will be with dignity." vic

21. steve leslie on May 2, 2008 9:11 am

Who is the first President of the United States is actually not a proposition bet. It is a trick question. This bet depends on how you frame the question. The first President is John Hanson under the Articles of Confederation the first President under the Constitution is George Washington.
My advice is to be very careful who you bet this one with, you may get your money and you might get a punch in the face.

http://www.cojoweb.com/first-president.html

Here is an article on some wacky proposition bets. This is excerpted from Cigar Aficionado magazine. Phil Hellmuth once bet Huck Seed that he could not wade in the ocean for 18 straight hours. Huck lasted only 3 hours. Johnny Moss was bet that he could not beat up a man in a bar even with the condition that he got in the first shot. The man proceeded to put Moss in the hospital for several weeks. When asked why he did it Moss exclaimed 15 to 1 odds were just too hard to turn down. Amarillo Slim once bet a man out of two flies that were resting on a table which on would fly away first.

The prop bet was used in the Color of Money when Tom Cruise and Paul Newman fleece a bartender out of \$1000 by making a seemingly impossible shot not once but twice.

In Crocodile Dundee, Mick bets Donk (a giant of a man) that if he balanced a beer mug on his head Mick could make him drop it. Donk carefully places the mug atop his head and prepares for Mick to punch him the stomach. Mick proceeds to kiss Donk on the cheek. Donk drops the beer and Mick wins the bet.

In Tin Cup Roy McEvoy, played by Kevin Costner, bets that he can hit a golf ball from inside the bar, through a window and knock a pelican off his perch.

In a casino, common prop bets include:

Baccarat betting on the tie.
Dice one time prop bets include betting the inside such as any craps,11 and the field.
Caribbean Stud Poker betting that a royal flush comes out.
Blackjack taking insurance that the dealer has blackjack.

Finally, the most familiar proposition bets occur during the super bowl. The Las Vegas casinos literally post hundreds of prop bets such as who will win the coin flip (an absolutely horrible bet either way since you pay a 10% vig to the house for an even money bet) Janet Jones Gretzky became famous for this one. They also include how many field goals will be kicked, which player will score first, will a safety be scored, will there be an overtime and so on and so on. Odds are posted on each proposition.

As you can see the proposition bet is a staple of the gambling culture and as long as there are men and women who like to gamble there will be those who will accommodate them.

sl.