Thursday, January 19, 2012

Bettors drop Romney's S.C. victory odds from 93% to 38% in two days

    Back in 2004 I had a lot of fun betting on political outcomes on, which allows the trading of shares in the happening of certain events. I didn't bet that much money, but won a little and had a pile of fun.
    At the end of the election season I withdrew my money. The government cracked down on Internet betting and so I can no longer place an Intrade bet with a credit card. I don't care enough about it to send them a check or wire transfer, so all I can do is watch.
    But Intrade is interesting to watch, because it tends to be ahead of the curve in predicting political outcomes. As well it should be, since people are having to put their money where their mouth is, by buying shares in outcomes.
    That doesn't mean Intrade shares can't be very volatile. Two days ago Mitt Romney was the overwhelming favorite to win the South Carolina primary. A "share" of Mitt Romney cost $9.30 and would return $10 on his victory. In other words the market was giving him a 93 percent chance of victory.
    Tonight a "share" of Mitt Roney is going for $3.78; the market is giving him only a 38 percent chance of winning. Newt Gingrich, meanwhile, is now given a 64 percent chance of South Carolina victory. Rick Santorum and Ron Paul both come in a two-tenths of one percent, so for you longshot players, there it is. (Note that Newt's total and Mitt's total exceed 100 percent. That's because each is traded individually. There is actually an opportunity for arbitrage on the Intrade system, although it requires far more money and faith than I have to spare.)
    So as of now, Newt Gingrich is the favorite to win in South Carolina. If anyone should tell you otherwise, tell them to put their money where they mouth is.
    But check the board before actually booking the bet!

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