A single trader lost at least $4 million dollars in two weeks by placing favorable bets for Mitt Romney in the 2012 elections, according to a recent paper. The mystery trader was possibly trying to manipulate the Intrade odds for the candidate single-handedly: his bets accounted for a third of all the bets placed on Romney in the two weeks before election day. Over the entire course of the elections, the trader lost up to $7 million — possibly making that trader the biggest single loser in the Intrade election bets..
According to economists Rajiv Sethi, of Barnard College and Columbia University, and David Rothschild, of Microsoft Research, the mystery trader "could have been attempting to manipulate beliefs about the odds of victory in an attempt to boost fundraising, campaign morale, and turnout." Or, of course, he could have simply thought the odds were good. In any case, the authors explain to the Wall Street Journal, the trader was "not someone who was dumb or stupid," and that the betting pattern didn't match up with irrational betting behavior. Possibly because of that, the paper seems to lean towards the assumption that the trader was attempting to manipulate the markets. The authors also speculate that it's possible the trader was "expressing a price view" on Romney (i.e. he thought Romney was underpriced). But given Intrade's status as one of "the most closely watched indicators of campaign vitality," manipulation seems to make the most sense — especially since, as much as he lost, the cost of manipulating the visible Intrade odds would probably be cheaper than buying a bunch of primetime commercial spots.
The veracity of Intrade was widely debated in the lead-up to the 2012 elections. The site predicted, correctly, an Obama win, yet its ups and downs became fodder for those looking for excuses to discuss campaign momentum. In August of that year, for instance, Nate Silver explained why he didn't trust the Intrade rally following the announcement of Paul Ryan as his running mate — at the time, the "bounce" was below average for previous Vice Presidential nomination announcements. In other words, even Mitt Romney's built-in bounce didn't soar impressively high. One can begin to see why some suspect the big spending mystery trader, assuming he did actually support Romney, was interested in trying to do something to change that impression.
This article is from the archive of our partner The Wire.
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