Trading on Democratic Nomination

[chorb]

Text


The article says that:

"Traders in the Dublin-based Intrade prediction market gave Democratic front-runner Barack Obama an 86 percent chance of being the Democratic presidential nominee, versus a 12.8 percent for Clinton, the New York senator and former first lady."

Is the term "traders" being used synonymously for betters? Or what the hell are they trading?

Move to P&N if it belongs there, but I dont think it does.

 

[sciencewhiz]

Here is a description of one such market: http://www.biz.uiowa.edu/iem/media/summary.html

And here is the price graph for the democratic nomination: http://iemweb.biz.uiowa.edu/graphs/graph_DConv08.cfm

 

[JS80]

They are trading futures. 86% chance means you "buy" a contract for $86 and if Obama is indeed the nominee you get back $100. If he does not it goes to $0. You can "sell" or short the contract by receiving $86 (or whatever the bid is) and if Obama is the nominee (i.e. you lose) you have to PAY $100 back (i.e. net loss = $14) but if Obama is not the nominee (you win) you get to keep the $86.

Currently the bid/ask is 85.4/86.6 for Obama and 12.2/12.4 for Hillary.

Obama to win the presidency is at 50.5/50.7
McCain to win the presidency is at 39.5/39.6
Clinton to win the presidency is at 9.1/10.2

I personally think McCain in underpriced.