VV o n g B a
09-10-2004, 08:03 AM
Bullish on Bush? Accumulating Kerry?
‘Political futures’ markets take stock of presidential race
By Mike Brunker
Reporter
MSNBC
Updated: 8:30 a.m. ET Sept. 10, 2004
While public opinion polls regularly generate headlines during the election season, a different type of predictor is quietly developing a devoted following among those who are bullish on Bush or accumulating Kerry. Known as “political futures” markets, the online oracles rely on the forces of capitalism to sort out political races by enabling “traders” to purchase contracts on candidates or election outcomes, much as they would buy corn or soybean futures on a commodities exchange.
For example, someone who liked President Bush’s chances of winning re-election could purchase a “contract” forecasting a Bush victory on Nov. 2, which on Friday morning was trading at 61.4 units worth 10 cents each, or a total price of $6.14, on Intrade.com. On Nov. 2, the contract will have a value of either 100 units ($10) if Bush wins or nothing if he is vanquished by his Democratic rival, Sen. John Kerry.
If the pick was Kerry, each contract would cost 39 units, or $3.90, and pay either $10 or nothing once the election is decided.
Purchasers holding contracts on either candidate also have the option of selling them before the election if they wish to either lock in profits or cut losses.
Intrade.com, which says that between 1,500 and 2,000 traders are active in its political markets each day, has no financial stake in the outcome since it simply skims a commission of 4 cents per contract. That amounts to a lot of pennies, however, as the site had $4.6 million in open interest in the Bush contract as of this week.
The numbers generated by the markets differ from polls in that the 61.4 for Bush does not indicate that he is expected to attract 61.4 percent of the vote. Rather, it indicates that the market rates him slightly better than a 3-2 favorite to win the election, even if only by one vote.
full story (http://www.msnbc.msn.com/id/5943565/)
‘Political futures’ markets take stock of presidential race
By Mike Brunker
Reporter
MSNBC
Updated: 8:30 a.m. ET Sept. 10, 2004
While public opinion polls regularly generate headlines during the election season, a different type of predictor is quietly developing a devoted following among those who are bullish on Bush or accumulating Kerry. Known as “political futures” markets, the online oracles rely on the forces of capitalism to sort out political races by enabling “traders” to purchase contracts on candidates or election outcomes, much as they would buy corn or soybean futures on a commodities exchange.
For example, someone who liked President Bush’s chances of winning re-election could purchase a “contract” forecasting a Bush victory on Nov. 2, which on Friday morning was trading at 61.4 units worth 10 cents each, or a total price of $6.14, on Intrade.com. On Nov. 2, the contract will have a value of either 100 units ($10) if Bush wins or nothing if he is vanquished by his Democratic rival, Sen. John Kerry.
If the pick was Kerry, each contract would cost 39 units, or $3.90, and pay either $10 or nothing once the election is decided.
Purchasers holding contracts on either candidate also have the option of selling them before the election if they wish to either lock in profits or cut losses.
Intrade.com, which says that between 1,500 and 2,000 traders are active in its political markets each day, has no financial stake in the outcome since it simply skims a commission of 4 cents per contract. That amounts to a lot of pennies, however, as the site had $4.6 million in open interest in the Bush contract as of this week.
The numbers generated by the markets differ from polls in that the 61.4 for Bush does not indicate that he is expected to attract 61.4 percent of the vote. Rather, it indicates that the market rates him slightly better than a 3-2 favorite to win the election, even if only by one vote.
full story (http://www.msnbc.msn.com/id/5943565/)