Obamacare Passes By 6/30/10: Should I Bet Against It?
The Intrade price of Obamacare passing by June 30, 2010 is 36.0. I’m sorely tempted to bet against it’s passage, even after reading the fine print:
This contract will settle (expire) at 100 ($10.00) if a
healthcare reform bill is passed into law before midnight ET on the
date specified in the contract.
will settle (expire) at 0 ($0.00) if if a healthcare reform bill is not
passed into law before midnight ET on the date specified in the
Expiry will be based on the official passage
of a healthcare reform bill into law, as reported by three independent
and reliable media sources.
For purposes of this contract a healthcare reform bill is considered one of the following:
– The Affordable Health Care for America Act (H.R. 3962)
– The Patient Protection and Affordable Care Act (H.R. 3590)
– A bill reconciling the differences between the two bills named above
any of these bills are passed into law the contract will expire at 100.
If none of these three are passed into law the contract will expire at
Anyone want to talk me out of this? Do people think that a few Republicans will get on the bandwagon for “patient protection,” Krugman’s “adverse selection by law” warnings notwithstanding? Or what?
Jan 25 2010 at 1:21am
Go for it, I see no reason for not betting against it if you have the money to spare
Jan 25 2010 at 2:44am
Jan 25 2010 at 2:45am
I’m going to bet against it. A lot can happen in 6 months but then 36% seems rather high given the “political sentiment”. It certainly looks like a better return than an S&P500 ETF over the next 6 months.
Thanks for for pointing this out.
Jan 25 2010 at 3:01am
Remember, you don’t get to put in unlimited money at 36.0. You have to take the current bids on the table, down to your ask price. After that, your remaining order goes unfulfilled.
Thus, the return isn’t quite as high as the 3.6 dollars a share won that seems to be assumed here.
My back of the envelope calculation using the current open order book and excel says that the most you could earn right now betting against (before fees) is $1551.37, and that is risking (and thus requires a stake of) $5768.63. This is of course assuming you take every offer on the table at the offered price with a fill or kill order.
This is still a 27% return, before fees, which is pretty great.
John T. Kennedy
Jan 25 2010 at 5:30am
This is a good bet.
Fighting passage tooth-and-nail is a very attractive course for all republicans and lots of democrats are already showing signs of bailing. I’ll be stunned if it passes (but then, I’m also stunned it’s been derailed).
Jan 25 2010 at 6:31am
Bryan, you wrote: “Expiry will be based on the official passage of a healthcare reform bill into law, as reported by three independent and reliable media sources.”
Where can one possibly find “three independent and reliable media sources?”
Jan 25 2010 at 6:40am
Maybe better still is the Bernanke reappointment contract. It is at 94 right now, doesnt that seem high?
Jan 25 2010 at 9:16am
Bryan: Just make sure you read the following, because Intrade could add a new bill to that list if it so chooses:
1.7 Unforeseen Circumstances
If there is any other change to an event not addressed in the Rules, the exchange, at its sole discretion, will determine the fairest and most appropriate course of action on the basis of the most similar event outlined in the Contract Rules.
Also, here is a brief post on the controversial expiry of the North Korean missile test contract back in 2006:
Jan 25 2010 at 11:21am
I wouldn’t do it just because the contract isn’t specific enough.
“A bill reconciling the differences between the two bills named above” could plausibly mean gutting both and passing something that is almost completely unrelated.
Jan 25 2010 at 12:15pm
This looks like a pretty good deal. I may buy in.
I wouldn’t take it if the language were that some kind of reform bill passed. I wouldn’t be surprised if they still did some health insurance reform token bill.
However, since they define “reform bill” so narrowly as HR3962, HR3950 or a reconciliation of the two, it seems a lot safer.
Jan 25 2010 at 12:16pm
Michael beat me to it. The third option for passing a bill is far to vague to bet against. A reconciled bill has a specific definition, but the content of such a bill is completely unknown- it need not contain provisions of either of the other two bills, and can simply serve as a vehicle for passing anything that can call itself a healthcare bill- and there are good reasons to believe the Democrats may, in the end, fall back to this sort of position to say they passed something while actually the bill will do nothing particularly unpopular.
Is there an option to vote against either of the two passed bills alone? The House bill is dead completely, so I doubt anyone would vote for it, but the Senate bill alone is still a viable option, and may have people willing to take the other side of your bet.
Jan 25 2010 at 8:54pm
Poor bet in my opinion, the odds of passage are probably closer to about 45-50%, and you are getting a poor pay out for near even odds. I’d save my cash and put it on MMA betting myself.
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