Nov. 8, 2011
Gingrich soars, Cain crashes on Iowa Electronic Markets
The price of a Newt Gingrich contract on the Iowa Electronic Markets has tripled in recent days as IEM traders perhaps believe he will be the next GOP candidate to get his moment in the sun from Iowa caucus goers.
The price of a Gingrich contract on the IEM's Iowa Caucus market was trading for 25 cents Tuesday morning, which means traders believe there is a 25 percent probability Gingrich will finish in the top two in the Iowa caucuses. Last Friday, his contracts were trading for only 8 cents.
Meanwhile, the contract price for Herman Cain on the Iowa Caucus market has been cut by more than half from its peak, as traders perhaps believe sexual harassment allegations are taking their toll on his campaign. This morning, the price for a Cain contract was trading at 18.8 cents, which means traders believe there is an 18.8 percent probability that Cain will finish in the top two in the Iowa caucuses.
Cain's contract topped out at 44 cents October 29 and has trended lower since.
Traders still believe Mitt Romney has the highest probability of finishing in the top two in the Iowa caucuses, with a contract price of 75.5 cents this morning. Rick Perry is selling for 33.5 cents, Ron Paul at 12 cents and Michele Bachmann at 8 cents.
The Rest of Field contract, which represents candidates or potential candidates who are not represented by individual contracts, was selling for 2.4 cents.
A real money futures market operated by the University of Iowa's Tippie College of Business, 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.
STORY SOURCE: University of Iowa News Service, 300 Plaza Centre One, Iowa City, Iowa 52242-2500
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