I’m excited to report that a new source of valuable insights is available from IBKR Forecast Trader, a recently launched product that offers contracts with Yes and No answers to questions regarding future inflation, interest rates, the labor market, national debt, climate change and other key data points. The contracts provide a competitive interest stream, and owners of derivatives with correct answers to economic questions receive positive returns as determined by each instrument’s pricing. From a market-research perspective, however, the contracts provide a novel and alternative view of investor expectations.
Forecast Trader is a simple derivative offering contracts with Yes and No answers to economic questions. Pricing is based on the likelihood of each answer being correct. For example, one contract asks, “Will US Housing Starts exceed 1,369,000 in August?” The contract version with the Yes answer is currently priced at $0.43 and the No version is priced at $0.55. This reflects that the No answer is considered to be the most likely to be accurate. The combined price of contracts totals one dollar plus a one cent fee spread among the buyers of the Yes and No choices once a pairing executes. The highest bids for Yes and No on the screen will add up to less than $1.01 as orders await fills. When an economic report is released, the owner of the contract with the correct answer receives a $1 payout.
The pairing of forecast contracts can provide a truthful look at how investors are viewing some of the most critical, existential developments of our time, like the national debt or climate change. While Wall Street consensus and the political pendulum may move in one direction or another, our Forecast Trader market may offer an alternative perspective, providing investors with valuable insights into the crowd’s wisdom.
To learn more about ForecastEx, view our recent podcast here.
Disclosure: Interactive Brokers
The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers, its affiliates, or its employees.
Disclosure: ForecastEx
Interactive Brokers LLC is a CFTC-registered Futures Commission Merchant and a clearing member and affiliate of ForecastEx LLC (“ForecastEx”). ForecastEx is a CFTC-registered Designated Contract Market and Derivatives Clearing Organization. Interactive Brokers LLC provides access to ForecastEx forecast contracts for eligible customers. Interactive Brokers LLC does not make recommendations with respect to any products available on its platform, including those offered by ForecastEx.
Disclosure: Forecast Contracts
Forecast Contracts are only available to eligible clients of Interactive Brokers LLC, Interactive Brokers Canada Inc., Interactive Brokers Hong Kong Limited, Interactive Brokers Ireland Limited and Interactive Brokers Singapore Pte. Ltd.
Join The Conversation
For specific platform feedback and suggestions, please submit it directly to our team using these instructions.
If you have an account-specific question or concern, please reach out to Client Services.
We encourage you to look through our FAQs before posting. Your question may already be covered!