Beware the Nevada Market

Since I’ve committed myself to pricing out each state this primary season, I have about six days left to figure out what I think is going to happen in Nevada.  And yet I do not know what is going to happen in Nevada.  And I particularly do not think the market fully understands itself either.  Here are some things that make me uneasy:

No polls

We’ve had, like, one.  I don’t know how many more we’ll get or how high-quality they’ll be.  The state is apparently quite expensive to poll, and with South Carolina and Super Tuesday around the corner, some pollsters may be keeping their powder dry.  The overall situation leaves the political bettor trying to impute Nevada trends from national polls or other random crappy state polls and it just feels thin.

There’s a debate

Even if we had polls, there’s a debate three days ahead of time.  A ton of New Hampshire voters decided late, and broke for Amy and Pete after the debate.  I’m not sure there’s a similar dynamic about to play out in Nevada, but I’m not really sure there won’t be either.  And I am really skeptical we’ll get a last minute poll measuring any such debate movement (as we did for New Hampshire).

Bernie v Joe?

I was sold on a Bernie v Joe fight in Iowa and didn’t really get one.  Is this the time?  Or is Pete going to out-organize and out-consolidate the rural white vote, resulting in Bernie coasting due to a moderate split?  Does Bernie win the Hispanic vote and, if so, by how much?  Does Warren play spoiler at all in any precincts, or does she miss threshold (to Bernie’s benefit)?

It’s a caucus

They’re using a Google Forms system this time!  Which should be better, except that maybe it won’t be because some people don’t know how to use an iPad.  That said,  I’m skeptical we get another true debacle but obviously the possibility cannot be foreclosed on.  Remember precinct leaders, for tiebreaks we don’t flip coins, we draw cards!

So Bernie’s worth 80c then?

I cannot imagine paying 80c for anyone to win six days out given the uncertainty at play here.  That said, someone has to do it, and I can’t really argue that Bernie isn’t the favorite.  Although, when you really think about it, what is winning?  How do we even define a win?  Who won Iowa again?  Which leads me to my final point:

Remember the first rule of PredictIt

Read the rules, kids.

New Hampshire and Betting Strategies

Live free or die, traders.

It’s probably Bernie

Unlike Iowa, where multiple candidates all had plausible paths to victory, in New Hampshire things seem relatively straightforward.  Bernie Sanders will win.  Unless there’s a polling error underestimating the turnout of moderate voters, who coalesce behind Pete to put him over the top, or may Amy Klobuchar once in a blue moon.  I don’t see tremendous herding in the polls (maybe some), and I don’t really respect a 5-point polling error as much as the models and markets seem to (but that may just be me).  So here are my prices alongside 538’s and PI’s:

NH prices.png
538/PI prices as of 2/10 at 9:00am on 2/10.  For 538 I’m using probability of winning the highest share of the vote (unlike highest number of pledged delegates which I used for Iowa) in order to match what the PI market is measuring.

You can see above that I’ve gone ahead and resolved the Iowa market for Pete for my scorekeeping (which I can fix), because it seems likely that barring a full recount (as of this writing, unclear this is going to happen), Pete will take the edge in both SDE (what the PI market resolves on) and pledged delegates (what 538 was forecasting).  So who’s doing the best so far?

538 > jipkin > PI (so far*)

(*assuming Pete holds the pledged delegate/SDE lead in Iowa.)

Yep, shorting Bernie ended up (pending) being the correct play!

post IA jipkin538PI kellys and briers.png

Both 538 and I agreed that Bernie was overpriced, but I was a bit more bullish.  So on average, 538’s Brier score is a little bit lower than mine.  Because Briers are squared error, they tend to compress differences between forecasts.  You can see the difference in performance a bit more clearly by looking at how much money you’d have made playing a buy-and-hold strategy based on applying the Kelly criterion using the odds provided by either me or 538.  Using this strategy, you would have bet YES on Joe, Pete, and Liz and NO on Bernie (no matter which forecast you chose), and net come out ahead either $917.17 or $723.56.  (And again, the Iowa market is not done yet – this could all flip if Bernie requests and wins a recount).

Other Betting Strategies…

Of course, playing a pure Kelly-based buy-and-hold strategy on 538’s forecast or my own isn’t the only way to go.  For fun, I’ve added a bunch of other betting strategies to compare (all assume you have $850 to spend per contract):

Betting strategy overview post iowa.png

Bet the favorite – Just buy whatever’s over 50c on the theory that PI’s prices are always too cautious.  If Bernie is 67c, you pay 67c.  If Joe is 25c, you pay 75c for some NO.  Did not, uh, work out too well in Iowa.

“Safe Money” – What happens if you only bet on things the market says are probably not going to happen, i.e. priced at 90c or more?  You end up losing a lot of money when Pete wins Iowa is what happens.

BLIND DEGEN – What happens if you max literally anything under 10c regardless of its true value?  Congrats on the $6k my friend.

“VALUE” DEGEN – What if you’re into degenerate bets, but temper them by only placing them on sub-10c contracts which 538 says are worth at least 6c more?  Easy $7.7k, shipped.

“The Market is Wrong” – Ah, you’re a contrarian I see.  Well fine, go ahead and literally take the opposite side of the market in every contract.  If Bernie is 67c, we pay 33c for NO.  If Joe is 25c, we buy Joe at 25c.  And if Pete is 9c, we buy Pete at 9c and hey would you look at that there’s $6.7k.

Inverse the Live Ones – A sophisticated contrarian!  For the trader who’s too wise to bet against everything, because they don’t want to lose money betting on trash.  This trader only bets against any contract that’s between 10c and 90c.  And does ok here, losing a max on Joe but winning more than that on Bernie NO.

jipkin’s Actual Profit – Finally, there’s the money I actually made playing the way I play.  Which, honestly, happens to be my second-best PI market of all time on account of all the craziness that’s happened (currently up $4.3k).  I’m curious to see how well I do versus these other strategies throughout the entire primary season!

What I did right and wrong in IA

Even though I made quite a bit of money in the Iowa market ($3k over the week), I’m more or less feeling “meh” about it.  There were numerous spots where I made subpar decisions, and I think realistically I should be up around $12k right now if I’d been sharper.  Here’s a non-exhaustive list of what I think I did relatively poorly:

  • I was correct about when the site would lag and trading would become unbearably slow, and playing lightly throughout the day on Monday was correct.  However, this meant I was basically sitting doing nothing all night when the results never came…
  • I should have bet against Joe Biden hard on the first satellite results. Even though at the time I knew they didn’t mean that much, I also knew they would move the markets, which they did.
  • I didn’t have the fastest results site for the initial few results we did have, and thus missed the beginnings of the Pete boom.  There was still time to hop aboard and I should have done so at least gingerly.
  • Later in the night, when it was coming down to competing data from Pete and Bernie, it was clear that Pete probably had the edge in SDE and while I did bet his numbers, I should have bet harder (the site performance didn’t help).
  • I should have gone into the first results update holding more than like 80 shares of Pete.  Probably should have held 2k shares total at least… it was clearly mispriced at that point (70/30 for Bernie) but unfortunately my loss aversion was too strong to make the obvious bet.  I reasoned that with how much volume was in the order book I’d be able to scoop shares, so there was little point in scooping.  However, this did not account for site performance basically preventing that play and for the fact that the IDP site didn’t update in my region for like 10 minutes after where it updated in other regions.
  • On the false IDP update where they gave delegates to Patrick and Steyer instead of Bernie and Warren, I should have noticed this long before anyone on twitter did.  I made money on this flip, but it should have been insanely more (could have been nearly doubled at 6-7c instead of 2k 8c shares).
  • I did catch the Bernie 30->75c flip, but should have bought for the bounce back to 60c and then back up to 75c.  Was not trading in the zone here!
  • Later in the week, I should have been flipping a bit more at a time and setting more aggressive price targets.

If you’d like to review my trades, you can find them here!  Here’s what the realized profit over time looks like:

IA cumulative profit over time.png

The Usual Disclaimer

Please do your own research before trading.  I obviously have positions in the markets I discuss here and you should therefore consider everything I write to be fundamentally biased.  None of what I write should be considered specific financial advice.

Jumbled Thoughts on a Jumbled Mess

At some point on Thursday night, February 6th, I was actually so exhausted from trading all week that for the first time in my life I simply did not want to trade anymore.  It was that kind of a week.  My brain is still an addled mess, as, it seems, the race for the Democratic nomination is as well.  I’ll give my thoughts on NH specifically tomorrow, but for now here is what I can make of the bigger picture:

(Note of caution: literally every take I wrote in this post from November turned out to be wrong, so reader beware).

FEEL THE BERN

PI state of the race.png
PredictIt’s handy map of market prices.

Say it with me folks!  President.  Bernie.  Sanders.

Okay, I don’t really buy this map.  I mean, he’s not sweeping the entire south, right?  (And we’ll get to Bloomberg in a bit).  But here we are.

The Bernie Domino Theory was that Bernie would win IA, NH, and NV, putting so much pressure on the others that he might even win SC or (at a minimum) sweep the big prizes on Super Tuesday.  I never put much stock in it, but I missed the scenario where Bernie winning the first three also coincided with Joe Biden failing miserably, and that is seeming more and more like the world in which we live.  If it’s a weak Joe, Bloomberg, Pete, and Klobuchar sticking around through Super Tuesday and mucking up the moderate lane, I don’t see how Bernie doesn’t cruise this thing (individual states will be another matter).

Joe Needs Nevada

At least he needs second place there.  That said, I do wonder how much fun would be had in the markets if he goes 4th -> 4th -> 4th -> and then 1st in South Carolina.  But if he doesn’t show any sign of strength by Super Tuesday, he will be gone shortly thereafter.  Speaking of which,

Where will Joe’s support among black Americans migrate if he collapses?

Young black voters have shown plenty willingness to support Bernie or Liz, but the older, more moderate core of black voters have simply not abandoned Joe at all.  The biggest question hanging over the race right now is whether or not this support starts to migrate elsewhere, and to whom if so.  The betting markets right now seem to thing Mayor Stop-n-Frisk will get his fair chunk (and I don’t entirely disagree, he did win substantial black support in his mayoral runs, and these voters may argue to themselves that he’s the best shot at beating Trump).  But I wouldn’t be surprised if a meaningful slice didn’t go to Bernie as well.

Liz running out of room

What would happen if Bernie and Pete tied for first in Iowa while Liz and Joe were a distant third and fourth?  Here’s what I wrote in December:

If A/B is Bernie/Pete and C/D is Joe/Liz – wew.  Liz is very close to done for and Joe is in trouble but not out of it – turbulent waters for him in Southern state markets.  Bernie would see 40c in the overall market in this world.

And yeah.  She’s just boxed in here.  Bernie is too strong for her to eat into his supporters.  Pete is too strong for the moderate educated whites to give her enough support in NH (she’s also losing some of that “wine track” support to Klobuchar now).  She may come out of NH and IA with “respectable thirds” which don’t matter for much.  Maybe she even organizes to another third in NV.  But at some point the money is going to dry up and you have to ask whether it’s worth the embarrassment of losing your home state on Super Tuesday, or whether you simply drop and endorse Bernie to put him over the top.

For fun, here’s what I wrote about Liz way back in December of 2018:

Her path – Put out lots of policy proposals thinking they’ll matter and drop out on March 11.

Moonberg

Ok.  I mean…. ok.  That’s how I feel about this.  Sure.  Why not.  Obviously, no one knows if you can actually just buy the nomination but he’s certainly giving it a go.  In addition to spamming a bajiillion ads, he’s also been very strategically accumulating superdelegate endorsements from House members whose campaigns he boosted in 2018.  His strategy is basically correct – he’s playing the game as he should given who he is and his resources.

But like, really?  The Democrats just pick the billionaire?  It’s hard for me to see him as doing anything other than winning like a handful of delegates on Super Tuesday, “suspending” his campaign so he doesn’t have to reveal his financials, then play kingmaker or hope to win a contested convention.

Pete

Is not dead, apparently:

He hasn’t and will not catch on with black voters.  He’s fading nationally (about to be surpassed by Bloomberg).  He retains some equity in IA, but not enough.  To me it feels like the tide is turning against the former mayor of South Bend, Indiana.  That said, he and Joe have the run of Iowa with two weeks to go due to the impeachment trial.  Maybe he pulls something out, but I’ve started to convince myself that the undecideds simply aren’t going to break his way.  I think he drops after NH, and now that I’ve committed to that publicly, he’ll probably go on to win the nomination or something.

Welp, I guess he’s going to go on to win the nomination now!  (Seriously though, what on earth is his path beyond hoping for a contested convention?  Would be quite hilarious if he wins NH, I suppose).

Game Time

Welp, it’s today!

Last week, I promised one final update on 538 vs PI, along with my own prices.  Here they are:

Iowa Final Prices.png
All numbers based on odds to win the most delegates, per PI rules.  “Final” means as of 11:59 on 2/2.  The PI lines will continue to move throughout the day – current up to 71c for Bernie! (Will share the full spreadsheet later and make it prettier over time)

As you can see, I come down closer to 538 than PI.  I think PI is simply showing far too little respect for uncertainty in both polling and the inherently wonky nature of the caucuses themselves.  [That said, you’ll note I’ve conveniently priced myself between the two (just how it worked out, I promise) so I’m guaranteed to beat either 538 or PI.]

Betting Strategies

In addition to accuracy measures, one of the things I’ll be doing with these predictions is comparing how various betting strategies using them work out.  More on this in the aftermath, but basically I’ll be comparing using my numbers or 538’s to bet on PI, simply betting the favorite, always betting the underdog, going full degenerate, etc.  These will all be “buy and hold” strategies based on getting in at the last moment, and I’ll compare their results to my own actual play (decidedly NOT buy-and-hold).

My plan

Speaking of which, what is my betting strategy?  Well, as you’ve learned or will learn reading this blog, I’m relatively bad at predicting the future.  But I’m relatively good at reacting to the present.  So my strategy revolves around watching the results and making moves as I feel appropriate.  Some elections flip-flop around (the fun ones), some break hard early and never look back, etc.  Here’s what I’ll be looking for:

Who is winning in early rural county precincts?  This is where a Pete/Amy surprise would show up first – and a Joe loss.

Is Bernie winning the urban counties as expected, or is Warren close or leading?  This is where a potential Warren upset would start to brew.

Who is winning the satellite caucuses?  If it’s Joe by a mile and he’s in a tight race with Bernie for the precinct caucuses… then it’s Joe’s night.

How much is Bernie crushing the first alignment?  This is the “popular vote” and I think a valuable source of information on how much enthusiasm Bernie can really inspire from his supporters this cycle.

When will PredictIt crash? Be forewarned – the instant a big flip starts to happen (let’s say it looks like Joe is going to win), everyone will try to trade all at once not only in the Iowa market, but in 50-odd markets site-wide.  The website has never survived this in the past, and therefore I have to be pessimistic we’re fully operational throughout the duration tonight.  This is also why I plan to be holding virtually no sizable positions from 8:00pm eastern on in any of the live contracts.

Will there be money in the MoV market?  This is usually where the big money on election nights comes from.  There are some other potential sources tonight too – if Joe wins IA for instance, Bloomberg will die site-wide (and Bloomberg moons if Joe is a weak fourth).

Good luck!

One Week

One week til we finally get some results!

The decisions traders make in betting markets are largely based on the stories they tell themselves about what could happen.  If one outcome sounds increasingly plausible, it will increase in value, even in the absence of hard data.  And betting markets are amazing at linear extrapolation.  Something going up?  It’ll keep going up!  (See: Warren 54c in September; Bloomberg 15c now).  So with that in mind, let’s write out the best stories one can tell oneself about how each candidate could win Iowa:

Bernie Sanders

Iowa_538_PI_Sanders.png

Last week, I wrote that Bernie was overpriced.  He proved me wrong by then leading in several subsequent polls (most importantly, the well-respected NYT/Siena poll that for some godforsaken reason comes out at 5am on Saturdays).  What’s his case?

Bernie wins Iowa when Liz continues to fall and caucusgoers attending precincts where she isn’t viable and can’t become viable mainly go to him.  He benefits from youth turnout exceeding older turnout, as DMR and NYT/Siena suggest.  And he benefits from Klobuchar and Pete having enough strength to exceed the viability threshold in several precincts, depriving Biden of necessary delegates.  He has the momentum and the organization to get at least 20% of the delegates on a bad caucus night, and he only needs a little bit more to take the lead outright.

Joe Biden

Iowa_538_PI_Biden.png

Joe Biden wins Iowa because polls like Suffolk are right, because older voters who support him but didn’t say they would caucus end up turning out anyway, because Liz stays strong enough to keep Bernie from running away with all her delegates, and because Klobuchar doesn’t rise high enough to truly threaten him.  His edge in a close finish comes from the overlooked satellite caucuses, where the snowbird locations will probably favor him.

Pete Buttigieg

Iowa_538_PI_Pete.png

Pete Buttigieg doesn’t win Iowa.  Okay okay.  He wins because Biden fades late, because Klobuchar rises enough to steal some Biden support and make it a true 5-way split, and because Liz is strong enough to block Bernie from getting all the delegates in many precincts.  He also wouldn’t mind getting a few of the “not-Bernie” Liz supporters in precincts where she doesn’t reach viability and where Bernie isn’t as strong (suburban Clinton precincts, perhaps).

Elizabeth Warren

Iowa_538_PI_Warren.png

Warren wins Iowa because she has a great ground game, the NYT and DMR endorsements matter (lol) and because Bernie softens in the final week of polling.  It’s a tough row to hoe, and realistically she’s just hoping for a strong top three.  Even then, it’s not going to be a straightforward path.

Amy Klobuchar

I don’t know, really?  Maybe in a crazy 5-way tie.  She did get 13% in Emerson, I guess.

One more note

I’ll be keeping track of how accurate models and markets are this primary season, and I’m going to do a silly wrinkle this time and throw in my own predictions to see how well I fare (I bet I lose).  I’ll post my final numbers and the markets’ next Monday, on caucus day, after the final batch of polling is out.  Things I’ll be tracking: Brier score (accuracy), calibration, betting strategy (bet-the-favorite, Kelly based on 538, Kelly on me, other models), and how much I actually make trading the way I trade these things to see how it all stacks up.

 

Two weeks to showtime

Two weeks to Iowa!  I have no clue what’s going to happen!  Woo!

A year ago, I had thought that by now polling would have sussed out a clear top-two or something.  Nope.  Yes, nationally, Joe continues to command the most support – but there’s a difference when you’re winning with 20-30% support and when you’re winning with 40+.  In Iowa, which is what matters far more, polling is both sparse, often low-quality, and not providing a clear picture.  Uncertainty reigns.

With those things in mind, let’s go through a pot-pourri of Things I’m Wondering About:

Is Bernie Really Worth Near 50c in Iowa?

I mean…. nah.  Right?  What evidence is there to support the claim that he wins 50% of the time?  A win in the DMR poll, but with only 20% support, extrapolated forward?  The case is too thin for me.  And yet!  The pricing persists.  Clearly, he can win.  Clearly, to me, he’s not worth 48c or wherever he is currently.  I price him near 30c, which is about the most I’d pay for anyone there.  We will see what polling says over the next two weeks – the last DMR poll will be the last big pre-caucus money-maker there (I expect this the Saturday before).

Klobucharge?

When I wrote the whole blog post gaming out Iowa scenarios, I rather conspicuously ignored the possibility that Klobuchar would come back and insert herself into the top echelon, or turn it into a 5-way scrum or some such bewildering result.  And she’s still yet to really catch on.  But there have been a few (lower-quality) polls here and there showing her starting to break through into double digits in early states.  I don’t know if there’s enough time left for her, and she herself will be tied to the impeachment trial, unable to capitalize on any movement (and lacks the surrogates of Warren or Bernie to campaign in her stead).  But let’s just say I’m holding off on betting against her just yet – if I miss out on a few pennies of NO profit for my caution, then so be it.

Pete Dead?

He hasn’t and will not catch on with black voters.  He’s fading nationally (about to be surpassed by Bloomberg).  He retains some equity in IA, but not enough.  To me it feels like the tide is turning against the former mayor of South Bend, Indiana.  That said, he and Joe have the run of Iowa with two weeks to go due to the impeachment trial.  Maybe he pulls something out, but I’ve started to convince myself that the undecideds simply aren’t going to break his way.  I think he drops after NH, and now that I’ve committed to that publicly, he’ll probably go on to win the nomination or something.

What fraction of state delegate equivalents will come from satellite caucuses?

I am literally writing this to force myself to do the math on this later.  I have the satellite caucuses generally favoring Joe, since so many are in snowbird states and Joe was always doing better in the virtual caucus crosstab of early polling.

Do I really have to worry about El Bloombito?

Like, really?  I’m deeply skeptical he wins anything at all.  Or ever shows up for a debate (which he really ought to do after South Carolina anyway).  But the market does not know how to price someone doing what he’s doing because literally no one has ever done what he’s doing before.  He’s bought himself into the high single-digits.  Can you buy double-digit support?  Can you buy a polling lead?  Can you buy state wins?

Gaming out Iowa

What’s Ahead…

December, 2019: a debate is (or maybe isn’t?) about to happen.

January, 2020: an impeachment trial will sideline the senators for at least two weeks (maybe more?).  Another debate.

February 3, 2020: Iowa.

…And What’s Important

Iowa.

The rest?  I’m skeptical the debate has a big impact, I’m skeptical the impeachment trial will matter.  I’m sure the next month and a half will see momentum shifts and polling swings, but it’s impossible to know exactly what they’ll be and what will instigate them.  Remarkably, for December before an election year, there’s really no clear front-runner for the nomination.  The market is nearly completely up in the air.

In the last post, I tried to suss out who I thought was under- or overvalued.  I said Joe was too cheap (and he went up since then), that Liz was too cheap (and she went down), that Bernie was about right (he’s gone up), and that Pete was a bit overpriced (he went up, but then down).  [And despite this decidedly poor record, I still feel much as I did then, though I respect the case for Bernie more now.  The great thing about PredictIt, of course, is that you can be wrong but as long as you recognize things quickly enough you can still come out okay, and I’ve tacked on another $300 or so since the last post, taking me to $6.2k in that market.]

So here let’s skip trying to figure out who’s going to win, and instead try to flesh out a decision-tree for possible results coming out of the Iowa caucuses.

How Iowa Matters

Iowa is about momentum, Iowa is about surpassing expectations and Iowa is about failing to meet expectations.  Iowa is about the media narrative.  The delegates won from Iowa are unlikely to matter in the end and are not a substantial number in any event.  The whole game here is to do better than expected and, hopefully, to be “in the conversation” and “have a ticket” and whatever other shit metaphors people use to verbally segregate the perceived winners from losers.  Now, it’s of course not entirely clear that media bumps will produce voter bumps – Obama got a big bump out of Iowa heading into NH but still ended up losing the Granite state.  But, and I can say this quite confidently, the markets are going to track media sentiment and this is where the money will be, at least initially.

One Iowa Wrinkle This Year

The Iowa caucuses are weird, and for the serious or semi-serious bettor out there, I do suggest having a read through of the rules governing them.  Briefly: there are several rounds of declaring support for various candidates.  Of these, the first and the last are the most important.  The first is where everyone huddles up in a group of other people who want to caucus for that candidate.  The last is where everyone ends up at the end of the night once initial groups with fewer than 15% of caucusgoers (note this depends on the number of delegates selected by a precinct to the county convention… it’s a bit complicated) are redistributed to other candidates.

In the past, we only knew the final segregation of caucus-goers, and the media went, then, with that as the story.  I suspect, but do not fully know, that this will be the case this time as well.  However, it’s worth noting this year that Iowa will be reporting the results of the very first division into caucus groups.  This is akin to basically the “first choice” vote that you would see in a primary state (except for the part that the voters are only those who are motivated to caucus in the first place).  It’s quite conceivable, for instance, that Yang gets 6% of the vote in the first choice but 0% of the delegates in the final alignment.  Bernie might be at 20% in the first round but end up with 30% of the delegates.  So what numbers the media latches onto will matter.

But let’s assume the media does what they’ve done in the past and focuses primarily on the final expression of preference at the caucuses and run through some scenarios.

A Clear Winner, A Distant Pack

Candidate A – 45%

Candidate B, C, D – 14-18%

Betting action: 

(Note that, of course, the prices you get for various things will depend on the extent to which any of these scenarios is expected or comes as a surprise.  It’s too much to further branch the decision tree in that regard, but it’s something to bear in mind as we draw nearer caucus day.)

If Candidate A is Joe – max Joe practically everywhere, max NO on everyone else everywhere.  It’s not completely over, Bernie could still beat him in NH and maybe NV in this scenario, but it’s basically over.  Neither Pete nor Liz will be viable on Super Tuesday, although they may hang on til then anyway to save face.  VT may be a fun state to watch, as some might panic-dump their Bernies there.  Joe might hit 20-30c.

If Candidate A is Bernie – max Bernie everywhere, but aim to flip him in the Southern states.  If you can get Joe under 50c NO in the southern states, take it.   The extent of the swing in Southern states will depend on Joe’s rank – if he’s fourth he’s going to see prices crash into the 20s at least temporarily.  Liz is dead in this scenario, and should be max bet against everywhere, including MA where if you’re fast enough (you probably won’t be) or get in ahead of time you’ll get the best price.

If Candidate A is Liz – max Liz practically everywhere.  Can this happen anymore?  I feel like she has another surge in her (I still have a lot of faith in her campaign) but perhaps she’s simply already on the way out.  See above for what to do in Southern States, and absolutely destroy Pete shares across the board, including Indiana.  He’s done here.

If Candidate A is Pete – whoa.  Obviously you’re maxing Pete everywhere and saying goodbye to Elizabeth Warren.  Joe and Bernie will both hang on here and we may well have a three-way contest heading into Super Tuesday.

A Clear Winner, A Striking-Distance Second, Distant Third and Fourth

Candidate A – 40%

Candidate B – 30%

Candidates C,D – 9-15%

Betting action:

If Candidate A is Joe – max Joe in all Southern States.  Flip him in NH and NV (the extent to which depends on who Candidate B is).  Sell him at 50-60c in California, and then use your best judgment about whether to short there.  If candidate B is Bernie, max NO on Liz and Pete everywhere.  If B is Liz, max NO on Pete and Bernie practically everywhere.  If B is Pete, Liz is probably dead, but I’m not so certain Bernie couldn’t come back.  Honestly, Joe + Pete getting 70% of the delegates in Iowa seems rather implausible.

If Candidate A is Bernie – max Bernie in NH, obviously, and take him out for a spin in NV and SC (but if B is Joe, don’t hold those SCs).  B here is either Pete or Joe – if it’s Pete honestly I’d probably just max Bernie everywhere and call it.  If it’s Joe, then Pete is done and Liz has the barest of chances remaining.  Regardless, you’re max betting against C and D here almost no matter what.

If Candidate A is Liz – this is probably a Bernie collapse scenario, so you’ll want to own Liz in NH.  Pete is completely gone, even if he’s candidate B (I don’t think that’s possible, really).  Joe is most likely the serious competitor remaining and I think he’ll put up a fight that lasts beyond Super Tuesday.

If Candidate A is Pete – presumably candidate B is Bernie.  Joe in a distant third or fourth would retain some Southern equity but I’d be betting against if I had prices under 50c in front of me.  Liz here is completely done, presuming there’s no universe Pete + Liz get 70% of the Iowa delegates.

A Top Two and a Bottom Two

Candidates A, B – 35%

Candidates C, D – 12%

Betting action:

If A/B is Joe/Bernie and C/D is Liz/Pete – Pete is dead, Liz is all but dead, and Joe is the favorite to win the nomination (probably like 70:30 Joe but the market will price it at like 50:30 at best).

If A/B is Joe/Liz and C/D is Pete/Bernie – another Bernie collapse scenario, so see above for what to do there.  It’s a closer race between Joe and Liz than between Joe and Bernie (I think?) but Joe is still the clear favorite here.  California is the action state here, where I think I’d want to own Joe more than Liz, but could see it going either way.

If A/B is Bernie/Pete and C/D is Joe/Liz – wew.  Liz is very close to done for and Joe is in trouble but not out of it – turbulent waters for him in Southern state markets.  Bernie would see 40c in the overall market in this world.

If A/B is Pete/Liz and wait is this actually possible?  I’m not sure I really see this.

A Three-Way Bunch and a Straggler

Candidates A, B, C – 28-31%

Candidate D – 10%

Betting action:

Bet against Candidate D, whoever it is.  Only Joe could conceivably come back from that and by “conceivably” I mean “really unlikely to happen”.  I’m probably betting against Pete regardless here as well.  Liz is fine being in a tied top-three, while Bernie and Joe obviously don’t mind it either.  Joe benefits the most from being A, B, or C here relative to (current) expectations.

A Clusterfk

Candidates A, B, C, D – bunched up from 15-25%

Betting action:

This is the most difficult.  If it’s literally a four-way tie at 22% there’s a very different story coming out than if its 25-21-17-15 despite these not really being all that dissimilar.  Pete is likely a goner if he’s not first (and I wouldn’t take him past 25c overall even if he is).  Otherwise it depends on the exact percentages and narrative that emerges and that will be quite murky.  My plan here is to seat-of-the-pants it and see what the media converges onto as the story.

The TL;DR

Pete needs to win or finish a close second.  If Pete or Liz is in a distant fourth, it’s over for them.  Joe can survive a third or fourth place finish, but his value will take on water.  A clear Bernie win will be seen as the first of what could be three dominoes in a row to fall towards his eventual victory, but it depends on the margin and which moderate does best.  Liz wants top two to have a chance, though she does retain some equity if they all remain bunched up but she’s technically in third.  And if Joe wins Iowa, he’s probably on his way to winning the nomination.