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Author Topic: Tips for Tikay - spread betting on the side  (Read 5617 times)
Simon Galloway
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« on: September 03, 2015, 07:46:07 PM »

OK, if you already know what you are doing, look away.  I'm just going to write this for readers that have no idea what a spread bet is, I'm not going to write anything advanced, just the basics.  All my pricing is for examples.. not actual prices ofc!

Just like fixed odds bookies, there are some generous sign-up/referral deals out there, so don't rush out and open an account.  I'm going to suggest a system where I refer people and throw 100% of any income generated from that into supporting Blonde, or Fred, or whatever else.  i.e. I won't make a penny from it, but we collectively might as well pick up the free $$ somehow.  I'm fine if someone else active in spread betting wants to do that instead of me.

What's a spread bet
A conventional fixed odds bet with Ladbrokes is one where you write out "£10 win" on a betting slip and then throw it away if it doesn't win, and collect if it does win, an amount pre-determined by the price you took, or by the price you are given, SP.  Your liability is known (£10) and your potential profit is also known.

A spread bet is one where it doesn't just matter if you are right or wrong, but by how much you are right or wrong.  So your liability is not always known at the point where you strike your bet, you have to work out "what is the worst that could possibly happen" and in some markets, "I'll have a tenner on that" could cost you several hundred, and in the blink of an eye.

How are spread bets priced
I'll give an example of a market that easily lends itself to being priced up as a spread, and one that doesn't, so the companies convert the varying possible outcomes into a numerical index so that it can be traded.

Football - time of first goal.  The firm may price that match up as 35-38 (quoted in minutes for this market)  If you think the game will be conducted within the centre circle with little chance of attacking play, you might "buy" (i.e. go higher) than their offer of 38 minutes and you choose a stake of £1 per minute.  If the game ends up 0-0 then the bet settles at 90 minutes, you were right, but more importantly, you were very right and you win (90-38) x £1 = £52.  Lovely.  Of course, they could walk a goal in from the kick off and the market would settle at 1 minute and you would lose (38-1) x £1 = £37.  Not ideal.  Most of the time, someone will score in the 28th minute or the 42nd minute and your wins and losses will be a moderate factor of your chosen stake.  But ALWAYS calculate the cost of the worst thing happening and be prepared to swallow that... because it will before too long.

Note that if you thought the game would be action packed, you would have sold the firm's bid of 35 mins, and if a goal was scored in the first minute, you'd have made £34 and if it ended up 0-0 you'd have lost £55.  The eagle-eyed will notice that every time the spread firm matches a buyer and a seller, they take £3 out the game... that is their over-round.

OJ Simpson trial.  This isn't an obvious numerical market, so they may make a market something like this:

0pts - Not Guilty
10 pts mis-trial
25pts manslaughter
50 pts murder
+10 pts for death penalty.

and then quote 26-28 on that index.  If you think he is getting off, you sell at 26 to your chosen stake, if you think  he is going to fry, you buy at 28.

Volatility
You MUST MUST MUST understand what can happen, so paper trading (writing down some trades for the first month without actually using money) is a good idea, you are going to find yourself in some scary spots if you aren't very very careful and perhaps even if you are.

If you are looking at a market where they are pricing up the number of Man City manager sackings for the course of the season, the quote might be 0.3 - 0.5.  You don't need to be glued to the internet all season, the bet is very likely to settle at 0 or 1, and if Pellegrini does get sacked, you'll get to hear about it and can decide if you need to trade out in plenty of time.  Your stake is likely to be quite a large unit, maybe a couple of hundred a point even for a modest bet.

If you are looking at a market where you are being quoted how many league minutes Aguero is going to play for the season, he could play every minute of every game and play 3420 minutes.  He could get a bad tackle 2 minutes into his next game and be out for the season.  You don't want a couple of hundred quid a point on this bet, coz not only can you be wrong, you can be wrong a couple of thousand times Smiley

In running or not

Most live matches are updated in running, in other words you can get an updated price quote so if you decide you were a bit wrong, you can close out the bet, by either taking an equal and opposite position, or if the firm has it, clicking on the "cash out in full" button.  This will limit your losses to some extent.  SOme matches (or other markets) are not updated in running, and you need to be comfortable with taking a position and not getting any future opportunity to get out and you have to take the full result on the chin.

stop losses / maximum makeup

Some accounts will allow you to trade with a stop loss.  For example, a bet that could settle anywhere between 0-1000, it is possible to have an account where your stop loss is maximised at 100 x your stake in a particular market.  This saves you from going down the tubes by 1000 x your stake and reduces volatility.  Note that if the market that could settle anywhere between 0-1000 was priced at 10-20, (where 0 is the worst possible outcome, I say that because you have to make sure that a negative settlement isn't a possible outcome) then you definitely wouldn't want to buy on a stop loss account, but you might very well want to sell on a stop loss account.

For other markets, perhaps NH match bets, they will suggest a maximum makeup of +/-15 lengths.  That is fair enough, as if it is a 4 mile race and yours falls at the first, and the other one crosses the line eventually... that's a lot of lengths to pay out on.  Not that for some markets, be very careful what you are staking.  IS it £10 per LENGTH or £10 per TENTH OF A LENGTH.  One bet is obv 10x bigger than the other, so make sure you understand the quote and your max liability.

overround

Flipping a coin type markets, WH might be 10/11 your choice.  You can work out their over-round.  (prolly will be 5/6 yr ch... what can I say...)
a spread firm may have a coin flip outcome on a 25 index.... 0 for "no" and 25 for "yes" priced up as 12-13.5  Obviously the tighter their spread, the less over-round they have.  If you buy the spread, you could win 11.5 or lose 13.5  if you sell the spread you could win 12 or lose 13.  You can convert that into over-round as a 'reader excercise'
Every time you trade, you have to buy their offer, or sell to their bid.  You are paying a fee effectively every time you get in or out of a market.  That's not to say there aren't some ok opportunites, but over trading will definitely kill you in the same way that standing at an fx bureau with $ and asking for £ then changing your mind and giving them £ back and asking for $ does.  (and both examples are relevant as many don't notice these "hidden" fees and the massive tax it is on your bankroll.)

That's enough to start with Smiley
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arbboy
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« Reply #1 on: September 03, 2015, 08:19:18 PM »

Very good summary.
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BorntoBubble
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« Reply #2 on: September 03, 2015, 08:46:24 PM »

Love the spreads.

But also hate the spreads, goes to SPIN now 🙈
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DungBeetle
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« Reply #3 on: September 03, 2015, 09:25:06 PM »

Good opening post.  Hopefully Tighty will tell us his Ramprakash story as well.
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Peter-27
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« Reply #4 on: September 03, 2015, 10:10:25 PM »

Very good summary Simon.

I very recently got into spread betting myself. If anyone reading is looking at dipping their toe in the water with low risk, I would suggest buying on the "player goal minutes" markets in football. Usually, a player can be bought between 1 and 20 (minutes). If you buy, let's say Aguero for £1, at 20, and he doesn't score, that's a loss of £20. However, if he were to score two goals, let's say in the 45th and 90th minute, that's a result of £135, which would be a £115 profit.

It should be noted that a player could score a hat-trick, and you could still lose money. To continue the example above, if Aguero scored in the 1st, 7th, and 11th minutes. His goal minutes would be 19, you would then lose £1.

As Simon said, you need to be careful on your bet sizes, but the player goal minutes markets do offer big potential profits for a small-to-modest risk.
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« Reply #5 on: September 04, 2015, 08:51:43 AM »

It's by no means as apparent as it used to be, but the general rule of thumb was you needed to be a lot more confident in a selection to be a buyer than a seller. It's a psychological thing that people prefer to cheer stuff on rather than hope they don't happen, so the value is more often in the unders as the firms adjust their spread up knowing they'll get buyers even at poor prices.
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tikay
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« Reply #6 on: September 04, 2015, 09:33:06 AM »

Great work, Simon, thank you.

Can you tell me how such accounts need to be funded?

Do we need to deposit a meaty sum to be able to trade sensibly, or just show proof of bank liquidity?

If we were betting to the sizes that Fred currently does, what sort of sum would we need to deposit?

How & when is "settlement" of the Account (not an individual bet, just the account).

I know there's no direct correlation, but in Fred, we sort of assume a max bet of around £300, except in exceptional circumstances. How would we come up with what amounts to the same thing, given that in some cases, the Spread might have a far greater potential loss. In a fixed odds bet of £300, our liability is known - exactly £300 - but in Spreads, there is a far greater potential liability.

Presumably, we can close our positions (buy/sell the opposite of our original position) Online? I used to have to phone them up. I don't like ringing people these days, as they sometimes answer. 

My only knowledge of Spreads is about 10 or 15 years out of date, so excuse my hignorance.



« Last Edit: September 04, 2015, 09:36:18 AM by tikay » Logged

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Simon Galloway
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« Reply #7 on: September 04, 2015, 09:40:02 AM »

opening an account

The old days, a little bit of KYC to go through and you could have a credit account with weekly settlement either direction.  Now you are far more unlikely to be offered a credit account and instead must put up margin to cover the bet liability.  So if a bet can swing 100 pts and you want to bet a £1 of it, you will have to have a balance of £100+ to place the bet.  Likewise with fixed odds season bets, this can gunk up your account.  If Fred wan't any season-long spread action, it would need to be with someone with a functioning credit account.

buyer or seller

What Jamie ^^ said may be true, but what I think is even more relevant is knowing your maximum liability.  For example, a football match where you can bet on the total shirt numbers of scorers.  The quote might be 42-45.  Buyers paying 45 immediately know thier maximum liability, as the worst possible result is 0-0 and they are sunk 45 pts.  Sellers selling at 42 get the opposite.  Their best possible result is 42pts, their worst possible result runs into several hundred, particularly when you have guys running around the pitch with 58 on their shirt.  Don't ever say in markets like that "he can't get a hatrick from midfield" .... at some point those 7-4 games do go in and it is very very painful if you get caught with your pants down.  I haven't worked for a spread firm, but I;d imagine on that quote of 42-45, the majority of punters will be buyers, for this reason.  Knowing this in advance, the firm may decide that true value is 42, but skew their quote to "fair bid, expensive offer" knowing that people will pay up.

arbing

I guess somone else on here might have something to chip in on this Smiley  In the very old days, for example cricket opening runs, with several companies in the industry, arns were regularly open.  One firm might open 340-360 whilst another firm opens 370-390.  Hopefully even first timers here will quickly work out how to take 10 risk-free points out of the game here.  Naturally, those arbs didn't stay open too long and often firms would limit your stake when they knew there was an overlap and/or mark your account up as an arber.  There are more complicated arbs, probably beyond the scope of this, but just to get your minds whirring a bit... Let's say firm 1 goes 350-370 and firm 2 goes 370-390.  Well obviously if you are selling, you are selling to firm 2 and if you are buying, you are buying from firm 1 and there doesn't look to be an arb there.  But there could well be!  If firm 1 has no stop loss, but firm 2 has a 200 run stop loss, you do have an arb.  In trading parlance, you can buy the 570 call options for free.  How you do this is you buy at 370 from firm 1 and you sell at 370 (with a stop loss) with firm 2.  Most results will see you break perfectly even ofc, and your hassle is to move money around.  However, on the rare occasion where the team plunders 570 runs, notice that you are stopped out of your sell position with firm 2, but still running your long position "for free" with firm 1.  So you will make 1x your unit stake for each run > 570.  Nice when it happens... it doesn't happen a whole lot.  You want a very volatile market and as small as possible stop loss.  And 2 accounts, funnily enough.
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DungBeetle
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« Reply #8 on: September 04, 2015, 09:44:41 AM »

It's by no means as apparent as it used to be, but the general rule of thumb was you needed to be a lot more confident in a selection to be a buyer than a seller. It's a psychological thing that people prefer to cheer stuff on rather than hope they don't happen, so the value is more often in the unders as the firms adjust their spread up knowing they'll get buyers even at poor prices.

This is true.  Also aside from people wanting to cheer, it's only a few hardy souls who want to sell something like total goal minutes in a match.  If you buy at 140 then you know your downside if it's 0-0, but people don't fancy selling and watching a 4-4 unfold!  I reckon total goal mins are always too high in the quotes.

It's not so much a problem when markets trade in running, but if you sell in a non premier league match then strap your seatbelt because you're in for the duration.

"More drama at Portman Road - what's happened now Kammy?"  <seller cries>
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DungBeetle
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« Reply #9 on: September 04, 2015, 09:50:49 AM »

An old flaw they used to have many years ago was that they increased test batsmen runs in a straight line - i.e. your guy gets a 4, his quote goes up 4 runs.  This didn't account for players getting "settled" at the crease so a winning strategy (small sample size) was to sell then close out if batsman got to 15.  If you notice now though, I think the quote starts lower and goes up in a steeper curve when the player gets to 10-15 and then goes up linearly after that to account for getting your eye in.
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tikay
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« Reply #10 on: September 04, 2015, 09:53:14 AM »



Thanks Simon.

So, for Fred purposes.....

1) We could deposit a reasonably modest account for short term bets  - individual games or events which take place in the near term.

2) For potentially volatile long-term stuff - "Season" football bets, Ashes Series, future Elections, that sort of thing, it would not really work for us, as we'd tie up so much of our Bankroll for too long. 

Have I got that right?
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« Reply #11 on: September 04, 2015, 09:55:23 AM »

How many spread firms are there these days, is it just Sporting Index?
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« Reply #12 on: September 04, 2015, 10:00:33 AM »

opening an account

The old days, a little bit of KYC to go through and you could have a credit account with weekly settlement either direction.  Now you are far more unlikely to be offered a credit account and instead must put up margin to cover the bet liability.  So if a bet can swing 100 pts and you want to bet a £1 of it, you will have to have a balance of £100+ to place the bet.  Likewise with fixed odds season bets, this can gunk up your account.  If Fred wan't any season-long spread action, it would need to be with someone with a functioning credit account.

buyer or seller

What Jamie ^^ said may be true, but what I think is even more relevant is knowing your maximum liability.  For example, a football match where you can bet on the total shirt numbers of scorers.  The quote might be 42-45.  Buyers paying 45 immediately know thier maximum liability, as the worst possible result is 0-0 and they are sunk 45 pts.  Sellers selling at 42 get the opposite.  Their best possible result is 42pts, their worst possible result runs into several hundred, particularly when you have guys running around the pitch with 58 on their shirt.  Don't ever say in markets like that "he can't get a hatrick from midfield" .... at some point those 7-4 games do go in and it is very very painful if you get caught with your pants down.  I haven't worked for a spread firm, but I;d imagine on that quote of 42-45, the majority of punters will be buyers, for this reason.  Knowing this in advance, the firm may decide that true value is 42, but skew their quote to "fair bid, expensive offer" knowing that people will pay up.

arbing

I guess somone else on here might have something to chip in on this Smiley  In the very old days, for example cricket opening runs, with several companies in the industry, arns were regularly open.  One firm might open 340-360 whilst another firm opens 370-390.  Hopefully even first timers here will quickly work out how to take 10 risk-free points out of the game here.  Naturally, those arbs didn't stay open too long and often firms would limit your stake when they knew there was an overlap and/or mark your account up as an arber.  There are more complicated arbs, probably beyond the scope of this, but just to get your minds whirring a bit... Let's say firm 1 goes 350-370 and firm 2 goes 370-390.  Well obviously if you are selling, you are selling to firm 2 and if you are buying, you are buying from firm 1 and there doesn't look to be an arb there.  But there could well be!  If firm 1 has no stop loss, but firm 2 has a 200 run stop loss, you do have an arb.  In trading parlance, you can buy the 570 call options for free.  How you do this is you buy at 370 from firm 1 and you sell at 370 (with a stop loss) with firm 2.  Most results will see you break perfectly even ofc, and your hassle is to move money around.  However, on the rare occasion where the team plunders 570 runs, notice that you are stopped out of your sell position with firm 2, but still running your long position "for free" with firm 1.  So you will make 1x your unit stake for each run > 570.  Nice when it happens... it doesn't happen a whole lot.  You want a very volatile market and as small as possible stop loss.  And 2 accounts, funnily enough.

I don't think the stop loss gives you a risk free arb.  It is a long time since I had a spread account, so this is from memory.  You have and sell at 370 with a stop loss at 570, England are motoring along at 400-4.  The quote can then move above 570 triggering the stop loss on the sell.  England then completely collapse and the final total is 450.  Hence you lose 120 x your stake.
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Most of the bets placed so far seem more like hopeful punts rather than value spots
DungBeetle
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« Reply #13 on: September 04, 2015, 10:02:38 AM »



Thanks Simon.

So, for Fred purposes.....

1) We could deposit a reasonably modest account for short term bets  - individual games or events which take place in the near term.

2) For potentially volatile long-term stuff - "Season" football bets, Ashes Series, future Elections, that sort of thing, it would not really work for us, as we'd tie up so much of our Bankroll for too long. 

Have I got that right?

For (2) you're probably best off using my account as I've got an old style account with credit facility.  For example the 3 long term football trades we have at the moment we can just settle either way at the end of the season with no need for margin.    I think a couple of the other guys on TFT have these as well.

For (1) you should open your own account and stick £500 in for short term stuff.  You also get a free bet I think (Peter said it was £100 risk free trading for a week).
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« Reply #14 on: September 04, 2015, 10:04:02 AM »

How many spread firms are there these days, is it just Sporting Index?

For sports I'd only recommend Sporting Index and Spreadex because they are regulated by the FCA and you are protected by Client Money Rules (i.e. if they go bust your money is segregated).

There are many other firms out there outside the UK, but I've heard some horror stories.
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