Political Futures Trading: Presidential Election Prediction of Betfair, InTrade and IEM

It seems that the Presidential election is one of the most popular markets in political futures trading! I always thought of Betfair trading to be the best (and probably the only) way to take advantage of an election prediction and make money along the way. That is why I always refer to Betfair when talking about politics, like yesterday when I discussed about Barack Obama’s graph to win the 2012 Presidential election. Today though I discovered InTrade and IEM (Iowa Electronic Markets) both of which are also available for US residents, unlike Betfair’s betting exchange. I haven’t got the time to do a lot of research, but it would be interesting to check out and compare their futures graphs regarding the US election 2012 and hopefully find out if any futures market is lagging behind the others.

Let’s start with the futures market about the Republican nominee, where Mitt Romney is close to 100% certain to be contesting with Obama in the next Presidential election. Betfair graph shows the smooth uptrend of Romney’s chance during the previous months. I used the inverted axis in Betfair’s graphs to directly compare them with InTrade’s and IEM’s graphs. Gingrich’s odds have tried twice to plummet down to 2.00 but 45% was the highest mark they scored. In the meantime Perry’s chance for Republicans nomination also reached 45% before falling to single-digit percentage.

Gingrich’s price at the political futures market over at InTrade prediction website climbed up to almost $40. InTrade graphs show fluctuations since 2009 providing historical data not available at Betfair.

How about IEM? The Iowa Electronic Markets’ graph presents all nominees’ prices together and the correlation between Romney’s Betfair graph and IEM’s one is profound. IEM’s graph shows data dated back to 2011.

Enough with the Republicans, let’s examine the winning party futures market. Starting with Betfair, trading the Democrat party has pushed their chance of winning to 65%.

The IEM’s graph of 2012 election result shows pretty much the same, offering a more detailed view of the price fluctuation.

The last part of Democrats’ graph at InTrade correlates with Betfair and IEM but InTrade offers once again a more detailed view of the past. $60 mark has been a crucial support and resistance level and I assume a breakout would become a key formation, should that happen of course.

Finally, let’s take a quick look at Obama’s futures graph of InTrade. The graph is quite similar with Betfair’s corresponding graph that I included in yesterday’s post, but more detailed.

Politics is becoming one of the most hot futures markets at InTrade as the next Presidential election approaches. I was surprised to find out about InTrade and especially IEM, which was developed by University of Iowa as part of their research and teaching mission. The University is studying individual trading behavior as well as market level performance via the futures market. Perhaps they should take a quick look at my recent Greek election prediction!

A vast amount of different markets seems to be available for futures trading and politics is not just one of them but one of the most popular! Are you keeping an eye on the 2012 Presidential election in the futures market or do you avoid trading futures? Let me know in the comments below.