IEM Traders Now Favor Gingrich, Romney in Iowa; Romney for Nomination

One month before the Iowa caucuses and traders on the Iowa Electronic Markets believe Newt Gingrich is the most probable GOP candidate to finish in the top two among Republicans, while Mitt Romney is still the party's most probable nominee.

Gingrich's contracts were trading for 80 cents on the IEM's Iowa caucus market Friday morning, which means traders believe there is an 80 percent probability he will finish in the top two in the Jan. 3 caucuses. That price is up from 69 cents earlier in the week, and from single digits just a month ago.

Romney is selling for 52 cents on the caucus market, which means traders believe there is a 52 percent probability he will finish in the top two. Ron Paul, who briefly traded higher than Romney on Thursday, was selling for 50.1 cents Friday morning.

Michele Bachman, Herman Cain, and Rick Perry were all trading for 5 cents or less.

Meanwhile, on the GOP nomination market, Romney was selling for 51.3 cents Friday morning, to Gingrich's 36.5 cents. Romney had been selling for as high as 85 cents as recently as Nov. 3 before beginning his downward trend. Gingrich's contract debuted on the nomination market Nov. 18 at 16 cents and has been trending up ever since.

Perry, Bachmann, Paul, and Cain contracts were all trading for 2.4 cents or less on the nomination market. The Rest of Field contract, which includes any candidate for whom no individual contract has been issued, was selling for 7.3 cents.

A real money futures market operated by the University of Iowa's Tippie College of Business, the IEM gives traders the opportunity to invest up to $500 and 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 prices on the GOP Convention market are available online at iemweb.biz.uiowa.edu/quotes/356.html. Updated Iowa Caucus market quotes can be found at iemweb.biz.uiowa.edu/quotes/355.html. More information on the IEM is available at tippie.uiowa.edu/iem/markets.