Intrade Airstrike.Iran Options
Piece on MSNBC titled “War with Iran unlikely if Gates has any say.” Interesting. This as the US and Iran move into an even more advanced stage of discord, further even than when Rumsfeld was around. The Big News is the abducted UK sailors coming right after a new round of sanctions approved by the Security council.
Several stories about Iran here. Only because the price of crude has broken the $65 mark for the first time since early September. I wanted to talk about intrade.com. I’ll be looking at the prices of futures options there as another indicator. I’ll average the furthest contracts in an attempt to monitor one number. It is March 28th. The March contract expires on the 31st. It is at $2.60 down from about $5 a month ago. Previous to that it had hit a low of $15 in July of last year before doubling to $30 last August and September as tension with Iran hit its highs. It started its slide coincident with that of the price of crude.
Airstrike.Iran.Jun07 : $16, before this week : $10
Airstrike.Iran.Sep07 : $20, before this week : $17
Airstrike.Iran.Dec07 : $30, before this week : $21
Average : $22, up about $6 from a week ago. What does this say? Well a contract pays $100 if it turns out good. So if the price was $20, this would mean an investor is paying $20 for the chance to win $100, or a 5-to-1 payoff. So I guess for even odds we would expect this suggests a 20% chance of conflict in the given time frame. So a week ago the expectation was a 16% chance, now it is 22%.
I personally feel the chances are a lot slimmer. Let’s say by at least 5% in both cases. But I want to play this game or at least practice. So I’ll start a portfolio with 10 contracts apiece of the 3 contracts that expire at the latest dates. So that gives us a value of $660. I’m betting that at some point the value of these contracts will rise before they start to slide. Could I have bought them earlier at a much lower price?
The graphs only go back 7 months, but the contracts should last 9 months to a year, so the complete history is missing. These contracts here seem to have bottomed at $7, $13, and $15 in January. The same month the price of oil bottomed.
Since I don’t think these are good prices and I’m just getting started we’ll say the account started with $5000. $660 is about 13% invested so the remainder will be cash for now. I’ll figure out the theoretical transaction fees later.
Several stories about Iran here. Only because the price of crude has broken the $65 mark for the first time since early September. I wanted to talk about intrade.com. I’ll be looking at the prices of futures options there as another indicator. I’ll average the furthest contracts in an attempt to monitor one number. It is March 28th. The March contract expires on the 31st. It is at $2.60 down from about $5 a month ago. Previous to that it had hit a low of $15 in July of last year before doubling to $30 last August and September as tension with Iran hit its highs. It started its slide coincident with that of the price of crude.
Airstrike.Iran.Jun07 : $16, before this week : $10
Airstrike.Iran.Sep07 : $20, before this week : $17
Airstrike.Iran.Dec07 : $30, before this week : $21
Average : $22, up about $6 from a week ago. What does this say? Well a contract pays $100 if it turns out good. So if the price was $20, this would mean an investor is paying $20 for the chance to win $100, or a 5-to-1 payoff. So I guess for even odds we would expect this suggests a 20% chance of conflict in the given time frame. So a week ago the expectation was a 16% chance, now it is 22%.
I personally feel the chances are a lot slimmer. Let’s say by at least 5% in both cases. But I want to play this game or at least practice. So I’ll start a portfolio with 10 contracts apiece of the 3 contracts that expire at the latest dates. So that gives us a value of $660. I’m betting that at some point the value of these contracts will rise before they start to slide. Could I have bought them earlier at a much lower price?
The graphs only go back 7 months, but the contracts should last 9 months to a year, so the complete history is missing. These contracts here seem to have bottomed at $7, $13, and $15 in January. The same month the price of oil bottomed.
Since I don’t think these are good prices and I’m just getting started we’ll say the account started with $5000. $660 is about 13% invested so the remainder will be cash for now. I’ll figure out the theoretical transaction fees later.
expires Mar2007
expires Dec2007
