Rogue Trader
Nate Silver writes an interesting article about his system vs Intrade and other market betting systems, and offers insight into the symbiotic feedback loop between American media, Intrade, and political activists late in elections.
The more pertinent question for the time being may be why Intrade differs from the other betting markets, and from the sports books.... At several points on Tuesday and early Wednesday, what appeared to be a single trader bought a large number of Mr. Romney’s shares at Intrade, at one point boosting Mr. Romney’s chances to about 49 percent from 41 percent over the span of a few minutes.
Intrade is cited far more frequently by the American news media. That at least opens up the possibility that someone could place a wager on Mr. Romney (or Mr. Obama) at Intrade in order to influence the news media’s perceptions about which candidate has the momentum....
It is not necessarily safe to conclude that represents an effort to manipulate the market, or public perceptions about Mr. Romney’s chances. Instead, it could just be someone who thinks Mr. Romney is a good bet relative to the price being offered.
A sophisticated bettor, however, would probably have sought out somewhere else to place his bets on Mr. Romney, since even before the recent market action, they offered a more favorable price than Intrade did.
Some people are also inclined to conclude that the “rogue trader” may have inside information about the state of the race. Personally, I think this is unlikely. The overall amount of the bet early on Tuesday equaled about $18,000. That is a large bet in everyday terms, but not by the standards of a professional gambler or investor who felt he had a sure thing...
My conclusion, then, is that the recent bets in Intrade are unlikely to represent the behavior of a sophisticated trader. Beyond that, it is hard to infer much about the motivation behind them.
Also just a note: mentioned in Nate's article is this, which was news to me:
the market’s tendency to overrate the chances of the trailing candidate (what is known as a favorite-long shot bias).