Curious Intrade Contract

Intrade runs a series of contracts based on “presidential decisions.” This includes oil futures and long-term interest rates, which aren’t exactly presidential decisions, but I supposed there’s some kind of presidential impact.
Anyway, one of the contracts is for troop level in Iraq on June 30, 2010, which is a presidential decision. According to the contract rules, each point is the equivalent to 2,000 troops. If there are over 200,000 troops in theater by the middle of 2010, the contract will be 100.
The current price for a Democratic president — presumably Barack Obama — is 45. For a non-Democratic president — presumably Senator McCain — the contract is 34. So does this mean that the crowd’s wisdom is that John McCain would be more willing to withdraw American troops than Barack Obama? I find that hard to believe, but perhaps I’m missing some Nixon-to-China effect. Or maybe the market is simply very inefficient here. It’s happened before.
One other point to mention is that the respective contracts will expire at 0 if the candidates don’t win. Fair enough. However, the McCain-to-win and Obama-to-win contracts are roughly the same right now. I don’t get why there’s such a difference in the troop level contract.
Update: OK, I completely misread this one. A reader writes: “There is no special explanation, what you see is what you said you would expect, Obama is more likely to withdraw troops. Think of it as a stock, if someone were to tell you a stock would be $100 this time next year, one is $45 and one is $34 (completely random), which would be more likely? Of course the $45, like Obama is priced.”

Posted by on September 10th, 2008 at 9:51 am


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