Traders Flee “2014 Republicans Gain Seats” Position
The notion that the GOP can gain seats in the up coming mid-terms is the first (traders) causality of the Republican shutdown.
While the “Republicans Lose Majority” position hasn’t yet eclipsed the “Republicans Hold Majority” position, I’ll be checking back weekly to take the temperature of the traditionally prescient IEM traders.
Here is the prospectus:
The financial contracts initially traded in this market are:
Code Contract Description
RH.gain14 $1 if the Republicans have more than 234 House seats;
$0 otherwise
RH.hold14 $1 if Republicans have more than 217 but no more than 234 House seats; $0 otherwise
RH.lose14 $1 if Republicans have 217 or fewer House seats;
$0 otherwise
The contract RH.gain14 represents the outcome that Republicans increase the number of U.S. House seats they hold. For purposes of initial seat count, we use the number of Republican seats as a result of the November 2012 election (234 seats). Thus, the RH.gain14 contract represents the outcome that Republicans hold more than 234 House seats after the 2014 election.
The contract RH.hold14 represents the outcome that Republicans maintain an absolute majority in the House, but do not increase their control; that is, Republicans have more than 217 and less than or equal to 234 House seats.
The contract RH.lose14 represents the outcome that Republicans lose an absolute majority in the House (have 217 or fewer House seats).
All references to “seats” in this document are to voting seats in the House of Representatives and specifically exclude those non-voting seats held by Representatives from American Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, and the District of Columbia.
Look at the bid-ask spread on the RH.lose14 contract. When I looked today, the bid was 0.27, and the ask was 0.5. That spread is very large.
http://www.grantland.com/fivethirtyeight/story/_/id/9802433/nate-silver-us-government-shutdown
Not sure if any of you guys have seen this, but it is Nate Silver from fivethirtyeight on an interesting take of how this affects things going forward. Long story short he thinks it is an uphill climb for the House to swing back to Democrats, but Republicans might lose even more ground in the Senate.
It was a pretty good read.
@Davy – nice catch on the ask/bid spread.
@Falcor – I read the Salon synopsis which made the article Silver sound like “maybe/maybe not…we’ll see” I have to read the whole thing,