The only reason the contracts are disconnected from the market is a lack of liquidity/market makers. And no they are not completely disconnected, the spread has come in a LOT since I first started trading there.
You can theorize WHY the contract traded away from spot, and indeed there can be many reasons. But, the primary reason for it to trade IN LINE with spot is arbitrage. Buy in one place sell in another, driving the price up in the first place, down in the other. There has to be significant capital/automated strategies in place for that to happen, and that just isn't the case with ICBIT.
I told you when leverage makes volatility a factor and when it doesn't - it all has to do with the option of the contract holder to default (as you pointed out), but both Long and Short can default, so such an effect should only increase the bid/ask spread, not spot-futures spread. Honestly, go pick up a copy of Hull (Options Futures and Other Derivatives), because you clearly have no idea what you're talking about.
I acknowledge ICBIT is being manipulated, but from where I'm sitting, it's most likely not the owners, just traders. It's just a market with orders, people are going to trade around. And besides, recently it's been pretty close to spot - not more than say 10 points off (with a wide spread).
Finally, I am not trying to impress anybody, I am just correcting some really bad misinformation. I have no affiliation with ICBIT except that I trade there and they actually got their contract design correct. I've also given them advice on how to correct some of the more glaringly bad things they do. I would like for there to be more liquidity in their market.
Here is one issue with volatility and pricing specifically as it applies to the type of contracts on icbit. The contracts are calculate by 1/price1 - 1/price2. If you enjoy math too much you can make a curve with the likelihood of a specific price being reached in the life of a contract on one axis and the profitability of a contract bought at one specific price on the other. x percent chance of the price touching a certain price, y percent profit on a contract at that price etc.
When contracts were priced $70 above spot that calculation was vaguely within an acceptable range. Both buyer and seller could be said to be in a position that made sense. A few weeks after that, the price of contracts went below spot even for contracts traded out to December. In other words someone was betting very heavily that between now and December the price of spot would not rise above the 80s.
It makes no sense unless you look at the trades and notice the unnatural patterns. I've covered this in other posts. Briefly again look at
http://www.nonprof.com/bitcoinistan.com/unlikely.jpg Right before the previous clearing someone extracted 325 contracts at the ridiculous price of 104. Then clearing was pushed up to 110. Then an hour 40 before the next clearing someone pushed clearing down to 107 and put a hundred contracts on the block to prevent it being pushed up. Selling December contracts at 107 is beyond suspicious. 104 more so. In the 90s even more so. In the 80s its silly. Again, a person would not sell at those prices based on any market info. Those trades are completely apart from any bitcoin price considerations. Do you deny that? It is funny.
When you say "the primary reason for it to trade IN LINE with spot is arbitrage" you are giving up any credibility you have. You are just making stuff up.
Same when you say "I told you when leverage makes volatility a factor and when it doesn't - it all has to do with the option of the contract holder to default". Uhm "leverage makes volatility a factor"? Volatility, the degree to which the underlying equity is volatile, has to be accounted for in anything that is leveraged.
