The Power of Prediction: Inside IBKR’s Innovative ForecastEx Platform

Join Andrew Wilkinson and IBKR Senior Economist Jose Torres as they explore ForecastEx, Interactive Brokers’ groundbreaking prediction platform. Learn how this innovative tool empowers investors to leverage data and market insights to make smarter, more profitable decisions.

Summary – IBKR Podcasts Ep. 208

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Andrew Wilkinson 

Welcome to this IBKR podcast, and here to talk about ForecastEx is IBKR’s Senior Economist, Jose Torres. Welcome, Jose. How are you? 

Jose Torres 

Hi, Andrew. Doing great. Hello, everyone. How are you? 

Andrew Wilkinson 

I’m doing well, mate. We’re going to talk today about ForecastEx, which is Interactive Brokers’ innovative new platform where investors can make a wager on the outcome of a particular event. We saw an incredible amount of business around the recent US election. Can you give us some sense of the number of contracts traded there? How did that market turn out, Jose? 

Jose Torres 

Sure. The market was buoyant. We had over 500 million contracts traded. This is a new product that was launched a few months ago in the second half of 2024. So, we’re happy to see that a lot of folks came in to participate in the Harris versus Trump contract, but also the composition of Congress—both the House and the Senate—as well as specific senatorial races and specific states, whether Harris or Trump would win in those. 

We had a lot of success with the election contracts—big contract volumes—but we don’t just have election contracts. We have other significant contracts as well: economic indicators mainly, including Payrolls, Consumer Price Index, Unemployment Rate, Initial Unemployment Claims, Retail Sales, GDP, Fed Funds, among others. 

We are looking to boost interest in the economic indicators. They are great to have alongside an investment portfolio, specifically if the portfolio manager needs to hedge specific risks as they pertain to the economy. If their portfolio is sensitive to higher inflation readings, low growth readings, or rising layoffs, they can take positions there. 

Some newer initiatives that I’ve been leading here at Interactive Brokers include a weekly pick, which we’re calling ForecastEx Picks. Essentially, what I do is look at all the contracts we have settling that week. This week it was Housing Starts; last week it was the Producer Price Index. 

We started last week, and my background is number crunching. I worked in the federal government for seven years at the Bureau of Labor Statistics, so I understand how these figures are calculated and published. I believe I have an edge in watching the spreads on the ForecastTrader dashboard. So, I’m looking at everything to see where the most compelling contract of the week is. That’s called ForecastEx Picks. So far, we’ve been publishing it on LinkedIn and on Twitter. 

Andrew Wilkinson 

Okay, so as an economist, Jose, you keep a keen eye on the forthcoming data releases. I’m guessing you’re not always in agreement with the consensus. I think what you looked at this week was the Housing Starts number, and you did some analysis on that. The market consensus, which is effectively like the at-the-money option where there’s a 50/50 chance of hitting the economist forecast, was 1.34 million. So, you went away and did what? You looked at a threshold lower than that to look at the pricing. Just explain the mechanism there. 

Jose Torres 

Absolutely. With Housing Starts, sometimes with ForecastEx and Wall Street, we have a discrepancy in expectations, and I look for that. That’s one of my main screens because when we have a discrepancy in expectations, I can gauge where I’m at and where there’s a particular edge. 

This week, I found the edge with Housing Starts because Wall Street was expecting a figure of 1.33 million seasonally adjusted annualized units. ForecastTrader, however, was offering 61% odds of a number higher than 1.298 million, which is much lower. Additionally, 1.298 million would have been the second-lightest figure since the pandemic. Only one was lighter, which was last July. 

Given the dynamics in the real estate market—where exuberance has been, particularly with builders and improving sentiment—I didn’t expect construction activity to fall off a cliff. So, I communicated that it was very likely the figure would be much higher than 1.298 million. In fact, it was probably closer to 90%. 

A lot of times, I’m looking at the threshold in ForecastEx. I look at what the “Yes” is priced at; in this case, it was priced at 61%. My probability was closer to 90%. That was an easy pick for this week’s ForecastEx, so we communicated that 

Jose Torres 

Last week, we saw a very compelling opportunity with the Producer Price Index (PPI), which tracks wholesale prices. Commodity prices were rising during the period, as were services costs—commodities excluding oil, by the way. 

The threshold in ForecastEx was at 1.3% year-over-year, but the Wall Street consensus was 2.2% or 2.3% off the top of my head. Big spread! Essentially, forecast traders were expecting a huge drop in wholesale prices month-over-month from September to October. That just really wasn’t in the cards. In fact, to get to 1.3%, you would have needed a 0.7% month-over-month decline. What we got instead was a 0.2% increase, and the figure came in at 2.3%. It was a good ForecastEx opportunity in that case, allowing folks to pay roughly 76 cents and collect a dollar—a return in excess of 20%. 

Andrew Wilkinson 

So, how does an investor participate in ForecastEx, Jose? 

Jose Torres 

They can visit us at interactivebrokers.com, go to the ForecastTrader tab, and request permission. Usually, permissions are granted within 24 hours, and they can immediately participate in our marketplace in the forecast contract universe. Investors can start small—contracts are priced at 61 cents, 50 cents, even as low as 40 cents. A small order might be 10 contracts, which could be $5.00 or $50.00. But we also saw large orders during the presidential election—million-dollar orders, millions of contracts at a time. 

That’s how ForecastEx differentiates itself: it’s a space for small players, big players, and medium-sized players alike. You even collect interest on longer-duration contracts. With shorter durations—say, a contract that settles tomorrow or the next day—you collect less interest. But with longer-duration contracts related to existential questions like climate change or national debt, there’s more potential. For example, will temperatures increase significantly in the next 10 years? Or what will happen with the national debt? These longer-term contracts can be particularly attractive. 

Andrew Wilkinson 

Among the data you’re watching, some of these are weekly jobless claims, while others are monthly, quarterly, or even annual. Which ones do you find most critical or easiest to interpret? 

Jose Torres 

I like the Producer Price Index because I’m a commodity watcher. Folks who follow commodity prices usually have a much better handle on the PPI. When you compare it to the Consumer Price Index (CPI), which is much more widely followed, there’s often a discrepancy. Wall Street tends to get the CPI almost right, but for the PPI, they can be off by 30, 40, or even 50 basis points. That’s always interesting to me. 

Contracts that are less widely followed sometimes offer unique opportunities because participants and analysts aren’t as focused on them. That creates room for someone who knows how to calculate probabilities and find an edge. That’s what I aim to bring with the weekly ForecastEx Picks. 

There are also arbitrage opportunities. For example, in December, there’s a chance the Federal Reserve will cut rates by 25 basis points—or they might hold steady. By comparing the odds in IBKR ForecastTrader with Fed Funds Futures, you can spot differences and arbitrage those probabilities. Similarly, CPI contracts can be cross-referenced with breakevens in the bond market. For those familiar with navigating futures markets, these tools can be invaluable. 

We’re also introducing international indicators, like data from Hong Kong and Singapore, and we plan to expand this offering. 

Andrew Wilkinson 

Very good. Jose, you’re putting out your weekly ForecastEx Pick on the IBKR landscape, which is part of Traders Insight. Let the audience know where they can find that. 

Jose Torres 

Absolutely. You can find it on the IBKR Campus, Traders Insight, and the main page of Interactive Brokers under Education. Alternatively, you can search for “Traders Insight” or “Jose Torres Interactive Brokers” on your preferred search engine, and it will pop up quickly. 

One other initiative I’d like to highlight is the “Read Through the Report” series, which starts December 3rd. Two to three times a month, I’ll cover major economic indicators or announcements like payroll employment, CPI, Fed meetings, and more. I’ll do this live on our social media channels—LinkedIn, Twitter, Reddit. 

For example, on Jobs Friday, we’ll go live at 8:20 AM, discuss market expectations, and analyze ForecastTrader spreads versus Wall Street consensus. At 8:30 AM, I’ll announce the winning contract and break down the granular data—job growth, unemployment rates, wage trends, and more. I’m really excited about these new initiatives. 

Andrew Wilkinson 

Jose Torres, IBKR’s Senior Economist, thank you very much for joining me today to talk about IBKR’s ForecastEx. 

Jose Torres 

Thank you so much. Ladies and gentlemen, come join the forecast contract universe. Thank you. 

Andrew Wilkinson 

Very good. Thanks, everybody. Bye for now. 

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