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05/14/2004: "A market in everything"
(Title phrase stolen from Marginal Revolution).
I really like the concept of Intrade (hat tip: Marginal Revolution). It's a cross between a diverse stock market and a low cost sportsgambling book.
You think President Bush will be reelected? Pay $5.79 now, and get $10 on election day. If you're wrong, you get nothing back. Think he will not be relected? Collect $5.68 now; you will owe nothing on election day if you are right, you'll owe $10 if you are wrong.
Either way, you'll have to pay $.04 to buy or sell the contract. I don't know about the margin requirements. That is; if you make a provisional promise to pay $10, I don't know how much of that $10 you have to keep in your account. I gather that the higher the cost of the contract, the more you have to have in your account.
You can also bet on the Democratic Vice Presidential candidate (Gov. Bill Richardson and Sen Hillary Rodham would be my bets), whether Secretary Rumsfeld will keep his job through June, when Osama will be captured, and whether or not the Dow will rise 25 points tomorrow.
Just like the real stock market, more active traders can buy low and sell high. If you think President Bush is about to take a dip in the polls, you can sell Bush-will-be-reelected contracts now and buy them back later at a lower price. Note that to break even, the price would have to drop $.19 or so; you pay $.08 for commission, and there is currently a $.11 ($5.79-$5.68) spread. Or, sell now for $5.64 ($5.68 - $.04 commission) and buy later for $5.64 ($5.60 + $.04 commission).
