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Why are punters unconvinced by the “Brown Bounce”?

December 19th, 2008

PB Balance of Money Index: CON majority 20 seats

With possibly a YouGov and a ComRes survey still outstanding before we can draw the curtain on the 2008 polling season the apparent set-backs for the Tories are leaving spread betting punters relatively unmoved.

The above table shows the overnight levels from which the PB Balance of Money Index is worked out – and as can be seen the mid-point spread on the Tories is at 335 seats – or ten more than is required for an majority. The betting spreads themselves are adjusted by the two bookmakers in response to the money that’s going on buying or selling the seats of the main parties.

    So those who are risking in many case quite a lot of money remain to be convinced that the position for Labour is as rosy as the polls, and more particularly the current media narrative, seems to be suggesting. If Gord did gamble on a February election then those who are backing up their forecasts with hard cash think Cameron would end up with a majority

And before you say – “aren’t the gamblers all Tories anyway” – just check out this post published here just after the polls opened on May 5th 2005 – general election day. Then the mid-point for Tory seats was 185 – or thirteen fewer than the actual number of seats won. Last time it was Labour backers who caught a cold.

The market position changes all the time and I attempt to supplement my pension by buying both Labour and Tories seats at different times according to what I think will happen in the polls and to spread prices. Risky? Yes but I’ve done pretty well in 2008.

Spread-betting for novices: My current view is that the market is over-extended to the Tories and earlier in the month I SOLD the Cameron’s party at the 342 level at £30 a seat. So if Cameron’s party ends up with 300 I make 342 (the contract amount) minus 300 (the actual) multiplied by the stake level. This equals £1260

If, however, there is a Tory landslide and they end up with 375 seats I lose the difference between my contract level and the actual. In this case 33 multiplied by the stake level – £990.

The principle here is that the more you are right the more you win and the more you are wrong the more you lose. But what makes this really interesting is that I don’t have to wait until election day. I can close my bets down at the prevailing price at any time and the transaction is ended.

Many punters are, like me, betting not on what they think the election result will be but on how they think others punters will see the betting in the short-term.

Mike Smithson






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