here's why I traded on that contract yesterday:
1. Woke up to the "Batman Massacre" news.
2. Realized that this would almost certainly make the media spend weeks talking about gun control, which would almost certainly spread to the campaigns.
3. Checked Obama and Romney's records on gun control (see Wash Post link below). Realized that, once again, Romney's Massachusetts record is at serious odds with the national GOP. And, realized that Obama has been more pro gun in the last 3 years than Romney was as governor.
4. Checked recent trade prices on the contract and made the decision that I thought Romney would decline from the ~40% odds at that moment, but probably wouldn't go below ~35% this far out from the election.
5. Shorted the contract at ~40, and bought the shares back late last night when it had dropped to ~38.
6. Pocketed 5% one-day profits.
My trading decisions have very little to do with my personal feelings on the "actual odds as of today" that either will get elected. This far out from the election, both candidates will float around 50 and there just isn't as much money to be made as on contracts trading at 1-2% that have a chance of spiking to 20/50/99%. Yesterday, my trades reflected my prediction on the tone of the media over the next few weeks and the spill-over effect I expect that to have on the candidate's campaign messaging and events.
For the record, the trades (and comment board) on the VP contracts probably gives more insight into the feelings of traders vis-a-vis this election. Traders were adjusting their picks all week based on the rumors Romney would announce his VP before going to London. After new of the shooting, I immediately began trading all my VP picks to factor in the ~1 month delay in learning the pick and started looking for VP picks with certain views on gun control. (Does Romney go super pro-guns? Try to avoid gun control? Go middle of the road and try the Obama 'I believe in the 2nd amendment and I believe in people's right to keep guns out of the hands of people who shouldn't have them' line?)
If you're trying to divine the "real odds" today of Obama victory, the day-to-day movements of the Intrade contract will tell you less than an educated read of public poll cross-tab data. If you're curious to learn why the perceived odds shift, read the comments below the GOP.VP and Pres.Win contracts.
http://www.washingtonpost.com/blogs/the-fix/post/where-obama-and-romney-stand-on-gun-control/2012/07/20/gJQAwMpNyW_blog.html
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