Political futures market: how to really understand an election
By Paul Orford, VP Business Development at TopFX I have a confession to make, I am a political junkie. Instead of enjoying a few drinks on a Friday evening after a long week, much to the displeasure of my fiance (sorry Rachel x), I will be listening to obscure interviews by politicians and dissecting their […]
By Paul Orford, VP Business Development at TopFX
I have a confession to make, I am a political junkie. Instead of enjoying a few drinks on a Friday evening after a long week, much to the displeasure of my fiance (sorry Rachel x), I will be listening to obscure interviews by politicians and dissecting their often dog whistle message.
Why do I do this when there are a million other things around to do and you have 48 hours of freedom? The reason for this is my own personal addiction…the political prediction markets.
If you are not aware of them, you can open futures contracts or get odds on a massive selection of these markets on a 24 hour basis. You can get everything from the EU referendum in the UK, will President Assad still be in power by the end of 2016, or maybe you could take a look at the nomination to run for the Democratic nomination in California. The choices are endless!
The reason why I find this a great tool of analysis is it is a fantastic guide of peoples opinions, as they are actually backing them with their own money. How many times have you been polled via telephone but you have never told the truth?
To give a great example of this, the previous UK general election no poll could call it correctly. However, taking in the data provided by such companies as Betfair and Predictit you can get a great sense of the direction of the opinion and direction being taken.
What I found intriguing and fun with a company called Predictit, is that like trading, timing is the key to success. You can make your trade when most people are going against your opinion to maximize the value of it. Then when / if the opinion turns the value of the contracts that you hold increases or decreases.
So if you would looking for forward guidance on a vote or an election, I would avoid the news paper polls and take a look at these exchanges. Moreover, you can join me on trying to ascertain who will win the Democratic Kentucky Primary.
Have a great weekend everyone!
