Romney's Chances of Finishing First or Second in Iowa Dips

Mitt Romney - Iowa Caucuses
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Mitt Romney - Iowa Caucuses

There's a place where some people bet money on the Iowa Caucus — and Mitt Romney appears to have the highest likelihood of paying off as a top two finisher. However, his market value has started to decline since a New Year's Eve peak of $0.912 down nearly 10 percent to a level of $0.825 (as of 12:30 p.m. CST on Jan. 3), according to trading data in the University of Iowa's Electronic Political Futures Markets (IEM).

The Iowa Electronic Markets are forecasting tools developed by the University of Iowa in 1988 that allows both university students and business professionals from around the world to invest real money trading shares in future events whose payoff is based on a successful prediction. Contracts for the correct outcome pay off at $1, while all other contracts pay off at zero.

Ron Paul contracts were the highest trading value of any listed GOP candidate less than one week ago, reaching a high of $0.900 on Dec. 29. After sinking to $0.470 two days later during the "Santorum Surge," Paul futures were back up to a high of $0.706 on Tuesday.

One of the more interesting trades is the multi-candidate entry for the prospects of Jon Huntsman, Rick Santorum, and the others who were not listed as individual contracts. Trading for less than a dime a week ago, futures traders started shifting their money into a strong Santorum finish, reaching a recent level of $0.490 as Iowans were readying to vote.

Meanwhile, Intrade, a leading Irish-based predictions market tells a similar story. It shows the probability of a Romney win in Iowa is now back above 50 percent. A surge on the last two days of 2011 helped push the former Massachusetts governor back to front-runner status, before a dip on Monday had Romney hovering mainly below 50 percent.

The likelihood of an Iowa win for the Libertarian-leaning Paul has plunged from about a 60 percent chance to less than 24 percent in just the last week, according to the latest Intrade data.

Paul's dip appears to have coincided with the upward momentum in Santorum. As polls started to indicate that Santorum was beginning to reach double digits in the Hawkeye state, futures prices for the former senator began to climb at a rapid rate on Intrade indicating a 3 percent probability of a win last week to a high of 34.5 percent, and back down to about 23 percent on Tuesday afternoon.

None of the other major GOP candidates are currently trading above the 1 percent probability level on Intrade at this time.