4 Comments, 1 Threads

1. 1. Carl S.

   Only if it gets seen….

   BTW, how come Mitt is having trouble breaking and holding $0.40 (40%) on Intrade? Granted, the open interest in both sides represents about $25million, which is a drop in the bucket for a $billion campaign, but I’d NEVER promote a conspiracy theory….

   October 26, 2012 - 9:42 am   Link to this Comment | Reply

   

   
   • Carl S.

     Oops, I meant $4.00.

     October 26, 2012 - 10:01 am   Link to this Comment | Reply

     

     
   • Lummox JR

     Best guesses:

     1) Intrade investors are looking too much at the polls, which until recently have shown Obama ahead, and think Romney’s only path to victory is a squeaker. Obama’s price took a nosedive after the first debate, but there may still be a lingering idea that he’ll pull it out in spite of Romney’s leads in polls like the Gallup tracker.

     2) There may be structural elements to the Intrade market that favor particular sides, like perhaps it has more Democrats or they’re better bankrolled.

     3) Markets can be manipulated like anything else, and someone like Soros could dump a little bit of money into Intrade to depress Romney’s “price” in order to try to create a self-fulfilling prophecy.

     4) Isn’t the goal of any stock market to buy low and sell high? Romney’s investors may be in it to win it, having bought low and held onto their stock instead of trading; Obama’s supporters may do likewise, or at least they may see it as too early to sell short. If you believe your candidate can win, there’s considerable incentive to hold onto your stock once the race starts breaking for them, but Obama investors probably bought higher to begin with and are unwilling to sell short if they can still hope for a victory. So in spite of being called a predictor, Intrade might tend to lag the reality on the ground rather than lead it at this point in the race; it may simply be structurally incapable of reflecting changes this close to contract resolution.

     1 and 4 are the ones I’d bank on. Intrade is touted as a prediction market, but at this stage in the game people might be playing close to their vests. New people may not enter the market at this stage. Also, Republicans who believe in a Romney victory may still be nervous enough that they’re unwilling to risk losing $100 in the event of a loss (which means the economy going further south) even if it means gaining around $200 at the current trading price in the event of a win.

     Besides, looking at Intrade’s state markets, something is way off. Mitt has the momentum in Ohio and while it’s making conservatives nervous, it seems pretty winnable. Intrade says the odds of a Romney win there are 37%, which seems ridiculously low. In Iowa it’s even worse, and that makes zero sense no matter how you spin it. Obama losing VA is almost a done deal at this point and even Obama knows it, but Intrade barely gives Romney the edge. And no matter what, WI and MI will be a bigger struggle for Obama than Intrade says they will. No, something is definitely off here.

     Question: What do you suppose this market would look like if the buyers were competing based on actual result percentages, where you made the most profit by correctly predicting not just the outcome but the closeness of it?

     October 26, 2012 - 10:28 am   Link to this Comment | Reply

     

     
     • Carl S.

       I didnt want to go down the manipulation path, but it’s surely plausible. With a total open interest representing the $25MM mentioned above it certainly could pass unnoticed. OTOH, does somebody know something that nobody else does? It keeps me awake, I tell ya!

       There is a market for the Democrat to win 280 electors, and it’s trading at about $6.00, slightly off from the straight win. I’m sure there are markets for greater numbers too. There is probably an arbitrage there somewhere.

       October 26, 2012 - 11:14 am   Link to this Comment | Reply

       

       

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