InTrade has a new Depression Trade!

[Random.Capital]

Can anyone spot the error?

https://www.intrade.com/jsp/intrade/trading/t_index.jsp?selConID=647817

This contract will settle (expire) at 100 ($10.00) if quarterly GDP figures show the US economy has gone into a depression in 2009.

The contract will settle (expire) at 0 ($0.00) if quarterly GDP figures DO NOT show the US economy has gone into a depression in 2009.

For expiry purposes a depression is defined as a cumulative decline in GDP of more than 10.0% over four consecutive quarters. This is calculated by adding together the published (annualized) Real GDP figures (as detailed below). If these annualised figures add up to more than -10.0% over four consecutive quarters then the contract will expire at 100.

Example 1:

In Q1 the Final Real GDP figure is -3.5%
In Q2 the Final Real GDP figure is -2.5%
In Q3 the Final Real GDP figure is -2.0%
In Q4 the Final Real GDP figure is -2.3%

The sum of these figures is -10.3% so the contract will be expired at 100.

Example 2:

In Q1 the Final Real GDP figure is -1.5%
In Q2 the Final Real GDP figure is -2.5%
In Q3 the Final Real GDP figure is -1.8%
In Q4 the Final Real GDP figure is -2.0%

The sum of these figures is -7.8% so the contract will be expired at 0.

Expiry will be based on official quarterly Real GDP figures reported by the U.S. Department of Commerce (Bureau of Economic Analysis, Table 1.1.1, "Percent Change From Preceding Period in Real Gross Domestic Product") as reported by the BEA.

 

[1a2b3cppp]

i've always wondered... is that website legit?

 

[Daal]

My bank(everbank) says they wont make a wire to intrade based on anti gambling legislation

 

[bond_trad3r]

I see the error! I'm shocked that intrade is making such a mistake. Although it's a common mistake made by first time investors and traders alike.

 

[bond_trad3r]

BTW, that's an screaming short btw. There is no way there is a 56.6% chance of a 10% decline in NOMINAL GDP in 2009.

 

[scriabinop23]

annualized GDP vs quarterly cumulative count? That is so broken.

That means a mere flatline GDP (q/q unchanged) but annualized 4 quarters of x -2.51%+ is a depression under their method...

If we have a -4.5% gdp the 4th Q, then by virtue of the economy just flatlining for 09 (not falling any deeper), we'll probably be at -20% for that contract. That contract looks like a buy unless by some strange miracle the last 2Q's see improvement y/y vs 2007.

The definition they mean to be going after is any peak to trough period that results in 10% cumulative or more from start to end .. Not deducable by counting quarterly smaller changes.

 

[Covertibility]

Let's say you had dual citizenship with the US and Ireland. Let's say you signed a tax treaty so that you pay tax only to US but over time you did win money off these foreign gambling sites like Intrade. Are you committing a crime since it is illegal to do this if you were solely a US citizen?

 

[dividend]

The mistake is stating GDP instead of CPI or PPI

Is this free $ or would they cancel this contact on this error?
I thought market was efficient

One part of me wants to short that to $0. Other part says its gonna get cancelled so wasted time.

 

[stock_trad3r]

If you can short intrade short this cause there will be no depression.intrade is useless anyway cause there's no liquidity.

 

[Random.Capital]

Quote from bond_trad3r:

There is no way there is a 56.6% chance of a 10% decline in NOMINAL GDP in 2009.

With all respect, I think you might want to take a second look at the terms of the contract.