General Election Predictit Strategy

For example, in the image below, a screen cap of the Tier 1 markets on May 5th, Donald Trump “Yes” is overpriced relative to the alternatives, since you can buy Republican “Yes” or Gender “No”at par value or cheaper. price dem

  • Coverage: BROAD
    • Democrat covers Clinton as the likely nominee but includes Sanders (- his prob. of an independent run) + non-candidates who have outside chance of the nomination such as Biden and  Warren as a byproduct of the uncertainty surrounding charges against Clinton with respect to her private server scandal.
    • Republican covers Trump as the likely nominee priced at a premium with respect to the potential for a brokered convention or a GOPe 3rd party ticket challenge.
    • Other covered Gary Johnson & Liz Stein, but also a Sanders or a spurned GOPe backed candidate running as independents at the expense of their original parties.
  • Exposure Ceiling:
    • $2,550 total
    • $1,700 on mainstream / $850 on lottery
  • Price Implication:
    • This market should price as the highest value premium market as it offers coverage of both Trump and Clinton plus the (admittedly small) chance that either (or both) of those candidates could be replaced by their party in the general election. If you can get this market discounted to other options, buy here first.

Will a woman be elected U.S. President in 2016?

  • Coverage: BROAD (lol)
    • Yes (Female President) is almost exclusively priced according to Clinton’s prospects as the Democratic nominee in the General Election + the chance that if Clinton is indicted, Elizabeth Warren could be produced as the Democratic nominee in a brokered convention deal.
    • No (Male President) primarily covers Trump but would include Sanders and Biden or any likely GOPe candidate that might be produced in the extremely unlikely event of a Republican contested convention.
  • Exposure Ceiling:
    • $850 total
  • Price Implication:
    • Of the three Tier 1 markets, this one seems to lag with price movement the most. If you are trying to buy the dips and sell the highs you can do it with less time sensitivity, but at a lower volume, here than in the other Tier 1’s. Personally, this is my buy and hold market because I have found the best margins in terms of coverage to price here before the Tier 2 markets opened.

Who will win the 2016 U.S. presidential election?

  • Coverage: NARROW
    • Primary action is in the Clinton and Trump contracts, both the presumptive nominees. At this point Clinton should trade with more hypothetical nomination risk than Trump, because while Trump has all but locked up his nomination, Clinton has been unable to subdue Sanders and has the specter of an FBI indictment lurking at the periphery.
    • That said, you can basically get in on any other named candidates, which you can split into Presumed (Clinton & Trump), Unlikely (Sanders, Biden, Warren, Marco), Lottery (Jeb!, etc.) But if thats your game, just send me your cash directly.
  • Exposure Ceiling:
    • $1,700 on Presumed
    • $3,400 on Unlikely
    • A bunch on everyone else but the shares are all capped at .99
  • Price Implication:
    • The market prices for Trump and Clinton here are usually stupidly overpriced compared to the alternate options you can find that I am outlining in this post. Why would you buy here? Literally only for selling bumps on the brand value of the contracts. Is it cool to own a bunch of Trump “Yes” shares? Yeah it is. Is it worth buying them at 5 cents over the alternate options covering more outcomes? Probably not.

  • Importance: HIGHEST
    • No President since JFK has been elected without winning Ohio
  • Polling
  • Current Government: Mixed
  • Price Implication:
    • The state of Ohio is the undisputed pound-for-pound champ in terms of importance, swinginess, and correlation with the general election winner. This should essentially trade at par with the Tier 1 Markets.
  • Importance: VERY HIGH
    • I am putting it at #2 because it is a must win for the Republicans and has flipped more recently than Virginia.
  • Polling:
  • Current Government: Mixed
  • Price Implication:
    • If Trump is unable to win Florida he will not be president. There is almost no chance he would lose in Florida but flip other states he would need to cover that gap. Thus, this should essentially trade at par with Trump “NO” in Tier 1 Markets.
  • Importance: VERY HIGH
    • Definitely top tier in terms of potential value, but Trump can probably win without it and the anti-DC area message of his campaign plus the active efforts of the sitting Democratic Governor to prevent the Republicans from winning the state will make it less likely to flip than in previous elections.
  • Polling
  • Current Government: Unified
  • Price Implication:
    • I am tempted to say that Virginia will be the Democrat’s Florida. It is not quiet as valuable or critical, but if they lose here they will almost certainly have lost substantially in other states. As previously stated, Trump is unlikely to win here. The only thing that would radically alter this field (and simultaneously prove that I am a prophet) would be if Trump brings Jim Webb onto the ticket as his VP. Webb is one of the few VP prospects popular enough in his home state with swing voters to move the ticket. I just don’t see Rick Scott or John Kasich (still lol) providing nearly the same kind of value in the previous two markets.
  • Importance: HIGH
    • The last time New Hampshire picked a losing candidate was in 2004, opting for Kerry over Bush by a margin of 1.37%. The time before that they voted for Ford over Carter. Not a terrible way to rack up a loss all things considered.
  • Polling
  • Current Government: Mixed
  • Price Implication:
    • This one will trade right at the general election market prices in Tier 1. Clinton will only do as well here as she does in general polling, and Trump might outperform based on his early strength here in the primaries. Additional food for thought: the Live Free or Die crowd’s anti-establishment streak produced impressive numbers for Ross Perot (even the second time).
  • Importance: HIGH
    • They picked Gore the first time and Bush the second. Only other recent miss? Dukakis. Go figure, this place is wack.
  • Polling
  • Current Government: Unified
  • Price Implication:
    • If not for that insane primary on the Republican side I would say this should trade at Tier 1 market price. But Iowa is Iowa. It is a state populated by special breed of person that seems to actively resist any effort to be polled, quantified, or qualified. I would respect that but it is super annoying in this context. As such, the most I am willing to say is that Iowa should be a little to the right of national opinion, but Trump could lose here if he seems insufficiently “conservative” which would produce a result reminiscent of Romney. I don’t see a point in going in here considering all the other options with less uncertainty.
  • Importance: HIGH (Maybe)
    • Pennsylvania is probably the biggest flip target for Trump outside of the normal swing states. The demographics are decent for him, his support for American manufacturing should swell his base far more than any recent Republicans, and Clinton’s foot-in-mouth antics has already alienated her from coal country voters.
  • Polling
  • Current Government: Mixed
  • Price Implication:
    • If Trump wins Pennsylvania he will be hard to beat. I suspect he will devote a lot of his time to the state on the attack, which would force Clinton to defend, and this territory is poorly suited to her platform defensively. Expect a tight race here, prices favoring the Democrats, but keep an eye on the polls and watch for a swing: this market may shift faster than the Tier 1 markets if polling starts to swing in Trump’s favor.
  • Importance: MODERATE (Nothing screams moderate like all caps)
    • Moderately important as a swing state, but very interesting as a betting market. While it is highly hispanic, Trump’s straight talking populist brand of Republicanism will do much better than the Neo-Con dribble of the past few contests. This one will probably come down to persuasion and I suspect it will serve as a decent barometer for the national race in general.
  • Polling
  • Current Government: Mixed
  • Price Implication:
    • Probably will trade near the general election market prices in Tier 1 with a small bump favoring the Democrats because of the demographics. That said, if you are convinced Trump will win (looking at you ✓ᵀᴿᵁᴹᴾ crew) this market should be attractive to you. How much of a factor the demographics will play considering the weakness of Clinton, and the alignment of Trump’s persona and brand with Nevada makes this a decent sleeper pick.

Tier 2 Bonus:


  • If you are confident Trump will win, buying unified control of Congress is actually one of the best contracts out there. The downside of this contract is tied to any one of the Presidential election, control of the Senate, or control of the House going to the Democrats. Due to gerrymandering the Republicans would need to work exceptionally hard to lose the House, and since they would never lose the House whilst winning the Senate or the White House, this market is simply “Will Trump win + Will the Republicans hold the Senate”. If Trump wins they will probably hold the Senate. Thus, the value here is high relative to the cost in the Tier 1 and Tier 2 markets if you consider it in terms of cascading outcomes.
  • Free money on “No”. As mentioned above, the Republicans will not lose the House. They have too much of a buffer in terms of seats, and too much of an advantage from gerrymandered districts.

 


Additional Notes:

  • 8/1/2016 – Predictit has opened many new markets since I originally wrote this guide. The strategy considerations for those markets are the same as those that are outlined here with respect to the Tiers and the value cascades.