The Senate Neither Contract on Intrade

On Intrade, you can trade three contracts for US Senate Control, the (SENATE.DEM.2010) contract, the (SENATE.REP.2010) contract and the (SENATE.NEITHER.2010) contract. The (SENATE.DEM.2010) contract is not what it seems and due to the contract language, it is not the same as Democrats keeping control of the Senate.

The three contracts state.

For expiry purposes any Senate seat held by an Independent who caucuses or votes with the Democrats will be considered Independent and NOT a Democratic seat. The same rule applies to any Independent who caucuses or votes with the Republicans.

There are currently two Independents in the Senate that caucus with the Democrats. So Democrats can maintain control of the Senate but the (SENATE.DEM.2010) contract can expire at 0% if Democrats have 48 or 49 Senators in the Senate not including the two Independents already in the Senate. If Republicans have 51 seats, the (SENATE.REP.2010) contract will expire at 100% and the other two contracts will expire at 0%.

This situation gets even more complicated with the fact that two candidates for the Senate are currently running as Independents. Sen. Lisa Murkowski in Alaska who lost the Republican primary and is running a write in campaign and Gov. Charlie Crist running on the ballot in Florida after losing the Republican primary to Marco Rubio. Rep. Mike Castle has recently stated he will not run a write in campaign in Delaware despite the fact that Nate Silver figured he had a significant chance of winning. As one poster on the Intrade forum stated, an Independent winning a Senate race increases the chance of the (SENATE.NEITHER.2010) contract expiring at 100. This is because it takes away from the 51 Republican seats needed to expire the (SENATE.REP.2010) contract at 100%.

Currently, the Democrats and Republicans are headed for 49 seats not including Independents. Republicans need two more seats to control the Senate but that does not seem very likely as the seats needed to gain a majority are getting harder and harder for them to win. For example Sen. Boxer in California seems to be pulling away from Carly Fiorina and Harry Reid continues to maintain a small lead over Sharon Angle in Nevada.

Here is a chart I made to easily interpret the US Senate Control contracts on Intrade.

Contract	Scenario Needed for 0% Expiry	Scenario Needed for 100% Expiry
SENATE.DEM.2010	Democrat* seats ≤ to 49	Democrat* seats ≥ 50
SENATE.REP.2010	Republican seats ≤ 50	Republican seats ≥ 51
SENATE.NEITHER.2010	Democrat* seats ≥ 50 or Republican seats ≥ 51	Democrat* seats ≤ to 49 and Republican seats ≤ 50

Disclosure: Currently, I have a sizable position going long on the (SENATE.NEITHER.2010) contract and going short on both the (SENATE.DEM.2010) and (SENATE.REP.2010) contracts which is the same thing but currently cheaper. For the first time today the (SENATE.NEITHER.2010) contract has traded 24.4%, higher than the (SENATE.REP.2010) contract. I have to agree with the market as I think the chance of Republicans holding 49 or 50 seats in the Senate is higher than Republicans holding 51 seats or higher.

*Not including Independents caucusing with Democrats.