How punters are viewing the by-election

With just two days to go before the first by-election of this Parliament the money seems to be following the Tories with some punters at least believing that the party might have a chance.

The above chart shows the implied probability of a Tory win in Cheadle on Thursday based on the latest betting odds and is the first time we have used this format to show market moves. Until now whenever we have featured a chart we have done it on the actual odds. As these tighten the graph goes downwards. This new method goes the other way and gives a better feel for what is going on, particularly in a two horse race.

There seem to be very few Lib Dem backers about and the price has moved up from 0.12/1 to its latest level of 0.37/1. So a £100 winning Lib Dem bet today would produce £37 – or nearly three times the profit compared with a bet placed two weeks ago. What is driving the price in a still small market is confidence amongst Tory backers who have seen the price move from 9/2 to its latest level of 1.8/1.

Now you can get reasonable returns on the Lib Dem victory will we see backers putting money on the party? A lot of this is driven by those working on the ground and although Charles Kennedy’s party looks as though it will win it is not the certainty that the latest heavy odds-on price would suggest.

In 2001 the Lib Dems took the seat with a majority of just 33 votes over the Tories. On May 5th the margin increased to more than 3,000 with what appeared to be a big tactical switch from Labour supporters. A 14% vote share four years ago became an 8.8% one at the General Election. Awareness amongst the electorate of the 2001 result clearly had a big impact encouraging Labour supporters to switch.

If it had not been for the Tory performance in South Staffordshire vote last month I would have been saying that the current price on the Lib Dems was a good value bet. There I was predicting a lower vote share for the party when in fact Patrick Cormack increased his percentage share and his majority. Nationally in 1997 and 2001 Tory poll ratings slipped back sharply after their General Election defeats. This does not seem to have happened this time.

I think the Lib Dems will probably hold Cheadle but I’m not confident enough to bet at the current levels. This view seemes to be shared by other punters and little more than £3,000 has been matched on the Cheadle market on the Betfair betting exchange.

Mike Smithson