Hi Jochen Jansen; Nice link. For the record, TradeSports shows Saddam at 38/41 to be gone by March 31st, and 59/61 to be gone by June 30, 2003. Might as well make a weekly habit of charting it, unless FADG God complains.
Expiration
Date 03/31 06/30
-------- ----- -----
03/01/21 38 41 59 61
I should explain: The value of the contract will be $0 if Saddam is still in power at the specified date, and $100 if he is no longer in power. For every person who is short the contract, there is another person who is long it. At the expiration date, the person who is short a given contract will pay the $ amount (either $0 or $100 depending on the outcome) to the person who is long. In this case, going long means that you will be paid $100 if Saddam is no longer in power on the expiration date. If you buy the June 30th contract today for $61, this means that you will make a total of $39 on the deal. If you sell the June 30th contract today for $59, then you will either end up with a profit of $59 if Saddam is still in power, or a loss of $41 if Saddam is out of power.
The number can be interpreted as an investor estimation of the probability of Saddam not being in power.
Examples:
(A) If you think that Saddam will be removed by March 31, 2003 with a probability higher than 41%, than you should buy the March 31st contract.
(B) If you think that Saddam will still be in power on June 30, 2003 with a probability higher than 41% (i.e. the probability that he will be removed is less than 59%), then you should sell the June 30th contract.
Also see Slate's "Saddam-o-meter", which currently shows a probability of invasion at 65%:
slate.msn.com
-- Carl
P.S. I suggest selling both these contracts, LOL. |
