Warren Buffett's Stake in Rockies' Victory; Hedging The Series

I am really glad to hear that Warren Buffet is cheering for the Rockies. From the article:

Jordan's Furniture, the Warren Buffett-owned local chain famous for commercials featuring brothers Barry and Eliot Tatelman, earlier this year promised free furniture - including sofas, dining tables, beds, and mattresses - to customers who bought between March 7 and April 16, so long as the Sox win the fall classic. Now, there's a real possibility that Jordan's could be paying back millions to customers.

He wouldn't disclose how much Jordan's might have to pay out, but the money won't come out of Jordan's bank account: Tatelman bought an insurance policy to cover any losses in the event the Sox win the title.

Still, Tatelman said the chain took almost 30,000 orders during the contest. One customer stands to get back $40,000, Tatelman said.

"He did his whole house," he said.

If I was one of these customers, I would take out a hedge at a casino in Las Vegas. You can pick the Rockies to win the series at +360 right now. So, the customer that bought the $40,000 in furniture could guarantee a positive payout for the cost of ~ $11,000. Sox win, he wins $40,000 of furniture - $11,000 hedge = ~$29,000. Sox lose, he wins $40,000 in Vegas. Somebody send me this guy's email!

Here is a video link of the story.

Comments

[outback]

So, in effect you're suggesting that he make an $11K bet on Colorado? With Josh Beckett going in game 5, it's unlikely that Colorado could do better than winning 3 and 4, and having to sweep in Boston. I'm not sure I'd make that $11,000 bet.

[WorldBeta]

Now the bet is half of that at +700. :)