β#StockMarket #ForecastContracts #Hedgingβ
π₯ Forecast contracts: how to bet on bets
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Contracts for forecasts are market assets that allow you to bet on the outcomes of various events related to economic indicators, politics, social trends, etc. The financial market is influenced by such contracts as a factor of collective opinion.
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How does it work?
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The exchange creates a market for some event, such as "US GDP growth of more than 2%". If an investor believes this will happen, he buys a "Yes" contract, or if he is sure of the opposite, he buys a "No" contract. The price depends on the market sentiment; if, for example, the contract is trading at $0.70, it means that the market estimates the probability of a positive event at 70%. When the outcome is known, participants who made correct predictions make a profit.
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Investors use prediction contracts to hedge against force majeure risks and forecast macroeconomic trends.
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ForecastEx, PredictIt, Iowa Electronic Markets, and Augur are examples of platforms for such instruments. PredictIt offers bets on the outcome of the 2024 US election and can monitor contract price changes based on current events and polls.
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Examples of current contracts: β’ economic indicators: Fed interest rate, US unemployment rate, US inflation;
β’ political events: elections (presidential, parliamentary, local), government resignations, armed conflicts;
β’ market trends: bitcoin to be worth over $100,000 by the end of 2025;
β’ technology: SpaceX human-crewed mission to Mars by 2030;
β’ climate events: include rising global temperature, risk of ecological catastrophe, etc.
Thus, you can (quite legally!) bet on any event and make a profit. In addition, control over the opinion of most participants helps make standard trading decisions.
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What do you think?
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Profits to yβall!