[Update]

As the Republican National Convention wraps up, InTrade's online bettors may be moving, as predicted, in line with the polls, coming back to Mitt Romney after a surprise Obama rally. Post-speech, the Mitt contract's median price bumped up half a cent. In the trading charts, which I've updated below, the Obama rally seems to have stopped.

Interestingly, trading volume on the Obama contract has already beaten yesterday's totals, while only a third as many Romney trades have been made. That implies, counterintuitively, that more people are getting into the Obama market post-RNC than the Romney one: many of them, shorting his stock. Given that Obama fell by a cent on that extra trading volume, we can assume that Mitt's speech scared owner's of Obama more than it cheered potential buyers of Romney.

Alll told, Romney ends the convention about 3 cents up from where he started. He's now trading at a median price of $4.40, or 44% chance of victory -- well below where recent polls would suggest.

[Original]

InTrade, the political predictions market, serves a decent aggregator of conventional campaign wisdom. Bettors trade contracts on events, like President Obama’s reelection. Optimists buy, pessimists sell, and the final market price can be construed as a probability of that event occurring. That number is often nicely linked to the polling and media narrative of the day.

Frankly, it’s usually worth ignoring.

But, when the numbers do something counterintuitive—or a trading trend builds up disproportionate steam—InTrade gets an opportunity to either prove its worth, or look really stupid. Case in point, the numbers on the “Obama to be reelected” contract, which have been rising, against conventional wisdom, during the Republican National Convention. Here’s the president's contract since Monday, August 27, making a surprise climb in volume and median trading price.

Why is this weird? Because candidates usually get a poll bounce during and after their conventions, bolstered by tons of free media coverage and feel-good speechifying. In past years, the triumphant nominee has gone up as much as 25 points in the national polls—that’s according to Nate Silver, who projects that Romney stands to gain up to four points as the Tampa party wraps up. That prediction has been borne out by polling released today by Reuters/Ipsos, which shows the Republican candidate taking a narrow lead over the president among likely voters, 44 to 42 percent: an impressive a four-point rise since Monday.

But apparently, nobody told the guys on the online trading floor. In addition to the rise in median price, trading patterns suggest accumulation, which means increased investor confidence. Obama took a hit on the first day of the convention, a day of low volume. But as investors have gotten back into the market—likely spurred by the much-covered Christie, Ryan, and Mrs. Romney speeches —they’ve flocked back to the president. His price has risen to $5.61: or a rough 56.1% chance of victory.

By contrast, Mitt has seen a lack of accumulation in his contract. Although it’s up from Monday, it certainly hasn’t seen the kind of boost that polling data would suggest.

It’s fairly easy for a viewer—or survey respondent—to get swept away by the bread and circuses of convention season. But given that InTrade’s bettors are working with real money, rather than free buzz, their trading suggests they’re either ignoring the Tampa antics entirely, or taking them as an ill omen for the Romney campaign. Either way, if InTrade stays far from polling data for long, a savvy investor might find an arbitrage opportunity.