Insights from Previous General Elections
Curiously, even outside of Westminster, betting on poltics has been a really popular activity on betting exchanges. Political betting markets hold the record for the biggest ever Betfair markets.
I was astonished when one market reached £113m on Betfair, only to be astounded when that record was shattered a few years latter when a market reached £200m. But that was completely ripped from history with the biggest ever Betfair market at £1.6bn.
In preparation for this election, I’ve been delving into my archives, analyzing data from previous general elections. My aim is to provide you with insights that might help you navigate the Betfair markets more effectively.
Understanding Liquidity in Betting Markets
Reflecting on Past General Elections
The first election I actively traded was in 2005, during Tony Blair’s era. It was a relatively dull market from a betting perspective, but it set the stage for my future strategies. Despite all the polls, the market got the winning majority wrong and it was a sharp adjustment on the night.
It’s been a similar story over the years and it seems the market believes in the polls too much. Ultimately they have to priced against something and polls are the ‘base’ against which they are formed.
But as David Ogilvy once said that “The problem with market research is that people don’t think how they feel, they don’t say what they think and they don’t do what they say”
There is your bias in polling laid out for you.
Polling and Market Movements
Polling plays a critical role in shaping market movements leading up to an election. The pre-election period is akin to the pre-off market in horse racing, where polls cause short, shallow market shifts. On election day, as real results come in, the market goes “in play,” reacting more dramatically to actual outcomes rather than opinions.
The big movement arrives when the exit polls are released. Exit polls are pretty accurate indicators of the final outcome and therefore the market will shift dramatically when the exit polls are announced.
If a hung parliament is predicted then there will still be movement on this uncertainty until early the following morning.
The Unpredictability of Political Markets
Trading Strategies: Navigating the Volatility
My approach to trading involves focusing on high-liquidity markets and being ready to act on polling data and exit polls. Exit polls, in particular, can cause dramatic market reactions, as seen in the 2017 election where an exit poll predicting no overall majority sent prices skyrocketing.
Exit polls are key on election night!
Conclusion: Preparing for the Upcoming Election
As the upcoming general election approaches, I plan to keep a close eye on market developments and polling data. Although I might not be able to trade actively on election night due to prior commitments, I’ll be monitoring the situation closely, ready to capitalize on opportunities.
Political betting on Betfair offers a unique blend of excitement and challenge, much like the spirited debates we’re likely to see around the election. By reflecting on past elections and understanding market dynamics, we can better navigate the uncertainties and potential rewards of this fascinating market.