February 29, 2012 | By UI News Services
The price of Mitt Romney’s contract on the Iowa Electronic Markets (IEM) jumped sharply after his primary wins in Michigan and Arizona Tuesday, while the value of the contract representing Rick Santorum fell by half.
The contract for Romney was trading for 82 cents Wednesday morning on the IEM’s GOP nomination market, which means traders believe there is an 82 percent probability he will be the GOP nominee. That price is up from the 70 cents it was trading for at the start of the day Tuesday.
Meanwhile, the price of the Rest of Field contract that represents Rick Santorum was selling for 10 cents Wednesday, down from 20 cents it was trading at Tuesday morning.
Newt Gingrich, the third-place finisher in Arizona, was trading for 2.1 cents Wednesday morning, and Ron Paul, who finished third in Michigan, was trading for 1.4 cents.
A real money futures market operated by the University of Iowa’s 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.
Contact: Tom Snee, UI News Services, 319-384-0010