If Bettors Are Any Indication--And They Often Are--McCain Just Lost

As they say in gold digging country, follow the money..

NYT Dealbook: Bettors can trade contracts on political outcomes using the Iowa Electronic Markets and Intrade. On Tuesday, Mr. McCain was a huge long shot in Tuesday’s election, if these markets are any judge.

McCain futures contracts on Intrade — which pay $10 if Mr. McCain wins the White House and nothing if he fails -– recently traded at 7.3 points, or 73 cents. That means the market thinks that Senator McCain has an 7.3 per cent chance of winning the election.

On the Iowa Electronic Markets, Mr. McCain looks to be in a worse situation. One McCain futures contract tracking the outcome of the election recently traded for 6.5 cents, giving the Arizona senator a 6.5 per cent chance of victory. If Mr. McCain wins, that contract would yield $1. Like Intrade, this is a winner-take-all contest — the contract either pays a buck or pays nothing.

It is important to note that these markets can be easily manipulated in periods of diminished liquidity, as was pointed out by Justin Wolfers on the New York Times’s Freakonomics blog. This manipulation has lead to some distorted results in the past.

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