Obama drops, Romney rises
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Traders on the Iowa Electronic Markets are growing more doubtful of President Barack Obama’s probability of victory in November, knocking more than 4 cents off the price of the contract for his re-election since Friday.
The Democratic contact representing Obama was selling for 54 cents Tuesday morning on the IEM’s Winner Take All market, which means traders believe there is a 54 percent probability he will be re-elected in November. The contract was selling for 58.8 cents on Friday, June 1. The price peaked at 66 cents on March 12 and has been trending downward ever since, although it had been selling for as high as 61 cents on May 12.
Meanwhile, the price of the Republican contract representing Mitt Romney has jumped more than 10 percent since Friday, from 41.7 cents to 45.9 cents this morning. The price of that contract bottomed out at 35 cents on April 12, shortly after Rick Santorum dropped out of the race, and has been trending upward since Romney all but secured the nomination.
A real money futures market operated by the University of Iowa’s Tippie College of Business, the IEM gives traders from around the world the opportunity to buy and sell contracts based on what they think the outcome of a future event will be. Contracts for the correct outcome pay off at $1, all other contracts pay off at zero. As a result, the price of the contract at any given time is the probability that the traders believe that event will happen. Traders can invest up to $500 in the market.