Aug. 12, 2011
GOP presidential contracts gain on Iowa Electronic Markets in lead-up to Straw Poll
Prices for the GOP presidential contract have risen consistently on the Iowa Electronic Markets (IEM) in the days leading up to this weekend's Iowa Straw Poll so that traders now believe the party's candidate has a nearly 50-50 probability of capturing the White House.
As of 9 a.m. Friday, the price of the GOP contract was at 48.7 cents, which means traders believe that whomever wins the party's nomination has a 48.7 percent probability of winning the general election next year.
Earlier in the week, the price of the contract was at 44 cents.
Meanwhile, the price of the contract for Barack Obama's re-election slid from 55.6 cents earlier in the week to 52.4 cents Friday morning. The price had been as low as 51.5 cents during the week.
A real money futures market, the IEM gives traders the opportunity to buy and sell contracts based on what they think the outcome of a future event will be. Contracts for the correct outcome pay off at $1, all other contracts pay off at zero. As a result, the price of the contract at any given time is the probability that the traders believe that event will happen.
Traders can invest up to $500 in the market.
Meanwhile, traders still favor a GOP sweep on the IEM's Congressional Control market. As of 9 a.m. Friday, the contract representing a Republican takeover of both houses was selling for 55 cents. The contract for a GOP House/Democratic Senate was selling for 16.1 cents, a Democratic House/GOP Senate was selling at 13.4 cents and a Democratic sweep selling for 12.5 cents.
The "other" contract, which represents a third party controlling at least one chamber, was selling for 3.1 cents.
The latest prices on the Presidential market are available at http://iemweb.biz.uiowa.edu/quotes/Pres12_quotes.html. The latest prices on the Congressional Control market are available at http://iemweb.biz.uiowa.edu/quotes/Congress12_quotes.html.
More information on the IEM is available at http://tippie.uiowa.edu/iem/markets/.
STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500
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