THE NUMBERS
Clinton continues to move up in Iowa estimates and in the national ranks. Obama moving up in VP ranks.
Despite strong Iowa, Edwards contract now about even with Al Gore, who isn't even running ...
Very little change among the GOP nominee contenders. Brownback trades to zero (even Hegel, who isn't running, has a higher bid). McCain's recovery momentum stalls. (It's doubtful that the strong falloff in Thompson's primary figures amounts to more than a data error. If not, he's running on fumes ...).
THE STRATEGIES
Here's an very interesting and quite possibly very profitable set of payoffs.
Suppose you are (a) pretty sure that it will be one of the frontrunners but (b) not sure which. Pretty sure that Thompson won't be in the final round, but not willing to bet the farm on it.
Using a combination of the parley contracts and the straight-up Thompson contract, you can get up to an expected return of 28% (before trading costs and the horrible bid-ask in the parleys...).
| Payoff any combo of Clinton, Obama, Giuliani, Romney | 46.9% |
| Hedged Payoff, Thompson Loses | 25.7% |
| Hedged Payoff, Thompson Wins | 31.9% |
| Expected Gain | 28.8% |
To execute this, one would buy the four parley contracts, Clinton-Giuliani, Clinton-Romeny, Obama-Giuiliani, Obama-Romney.
IF one of the combos "wins", the others all lose by definition, for an expected result of 46.9% (if any one of the non-frontrunners wins, then all the money is gone ... so, don't pretend to yourself that this stuff isn't speculative).
To hedge against the win of Thompson, the most-likely non-frontrunner at this point, you could buy the Thompson contract outright. If he ends up in the final parleys, you might profit 31.9%. If he does drop out, then buying this "insurance" only trims your result to 25.7%.
Considering that the parleys might be known by February of next year, that's not bad for a six month investment!
Update: I ran the numbers on the "ask" side of the market for the parleys, which looks particularly 'bad', because it is far more expensive, not just slightly more expensive (although I think that intrade has a mechanism where you can try to get the price you want). Anyway, using the published figures the numbers do change substantially because of the "bid-ask" spreads:
| Payoff any combo of Clinton, Obama, Guiliani, Romney | 29.4 |
| Hedged Payoff, Thompson Loses | 6.9 |
| Hedged Payoff, Thompson Wins | 48.1 |
| Expected Gain | 27.5 |
| Next President | Pr (%) | Chg Wk. | bid-ask |
|---|
| CLINTON(H) | 41.2 | 3.2 | 1% | | GIULIANI | 19.5 | 1.4 | 1% | | OBAMA | 10 | -3.9 | 8% | | ROMNEY | 8.6 | -0.6 | 9% | | THOMPSON(F) | 8.6 | -0.5 | 6% | | GORE | 3.8 | -1 | 37% | | EDWARDS | 3.1 | -0.7 | 23% |
| 2007 Week 35: Dems in Iowa with Lance Armstrong (Clinton announces new 'War on Cancer'); blogger Lane Hudson files against Thompson's entry dance; and Thompson will, at long last, announce. Rudy takes swipes at his 9/11 management with statistic about Yankees games; Romney releases jogging ad that causes a stir.  |
| GOP Nominee | Pr (%) | Chg Wk. | bid-ask |
|---|
| GIULIANI | 38.7 | 2.5 | 1% | | ROMNEY | 23.5 | 0.1 | 0% | | THOMPSON(F) | 21.2 | -1 | 6% | | MCCAIN | 5 | -1.1 | 2% | | HUCKABEE | 3.5 | 0.5 | 3% | | PAUL | 4.1 | 0.3 | 5% | | GINGRICH | 3.3 | 0 | 3% |
| | DEM Nominee | Pr (%) | Chg Wk. | bid-ask |
|---|
| CLINTON | 67.9 | 5.2 | 0% | | OBAMA | 16.9 | -3.2 | 2% | | EDWARDS | 7.1 | -0.3 | 4% | | GORE | 7.1 | -1.4 | 10% | | RICHRDSN | 1.1 | -0.7 | n.m. | | BIDEN | 0.4 | 0.2 | n.m. | | DODD | 0.1 | 0 | n.m. |
|
| Senate | Pr (%) | Chg Wk. | bid-ask |
|---|
| DEM | 80.5 | 5.4 | 5% | | GOP | 15 | 0 | 31% |
| |
| DEM VP Nominee | Pr (%) | Chg Wk. | bid-ask |
|---|
| OBAMA | 25 | 3 | 18% | | RICHARDSON | 18 | -12 | 44% | | CLARK | 10 | 2.4 | 30% | | WARNER | 10 | 0 | 85% | | WEBB | 7 | 7 | 36% | | BAYH | 6.5 | -3 | 109% | | GORE | 4.4 | 0.4 | 9% |
|
: this is just an informational note and not a solicitation or recommendation to buy or sell securities and there is no guarantee implied and people can lose all money on all investments. Numbers are believed to be correct, but do your own math and make your own conclusions or consult with an advisor before making any decisions.
| Caucus/Candidate | Pr (%) | Chg Wk. | bid-ask |
|---|
| Iowa Caucus |
| Democratic |
| CLINTON | 50 | 5 | 50% |
| OBAMA | 17 | 7 | 18% |
| EDWARDS | 27 | 2 | 85% |
| FIELD | 0.1 | -0.2 | n.m. |
| GORE | 0.1 | 0 | n.m. |
| Republican |
| ROMNEY | 50 | 5 | 80% |
| GIULIANI | 10 | 0 | 100% |
| THOMPSON(F) | 5 | -20 | 600% |
| FIELD | 6 | 0 | 150% |
| MCCAIN | 1 | 0 | n.m. |
| New Hampshire Primary |
| Democratic |
| CLINTON | 65 | 0 | 15% |
| OBAMA | 15 | 0 | 67% |
| EDWARDS | 5 | 0 | 200% |
| FIELD | 0.2 | 0 | n.m. |
| GORE | 1.4 | 0 | n.m. |
| Republican |
| ROMNEY | 50 | 5 | n.m. |
| GIULIANI | 20 | 0 | 50% |
| THOMPSON(F) | 0 | -15 | n.m. |
| FIELD | 6 | 0 | 150% |
| MCCAIN | 1 | 0 | n.m. |
| South Carolina Primary |
| Democratic |
| CLINTON | 55 | 5 | 9% |
| OBAMA | 25 | 0 | 40% |
| EDWARDS | 10 | 0 | 100% |
| FIELD | 0 | 0 | n.m. |
| GORE | 1.5 | 0 | n.m. |
| Republican |
| ROMNEY | 5 | 0 | 200% |
| GIULIANI | 30 | 0 | 33% |
| THOMPSON(F) | 11 | -39 | 445% |
| FIELD | 0 | 0 | n.m. |
| MCCAIN | 0.1 | 0 | n.m. |
| Florida Primary |
| Democratic |
| CLINTON | 80 | 0 | 0% |
| OBAMA | 10 | -0.1 | 0% |
| EDWARDS | 0 | 0 | 0% |
| FIELD | 0 | 0 | 0% |
| GORE | 0 | 0 | 0% |
| Republican |
| ROMNEY | 0.1 | 0 | 0% |
| GIULIANI | 60 | 10 | 0% |
| THOMPSON(F) | 5 | -25 | 0% |
| FIELD | 5 | 0 | 0% |
| MCCAIN | 0.8 | 0 | 0% |
| Nevada Primary |
| Democratic |
| CLINTON | 75 | 5 | 0% |
| OBAMA | 15 | 0 | 0% |
| EDWARDS | 0 | 0 | 0% |
| FIELD | 0 | 0 | 0% |
| GORE | 0.1 | 0 | 0% |
| Republican |
| ROMNEY | 15 | 0 | 0% |
| GIULIANI | 30 | 0 | 0% |
| THOMPSON(F) | 0 | -40 | 0% |
| MCCAIN | 0 | 0 | 0% |
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