US Election: A tight race should mean plenty of shocks

He may have lost momentum but Mitt could still cause a few shocks

Election night on Betfair means in-play betting drama and usually big upsets. Paul Krishnamurty thinks the closeness of this election offers the perfect conditions for backing those upsets, and has three outsider bets for the meantime...

With the swing state polls and prevailing narrative pointing towards an Obama victory, market opinion on Betfair is hardening. Among the 50 state betting markets, the favourite is trading above 1.51/2 in only three - Florida, Virginia and Colorado - and above 1.251/4 in another four.

Experienced political punters, however, will be taking nothing for granted. Whether it's US primaries, UK by-elections or party leadership contests, the recent history of political betting is littered with upsets. Time and again we've seen heavily odds-on chances turned over, especially in-running after pundits have drawn premature conclusions. 

As Jack Houghton pointed out on Friday, the markets are likely to fluctuate wildly once results start pouring in, so it might pay.to risk small stakes for big rewards on upsets in the swing states. On several previous occasions, political bets have lost despite being matched in-running at the minimum 1.011/100. 

Quite simply, forming strong opinions on the basis of limited polling information is a profoundly risky strategy, especially when the numbers are this tight, close to or within the margin of error. A better strategy for now is to back outsiders, with a view towards laying off at shorter odds in-running as races turn out to be closer than expected. The following three markets particularly catch the eye as too one-sided.  
 
Lay Romney for Electoral College Handicap (2) @ 1.364/11
In order to land this short odds-on bet, Romney would need to gain 224 votes. My previous estimate was 257, but that total may need revising downwards in light of Obama's growing momentum. Indeed the three tightest state markets were counted in the Romney column, but Obama has since assumed favouritism in Virginia and Colorado, whilst Florida is tightening. 

Back Obama to win North Carolina @ 4.216/5
This is another state where Romney's advantage may soon disappear. The fieldwork for recent North Carolina polls was done a week ago, when the challenger still had momentum and before the Obama bounce that we've seen elsewhere. After the next batch, I'm expecting the RCP average to shorten from a 3.8% Romney lead to within the margin of error. It is only five weeks since Obama was regularly rated ahead here, so there's clearly enough potential votes for a late swing.

Back Romney to win New Hampshire @ 3.711/4
This state was regarded a toss-up until just a few days ago and, without any new polling data to justify it, Romney's lengthening odds could prove to be an over-reaction. Excluding polls where the total of both candidates was less than 96%, none of the last eight surveys showed a lead above 2%. Moreover, Romney's reputation from his time as Governor of neighbouring Massachusetts offers a personal edge he lacks in other swing states.

Next President Odds

Barack Obama 1.330/100
Mitt Romney 4.216/5