Why are the spread markets not reacting?

The above shows the latest commons seat spread prices from two of the main markets – IGIndex and Spreadfair – and from where I sit these levels simply do not fit with the polling evidence.

We are nearly at the stage, surely, where it’s going to be very difficult for Brown and Labour to pull back from the general election challenge. Last night’s stunning poll showing C33-LAB44-LD13 will almost certainly prove to be an overstatement of Brown’s position. In fact I am sure it will but it is becoming very difficult to argue that an October-November general election would produce anything other than a significant Labour majority.

Yet with 325 seats being the magic point at which Labour would be returned with a majority the current spreads seem extraordinary. These levels will surely go up.

There will be a raft of new polls over the weekend and if they also show a further move to Labour then the pressure on Gordon to risk it this autumn are going to be almost overwhelming.

With commons seat spread betting you buy and sell like shares on a stock exchange. The higher level is the buy price and the lower one the sell price. Thus I hold a buy contract on Labour at 318 seats. If they ended up 358 my profits would be the difference between the two numbers multiplied by the stake level. So a £20 bet would produce winnings of forty times that – £800. I can sell the position now at the 322 level and still make four times the stake as profit.

Of course if things move in the other direction losses are calculated in the same way.

My biggest position is a £42 sell at 75 weeks on the length of time between Brown’s arrival at Number 10 and the general election. If there is an early poll then my profit could be sixty times that £42. Even if there is no 2007 election there will be continued speculation throughout 2008 and the levels will remain tight.

Mike Smithson