contest-logoNovember 2013 Recap

Our first monthly Political Futures Trading Contest is officially in the books.  And our first batch of winners reaped a tidy windfall just in time to defray their holiday shopping.

Having kicked off the month with 10 listed contracts, and expanding to 15 for the final week, we saw total monthly volume of 127,578 contracts.  The notional value of the monthly turnover was nearly $13 million, with roughly $2.5 million in open interest at the end of the month.

Most actively traded markets:
1.  Who will be the Republican Presidential nominee in 2016?

2.  Will Obamacare’s individual mandate be delayed?
3.  Who will be the Democratic Presidential nominee in 2016?
4.  Will the medical device tax be repealed in 2013?
5.  Will the Fed taper by March 2014?

The top 10 traders all posted double-digit gains for the month.  But the top three (who forever maintain bragging rights for capturing our inaugural cash awards) put up truly notable numbers.  Below, they share some of their trading strategies and what they’re keeping an eye on in the coming month.

1st place – $5,000

Tom from Georgia (“jst_becuz”): 152.6% gain

Expand to read about Tom's strategy.

What is your occupation?
Financial Planner / Advisor

What is your strategy for this contest?
I try to establish a “fair value” for each contract based on my estimate of the probability of the event. Whether I want the event to occur or not has no relevance (I try to keep emotion out of the game). I’m willing to buy or sell that contract based on how the price compares to that fair value estimate. It also helps to find real-money exchanges where similar contracts are trading as an anchor for what fair value is.

What was your best and/or worst trade during your winning month?
Best trade wasn’t a “trade” per se. It was joining the contest early and taking advantage of the volatility in all of the contracts in the first few days of trading. Worst trade was initially getting long the Medical Device Tax contract at low prices as a long-shot bet. At first glance, I didn’t realize it expired at the end of 2013 and that didn’t give much time for a long-shot to develop so I mispriced fair value.

What should political futures traders be watching for in December?
I don’t expect a ton of volatility in the long-term contracts, but there are quite a few that are expiring soon. There’s a Fed meeting in December that can provide clues as to whether there will be a taper by March (could even be in December). The Medical Device Tax contract expires by end of month, so time value will erode there quickly unless there’s a hint of legislative action. Political jockeying will bounce the probability of a government shutdown early in 2014 as well. Washington is a place of great uncertainty right now and that should translate into volatility in short-term contracts.

2nd place – $1,000

Scott from New York (“supak”): 73.4% gain

Expand to read about Scott's strategy.

What is your occupation?
I’m a former Los Angeles stage technician who worked 20 years in theater and television. I was injured and retired five years ago, and now, along with my wife, own and operate Supak.com, LLC, a web publishing, design, and search engine marketing company.

What is your strategy for this contest?
I read a lot, mostly political and scientific blogs. I read the news, have various alerts based on the subjects of the contracts, and try to stay on top of events as they unfold as much as possible. I determine a price I think is “correct” and then play both sides, shorting if too high, buying if too low compared to my price.

What was your best and/or worst trade during your winning month?
Bought too many shares of Democrats to Keep the Senate at too high a price, thinking it was a little savings account. Not enough volume yet to unload at the right price, so I’m stuck with those for a while.

What should political futures traders be watching for in December?
Signs of another government shutdown, the performance of Healthcare.gov which is crucial to key Senators who might vote to delay the individual mandate, and any more signs that the Fed may begin their taper, and when.

3rd place – $250

Jamison from New York (“jdavies25″): 44.4% gain

Expand to read about Jamison's strategy.

What is your occupation?
I am an attorney.

What is your strategy for this contest?
I tend to think structurally, in terms of base rates, rather than doing a lot of research on individual topics.  I was also lucky to sign up early, before there was as much liquidity as there is now, and I was able to make some good trades.

What was your best and/or worst trade during your winning month?
Best: I traded around in the individual mandate question a lot and made a good amount of short swing profits.  The IFP was very volatile.  Worse was Fed taper, I mis-guessed what the FOMC minutes would say.

What should political futures traders be watching for in December?
The next fed meeting in mid-December and the progress of the health care sites and any rumblings about delaying the mandate.  Shutdown is also a possibility, if the price gets low enough.