Sept. 30, 2011
Cain, mystery candidate looking good to Iowa Electronic Markets traders
The likelihood of Herman Cain and a mystery candidate finishing in the top 2 in the Iowa caucuses has jumped significantly in the last week, according to traders on the Iowa Electronic Markets.
Cain's odds of finishing in the top 2 in the caucuses are still long, but much better than they were a week ago, when he was the surprise winner in the Florida GOP straw poll. On Friday morning, he was trading at 10 cents, which means traders believe he has a 10 percent probability of finishing in the top 2 in the Iowa caucus.
Last weekend, before the Florida poll, his contract was trading at less than a penny.
The market's Rest of Field (ROF) contract has also jumped significantly in recent days, as political observers continue to buzz about the possibility of Chris Christie jumping into the race. The ROF contract represents someone for whom no individual candidate contract has been issued. The market has issued individual contracts sold for Cain, Mitt Romney, Rick Perry, Newt Gingrich, Michele Bachmann and Ron Paul, so the ROF contract represents candidates other than those five.
This morning, the ROF contract was trading at 21 cents, which means traders believe there's a better than 1-in-5 probability that someone outside that group will finish in the top 2 in the caucuses. Last weekend, that contract traded for as little as 6.6 cents.
Traders still give Perry the highest probability of finishing in the top 2 of the Iowa caucus, with contracts trading at 68.5 cents this morning. Romney has the second highest probability, at 60.5 percent.
Bachmann has a 28 percent probability of a top 2 finish and Paul was at 15.9 percent. Gingrich was trading at 1.7 cents, which is down slightly from the 2.3 cents he was trading at when he released the latest version of his Contract with America.
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.
The latest prices on the GOP Convention market are available online at http://iemweb.biz.uiowa.edu/quotes/356.html. The latest Iowa Caucus market quotes are available at http://iemweb.biz.uiowa.edu/quotes/355.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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