How to profit from Cleggmania - or the inevitable backlash

TV debates have elevated Nick Clegg almost to the position of political sainthood. But politics is fickle, and he could just as quickly fall from grace. Here's how to cash in whatever happens.

For decades a two horse race, the next General Election has been thrown wide open by the resurgent Liberal Democrats. And that's down to some slick performances from Nick Clegg in the recent televised debates between the three main party leaders. While Gordon Brown has come across as tired and lacking in new ideas, Clegg has managed to position himself as a valid alternative - at least in the looks and charm stakes - to David Cameron.

Indeed, so powerful has the recent Lib Dem run been that spread betting firms such as Sporting Index were forced to suspend their election markets during the first debate as interest in up-bets on Clegg rocketed.

But has Cleggmania peaked? After all, behind the shine, some Lib Dem key policies - on immigration for example - look as poorly thought through as those of the other parties. And Clegg needs to be careful - too much triumphant talk ahead of the election could have the same catastrophic impact on Clegg as Neil Kinnock's infamous fist waving and cries of "well alright" on national television just before he lost the 1992 election.

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Given that most of the Lib Dem surge has come at the expense of the Conservatives, there are two obvious ways to bet on something of a reversal.

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First off, you could sell the Lib Dems Sporting Index offers a spread of 88-91 seats (so a downbet would sell 88 seats at say £5 or £10 a seat. You make the amount you bet per seat for every one the Lib Dems drop below that level).

Or you could buy the Tories on a spread of 304 - 309 i.e. place an upbet on them winning more than 309 seats.

In either case you don't have to wait until after the election to cash in if the spread moves sharply in your favour before then (there is one more televised debate to go) you can cash in straight away.

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.