Trading the 2008 Presidential Election
As the 2008 Presidential election approaches, a smart trader starts looking for positions where he or she can enjoy a nice edge. As of this writing, some of the most outstanding trading opportunities that I have ever seen exist in this market (binary contracts on the November Presidential election). Now many of you are probably not familiar with these particular markets, and that is precisely the reason these opportunities exist. It is largely an undiscovered trading vehicle, resulting in an inefficient market which is extremely profitable to trade. I highly recommend that you get involved in it ASAP.
The first question I probably need to answer is where do you need to open an account so you can bet on …ummm…. I mean trade, the election. The two best markets are:
• Intrade (a division of Tradesports) at www.intrade.com
• Iowa Electronic Markets (run by Iowa University) at http://www.biz.uiowa.edu/iem/
I highly recommend that you open an account at both so you can trade the arbitrage opportunity that I am about to describe, and/or seek out the best contract prices. If you already have a Tradesports account then you automatically have an Intrade account, although you will have to fund it separately. (Your password will be the same and your login name will be your Tradesports login name with a .i after it.)
Now, on to the trade. As of today McCain is a decided underdog at Intrade and about even money at IEM. This is easy money and it doesn’t matter who wins. Fund accounts at both places and buy McCain at Intrade while simultaneously selling him at Iowa. Currently you can buy Mccain for about 38-39 at Intrade and sell him for about 45-46 at IEM. You may have to clean out some bids and offers and sit there with an inside bid for a few days to get everything filled, but these markets are high-volume with a lot of interest so it’s not a problem to do.
For example, let’s say you send a check for $1,000 to each place. At Intrade you will wipe out all the current offers selling Mccain through 38.9 and sit there with the rest of your order at around 38.5. You would also wipe out all the bids through about 44.1 at Iowa and sit there with a sell order for the rest of your money at around 44.5. You will need to check back daily and see if anybody fronted your offers so you can leapfrog them in order to get first fill. With this much gap in price a half-point on either side doesn’t really matter.
That’s the free money trade. Adventurous gamblers may be interested in knowing that Intrade has an incredible accuracy record of predicting the outcomes of political events. That being said, I am more inclined to buy McCain under 40 and take my chances with my speculation money. Personally I could see him winning in the biggest landslide in recent history, so at that price it looks like a great value.
Oh yeah, one last thing. Never let your own personal political affiliations affect your trading decisions in these contracts. It’s bad for business.
Technorati Tags: Presedential election, Binary contracts, Trading, Mccain, Obama
