Bloggers have been speculating wildly about the outcome on Election Day, so I thought it was worth taking a look at the new Tradesports futures market contracts for House seat swings. Using basic rules of probability, I translated the contract prices into the following graph:

I’m struck by the steep dropoff above 25 seats. Given yesterday’s release of a paper from three respected political scientists projecting a 32 seat swing, the contracts that pay if the Democrats pick up more than 25 or more than 30 seats are looking underpriced.

(Note: Using the same methodology a couple weeks ago, I extrapolated predicted probabilities for Bush approval in November.)