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What shall be the average trading price of Donald Trump YES shares in the RNOM16 market for July 3-July 22?

New market proposal: "[Rounded to the nearest penny, w]hat shall be the [weighted] average trading price of Donald Trump YES shares in the RNOM16 market for [the 20-day period] July 3 through July 22?" Purpose: Many "informed" PredictIt traders may be "maxed out" on Trump YES and arguably RNOM16 may demonstrate inefficiencies as a result. This new market allows traders to predict the extent of those inefficiencies, and hedge these inefficiencies. Because the period ends a few days before the convention, and because it is a 20-day period, this "weighted average price" will not easily be manipulated by traders. This would be PredictIt's first "compound derivative" market. Suggested Brackets: B1: 95-99; B2: 90-94; B3: 85-89; B4: 80-84; B5: below 80 Methodology: For each trade during the period, multiply the price by the number of shares traded at the price; then divide by the total number of shares, and round to the nearest penny, adopting the convention that 0.5 shall round up.

An alternative possible bracketing: B1: 98-99; B2: 95-97; B3: 90-94; B4: 80-89; B5: Below 80. This is attractive because of the more "geometric" nature of the brackets.

I appreciate your point, but this seems to me like a bit of a slippery slope.  As soon as a derivative market based on RNOM16 is created, other traders will want this for USPREZ16 and perhaps for other markets, as well.  Your argument that the underlying contract would be difficult to manipulate might be more tenuous in other cases.  If a compound derivative market is created, I would suggest careful consideration of the precedent that its rules would set for future derivative markets.


It seems to me that what you're really asking for is leverage.  I agree, of course, that the lack of leverage dampens interest in slow-moving, long-term markets. Derivative markets (or, worse, margin buying) would complicate oversight/regulation considerably, though, and even unfounded allegations of manipulation might have a negative effect that outweighs the potential benefit.


On the off chance that you were truly proposing this as an academic experiment on the effect of capital requirements on market efficiency, I would be more supportive if it were implemented in a way that cleanly tested that. At leas then the scandal might be spun into the (questionable) story line that PI is all an intellectual experiment.


Thanks for the comment! I also appreciate the feedback I got on the RNOM16 discussion board. The concept clearly does not enjoy trader support, at least at this time and for this particular underlying contract. I proposed this contract because I believed the Trump RNOM16 contract had a high likelihood of diverging substantially from its objective expected value. This is because, though Trump is the presumptive nominee and has been for some time, there are significant and powerful interests interested in creating the impression, if not the result, that Trump can and will fail to achieve nomination. Using the 2012 Intrade trading of the Romney contract as an exemplar, there might be one or more traders who would aggressively buy Trump NO to sow uncertainty about Trump's nomination. See the paper by Rothschild and Sethi that I cited on the RNOM16 discussion board. However this is turning into quite an annus mirabilis, with Hillary having developed a cloud all her own. Thus I see the "slippery slope" argument. And there certainly is regulatory risk as well, because this is arguably a bet not so much on a political outcome as on the value of a contract. Thanks to emcee73 and all who took some time to think this through!
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