Obama price jumps on Iowa Electronic Markets after health care ruling
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Traders on the Iowa Electronic Markets (IEM) see President Barack Obama as the big political winner in the June 28 decision by the Supreme Court to uphold most of the health care law.
Before the decision was handed down mid-morning Thursday, Obama’s contract was selling for 55.4 cents on the IEM’s Winner Take All market, which means that traders believed he had a 55.4 percent probability of re-election in November. Romney’s contract was trading for 46 cents.
But by Thursday afternoon—after the decision had been handed down—the price of Obama’s contract had jumped more than 2 cents, to 57.5 cents. The price of Romney’s contract, meanwhile, fell more than 3 cents to 42.5 cents.
A real money futures market operated by the University of Iowa Tippie College of Business, the IEM gives traders 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. The latest general election market prices are available at iemweb.biz.uiowa.edu/quotes/Pres12_quotes.html.