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View Full Version : Something odd on Intrade




bc2208
12-24-2007, 02:44 AM
Ron Paul's GOP contract has a spread of 4.9-7.7, meaning the highest active bid is 4.9 (or 49 cents) and the lowest sell offer is 7.7. This is strange, because usually the bid-ask is very close, within a few ticks. Not sure if this is a technical thing or not.

ThomasJ
12-24-2007, 02:48 AM
I think that is some short selling going on.

There may be a move by some of the other candidates to deflate his in-trade numbers.

bc2208
12-24-2007, 02:54 AM
I understand the selling, I just find it unusual that they wouldn't leave any sell offers up. Deflating his intrade prices would just be dumb, because it doesn't impact his popularity or viability.

And BTW, the last sell is 7.6...

davidhperry
12-24-2007, 02:56 AM
It is a fairly thinly traded market.

jorlowitz
12-24-2007, 06:12 AM
Yeah, I noticed that too. Here's what I think:

1) The distance between bid and ask prices is not a problem. It's called "the spread" and it reflects a lack of consensus about price movement. Bidders (bulls/buyers/long investors) are interested in buying but want to do so at prices lower than the Askers (bears/sellers/short investors) are offering. This happens all the time with commodities prices and will resolve over time as more stuff happens to indicate a shift in support.

2) The more interesting question is how the contract got from nearly 8 to under 5, and why. In order for the price to drop, several hundred contracts had to be offered at lower and lower prices. This means someone who thought RP was overvalued at 8 thought he was still overvalued at 7, 6, and even 5.

3) It's possible that this person or group of individuals was trying to manipulate the market. What would that mean? Well, maybe they just wanted to shock the price for no other reason than to create a panic about, say, his perceived viability in Iowa and New Hampshire OR about his Meet The Press Performance. If that was the case, assuming people don't take the Intrade price as "truth" and continue to invest based on where they think the market will head, that price will rise back up fairly quickly. In fact, if you were an Intrade investor and noticed the price drop from 8 to 5 it would have been a great buying opportunity to pick up some Ron Paul stock on the cheap.

4) Could this have been a "genuine" sell-off. By genuine I mean a change in price that was affected by external conditions somewhat correlated with Paul's actual chances (or at least meaningful predictive indicators of them). It's possible. Paul's numbers have seen repeated spikes around major fundraising accomplishments like 11/5/2007 and 12/16/2007. What has happened fairly consistently is that Paul's numbers will rise 2-3 points immediately prior to and after the fundraising and then drop about the same amount in the two or three weeks to follow. Why would that be? It's possible that investors and pundits watch this fundraising phenom in his major public appearances and simply think he doesn't sell his message well enough to continue the groundswell into the mainstream. I've thought this before, and I think it's a plausible reason why prices might have dropped today. I think when many pundits watch Ron Paul on shows like Meet the Press they think he simply can't close the deal with more than a minority (10-20%) of Americans.

update: Paul is up to 5.5 with the nearest ask at 7.7. I bet by tomorrow the price will be over 6.5 again... but who knows, maybe the traders have some info we don't.

p.s. Just to give you an idea of how cheap (easy) it is to manipulate stocks in the market in which Paul's contract is trading, it'd only cost about $5,000 to drive the price down all the way to 3. That's saying a lot for the largest, most HIGHLY traded political futures market in the world.