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Edited on Mon Jan-14-08 02:42 AM by Awsi Dooger
It's based on low amounts, $100 contracts. At any given point there are bids and offers, usually small numbers of contracts available. A half dozen at a time is a good nab. It's even lower now than in '04, due to the regulations against internet gambling, which have drove speculators away. Intrade markets are generally thin.
This is no different than election day '04, when I got stuck with a big loss on Kerry contracts on Intrade based on the early exit polls. I was working GOTV and unable to pay close attention to the specifics. My friend grabbed as many Kerry contracts as he could within the range we were willing to trade. It continued to shift in that direction until it became obvious Bush would prevail, then Intrade swung sharply toward that side. I was still working GOTV, otherwise I would have tried to reverse course and bail out. By the time I got home it was too late, the Bush contracts already at steep level.
Obviously, the markets react to polling data and available info, rather than the other way around. They certainly don't know more than the collective wisdom of the people involved.
Hillary's futures dove after Iowa then took off on NH night, once the results dribbled in. I wasn't paying daily attention to politics at that point, and frankly right now I'm sick I didn't grab Hillary nomination contracts at bargain rates. I had no idea they dropped so low, based on one result.
A perfect market does not always identify the winner. A 90% market should be wrong 10% of the time, not never. What the markets do is summarize the poll findings and conventional wisdom into a single number, the theoretical percentage.
Without the morons, there's no incentive for the more astute speculators to get involved. You're betting against someone else, not the house at a fixed rate. If you follow Intrade closely day to day, you'll notice traders who overreact to leads in basketball games or football games, often setting the prices far above correct likelihood based on score and situation. It's hardly atypical for more speculators than typical to get involved on big events like a high profile primary, not unlike a Super Bowl earning surreal numbers of novice bettors. I can almost guarantee the Intrade prices would not have fluctuated so wildly if only the veteran investors had been playing. The veterans no doubt were the ones who grabbed Obama contracts quickly after the Iowa result, then took Hillary once the results indicated she had far greater chance to win than was projected mere hours earlier. It's always a matter of value for the day to day guys, often wagering on contracts you think will lose, but not as often as your number indicates. Give me a 20 contract on a 40 likelihood every time. That's the basics of Intrade.
If someone were to fix an outcome, there would be evidence of heavy and unusual wagering activity ahead of time, when it made no sense based on the pricing. That's what Nevada gaming regulators look for, and it's what sparked the recent probe into a few specific tennis results. In this case nothing strange took place, merely major shifts toward the individual with the apparent advantage, in one direction post-Iowa then the other way on NH night. It only occurs with man-to-man markets, which stay open during the event. If a place like Las Vegas offered election betting, the wagering would close as soon as the polls opened, and there wouldn't be late correction when the results differed sharply from expectation. That's all that happened here.
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