One Trader Blew Up to 7 Million Dollars Betting on a Mitt Romney Presidential Victory
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A new research paperon presidential trading strategies has revealed that a single trader lost between $4 million and $7 million placing a number of bets on Republican presidential candidate Mitt Romney in the final weeks leading up to last year’s election, Wall Street Journal reported.
The trader, who accounted for a third of all the money bet on Romney in the final two weeks and one quarter of the entire cycle on Intrade, placed 1.2 million pro-Romney contracts, with some even against an Obama victory.
The two economists who conducted the research, Rajiv Sethi and David Rothschild, believe the rationale behind the trader’s large bets might have been to “manipulate beliefs about the odds of victory in an attempt to boost fundraising, campaign morale, and turnout”.
While the trader’s motivation for wagering so elaborately on Romney’s campaign cannot be determined definitively, author of the report, Sethi, said the patterns of the trader’s bets indicated that he was not someone who was dumb or stupid – but possibly “extremely sophisticated.”
The economists conclude that it is possible the trader was either trying to manipulate the market to distort prices, or that that he/she was convinced Romney was underpriced and was simply expressing a price view.
The study also surprisingly found that political betting appeared to be much more static than other trading markets with 86 percent of traders never changing once who they were betting on despite news reports and predictions.
The veracity of Intrade, who stopped trading activity in March, was widely debated preceding the 2012 elections particularly after many storie and blogs claimed that Romney was faring well, despite lagging behind in public opinion polls, Atlantic Wire reported.
Read more about this study.