Monday, Nov. 03, 2008

Futures Market Trading

We're in the midst of a recession and a declining global financial market, but when it comes to the elections, people are still playing the markets. allows people to trade futures contracts based on the likelihood of real-life events, including politics, current events and weather. On the eve of the election, Obama contracts were trading just above 90 points; McCain's were a hair over 10. Also trading: a bet that the Democratic nominee would win with 370 electoral votes or more, at 29 points.

Each point is worth 10 cents. So if Obama wins, for example, that contract will close at 100. A person who bought one "Obama wins" contract at 90 would then earn $1 (100-90 = 10 points x 10 cents a point = $1.00). If they hold a 10-point McCain contract, they stand to make $9 (100-10 = 90 points x 10 cents a point = $9.00)

Although Intrade has no history of predicting election results, the Iowa Electronic Markets, a similar exchange, has called every election correctly since 1988. As of Nov. 3, the 2008 presidential election vote share market was trading at about 53 for Democrats and about 46 for Republicans. Alas, the IEM is operated by faculty at the University of Iowa's Henry B. Tippie College of Business for research and teaching purposes only — those hoping to make up their losses on the NASDAQ should look elsewhere.

Markets' Prediction: Obama