Saturday, January 30, 2016

Election 2016: Prediction Market Musings

Official portrait of Vice President of the Uni...
As I mentioned awhile back (not worth looking up to link), I've invested a whopping $10 in the PredictIt "prediction market" on two sets of shares. I bought:

  • 100 shares of "Joe Biden wins the 2016 Democratic presidential nomination" at five cents per share; and
  • 250 shares of "Joe Biden wins the 2016 US presidential election" at two cents per share.

The price of those shares as reflected in trading at PredictIt has been swinging back and forth -- their prospective total sale value has been up or down by as much as $5 since buying them. As I write this, the most recent trade of Biden for the nomination was at eight cents per share, Biden for president at two cents.

For obvious reasons, I'll be watching those shares on Monday night.

Shares of "Hillary Clinton wins the Iowa caucus" are currently trading at 66 cents, "Bernie Sanders to win the Iowa caucus" at 40 cents. Biden's at one cent per share there and I wouldn't buy at that price.

If Clinton loses, or even just barely edges Sanders out, I expect a big boom on "Biden for  the nomination" shares and a smaller one on Biden in the general election. Especially so if "uncommitted" (which is not listed as a share option on PredictIt) does well.

I'm liking my chances pretty well on that proposition.  And at that point, it would be gut check time. I would have to decide whether to sell out or to hold on. If I keep those shares and Biden wins the nomination and the election, my $10 investment will have become $350. If I keep them and he wins neither, I lost ten bucks.

Of course, I could see both shares dip to effectively zero very early. For example, if Clinton unexpectedly routs Sanders really badly in Iowa, and manages to parlay that win into a New Hampshire comeback/upset. But I'm not expecting either of those things.

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