Traders participating in the Iowa Electronic Markets (IEM) believe that Barack Obama has an 84 percent chance of winning Tuesday’s popular vote, according to the latest tallies this morning. The online, real-money trading market, created by the University of Iowa’s Tippie College of Business in 1988, allows participants to purchase and trade contracts based on whom they believe will win the election.

Contracts for Obama were selling for 84.1 cents on the IEM Winner-Takes-All Market this morning, with McCain contracts trading at 16.5 cents. It’s the second-widest spread between presidential candidates since the University of Iowa created the electronic trading market (www.biz.uiowa.edu/iem) 20 years ago, said Thomas Rietz, an associate professor of finance and member of the IEM steering committee.

“So it’s unlikely at this point that McCain will win, but it is possible,” Rietz said. “What we’re predicting (in the winner-takes-all market) is probabilities of an outcome.” Contract holders of the winning candidate in that market receive $1, while losing contract holders get nothing. The price spread has been largely unchanged for about three weeks in the market, which is open to college students in more than 100 participating universities as well as the public. Trading volume has been heavy in recent days, with more than 7,700 contracts changing hands Wednesday.

The highest point spread in any race in the Winner-Takes-All Market this close to the election was in 1996, when contracts for Bill Clinton’s reelection bid were trading at 95 cents compared with 5 cents for his Republican opponent, Bob Dole.

The IEM also operates a Presidential Vote Share Market, which is predictive of what percentage of the two-party popular vote that each candidate will receive. Obama’s contract was selling at 54.3 cents this morning, while McCain’s was selling at 47.2 cents. Those figures indicate traders believe Obama will receive 54.3 percent of the two-party popular vote, while McCain will receive 47.2 percent.

As a research and teaching tool, the IEM boasts an impressive prediction record. On average across all the Vote Share Markets for each election since 1988, that market has come within an average 1.3 percentage points of predicting the outcome of the popular vote, Rietz said. Nearly 2,400 people have about $344,000 at stake in all of the IEM’s markets.

The latest New York Times/CBS News poll showed that 50 percent of voters favored Obama, while 40 percent favored McCain and 10 percent were undecided.