Funky business on Intrade - Obama-Hagel

Mark Nickolas at HuffPost noticed something interesting on Intrade.com on July 20: someone bought 20,000 contracts for Obama to choose Chuck Hagel as his VP. That's beyond bizarre. The total contracts for Hillary to be Obama's VP are currently just over 5,000. So Hagel traded four times as many contracts in ONE DAY as Hillary has ever traded.

What's particulary bizarre about this is that the price of the contract didn't really move much, despite massive demand. Whoever bought the Hagel contracts paid $0.675, and Hagel is currently trading at $0.51.

Another twist is that there are still over 1,000 bids for Hagel, including one block of 889. That's unusual - the only other candidate I could find with that kind of bidding is Hillary, who also has a huge block, 865. Both of those could easily be aggregations of orders, or they could be mostly one person.

One thing that Nickolas doesn't mention is that for someone to buy that many contracts, someone else had to sell them. I'm fairly certain that Intrade has someone to make a market in these contracts, i.e. someone has an agreement with Intrade to buy contracts, to get things going. Whoever has that would have massive amounts of capital available. So maybe somebody decided to blow a wad on Chuck Hagel, and the market maker swooped in and decided to take the bet.

Nickolas asks if whoever bought these contracts knows something that we don't, i.e. do they have a source inside the Obama campaign, or are they actually inside the Obama campaign. It's a good question, and it's entirely possible - trading on inside information is pretty much a given on Intrade. But it's also highly unlikely. I haven't heard any buzz about Hagel anywhere else, and so much activity on one day suggests one or maybe two buyers - a handful, at most. I also seriously doubt that it is from someone inside the campaign - that would be embarassing for Obama.

And I just don't think Obama choosing Hagel makes that much sense. He's got solid foreign policy/military credentials, but socially, I understand he's a standard conservative. Plus he's a Republican. As much as Obama likes to talk about being bipartisan, I think that would be going a little far.

Another possibility is that a Hagel supporter bought all these contracts as a way of generating buzz for the good Senator from Nebraska. I think that's the most likely scenario. They paid $13,500 (plus commissions), which is one hell of a lot cheaper than buying advertising in any national media. And, if it pays off, it would be one hell of an investment (it would pay off $200,000, assuming this was all one person buying the contracts). This buy took place on July 20, when Obama and Hagel were in Afghanistan. So maybe it was timed to generate buzz around that event.

An interesting thing to watch, that's for sure.