Folks, we are under two weeks to go! How soon can we know on election night whether things are going well for Democrats or Republicans? I have a lot of (incomplete) thoughts on this as I’ve been mentally preparing for election night, so here we go.
The Needle is Master. All praise be unto The Needle and to its Holy Wiggliness.
Yes, the NYT Needle is coming back. In markets where we’ve had Needles, this tends to be the dominant signal for traders. It’s free. It’s easy to understand, and it directly translates to market prices. When we have a very complicated 435-part jigsaw puzzle to put together, having a model do some of the work in real-time makes things a lot more straightforward. You don’t have to do any hard thinking yourself about what the results so far in KY-06 mean for districts with similar demographics if the model is doing it for you. That said, it’s not clear The Needle will be predicting number of seat pick-ups or just odds of one party controlling each House, so it’s worth plotting out other bits of data to pay attention to. (I also wouldn’t be surprised if we get Needles for each individual race, which would really make them all-important).
Election Night: The Early Going
Speaking of Kentucky, the first states to report are Kentucky and Indiana, which means the first results bettors (and pundits) will be eagerly dissecting come from KY-06 and IN-SEN. Geoffrey Skelley went back and watched 2016 over again and found that only 7% of the vote in KY came in by 7 pm, though this increased to 50% by 8pm. Still, these will be the only data* we have in the pre-7 pm hour and I expect jumpy traders to make moves on it. A lot rides on McGrath and Barr! Similarly, if Donnelly is leading early, I expect two or three brackets in GOPSEN to finally die right then and there (there is no path to 56+ that doesn’t include Donnelly’s seat). If it’s Braun, those same brackets might giddily head moonward (at the same time, D’s chances of holding the Senate will crash from wherever they start the night at – which might not be that far).
*(Except for the Early Vote stats, and maybe exit polls, etc.)
Other Early Indicators
Let’s not forget that there are plenty of other House districts that will be reporting results in IN and KY while our attention is focused on KY-06 and Donnelly. Here the issue is not so much who will win (all of them are Safe seats), but by how much. One thing I will be doing is running a script that compares the election results from each House district to what the forecasted margin for that district was (using 538’s and CNN’s models). How close is it to the median forecasted margin? The high? The low? The reliability here will be a bit suspect with how few votes will be counted in the early going (and given that they may be lopsidedly from urban or rural areas) so I intend to be cautious with it, but I do still think it’s worth paying attention to.
What if PredictIt Slows to a Crawl and Trades Get Backlogged?
Now, I’ve written to PredictIt several times over the past two years. I’ve spoken in person with folks there about how important it is to have excess bandwidth or technical capacity for election night. They know it could be an issue and they desperately want to avoid it. But we also can’t ignore that for election night 2016, the website was basically unusable from 8:30 onward. Similarly, for Jones v Moore in the Alabama Special last December, trading became impossible around 9:30. During Kavanaugh, trading functioned normally and smoothly, but other site features (like notifications, and the page updating your shares and offers without refreshing) were delayed sometimes by hours (I’m okay with this, so long as trades work).
If this happens again – which it could – you’re basically going to be stuck riding your positions or hoping your queued trades go through before the price changes too much. It is an incredibly frustrating feeling. So be ready for it. If I’m unsure how things are going in the House by 8:30 pm, I plan to be out of all but my “safe” positions.
If trading is active, the time period from 8:00 to 11:00 will be shear mayhem. Florida, Georgia, Ohio, Virginia, North Carolina, West Virginia, Missouri… the list goes on and on (and I’ll have a spreadsheet for you all later, don’t worry). Governor’s races. Senate races. House races. House control. How many seats Ds or Rs will hold. Everything will be going nuts. If House control is going to break for Dems, it will be clear by around 9-9:30 (perhaps earlier if VA and FL are counting fast). If it’s going to be an all-night slug-fest, that too will be clear then. If the servers don’t overload my brain surely will trying to keep up with all the markets in play.
The Western Front
From 9:00 onward (yes this overlaps with The Madness), attention turns to the Western states. Texas, Arizona, North Dakota, South Dakota, Nevada, Kansas, Montana, etc. Things should be calmer by now. The House control picture will be coming into focus at this point. Senate control meanwhile might still depend on these states (along with Balance of Power). Either way the number of seats markets (DEMHOUSE, GOPHOUSE, and GOPSEN) will be the main attraction during this period. (And don’t forget: we will likely get MoV markets for many of the Senate races that will still be ongoing).
The Point of Thorough Exhaustion
As we get to midnight and beyond, there will be only a handful of still active markets (MoVs, maybe GOPSEN, maybe OR-GOV, and many of the CA House markets). Drink your favorite energy beverage and keep going, my friends. (If PredictIt does get stuffed up, this is around when it would start coming back).
Oh and Don’t Forget the Niche Markets
How many women will be in the House? The Senate? Governor’s mansions?
How much turnover will there be in the House?
How many seats change hands in the Senate?
I intend to keep checking in on these since I’ve done the prep work for them enough to keep track of which districts and races matter and so forth. For those that haven’t yet, you can read my (early) takes on these markets here and here.
It’s quite conceivable that a few MoV markets and the fate of several House seats in CA/WA won’t be known on election night. Instead, we’ll have to wait for additional mail-in ballots to arrive and be tabulated over the coming weeks. Hopefully we’ll get at least one or two great markets out of these that will be a lot higher volume than normal as new traders look to spend their winnings. (Reminder that in 2016, Darrell Issa went to 97c on election night only to fall to 70c as additional mail-in ballots showed his lead narrowing and narrowing – he ended up hanging on in the end of course).
The Contingent Markets
Election night is a Tuesday, and the Trump tweets market ends Wednesday morning. How much will he tweet that morning? How much does that depend on the outcome? What will the impeachment markets do? Will anyone resign the morning after, a la 2006?
Okay, that’s your rough overview of election night. More to come, including a spreadsheet with markets listed by closing time. While you wait, don’t forget to check out The Spreadsheet for comparison of market prices to what various expert forecasters and modelers are saying.
Disclaimer: I probably have positions or intend to take positions in just about all the markets I discuss herein. You should always do your own research prior to making any investment decision. You should consider my advice and knowledge I share to be fundamentally biased in its presentation and selection by my own financial incentives. While I do not knowingly lie I certainly do knowingly omit information that I think gives me an edge.