Posts Tagged commission
Back the draw
Posted by Peter Webb in Football / Soccer on August 27th, 2011
I’m going to put up some information on Saturday’s about football / soccer. Some of it may seem contradictory for some of you and some logical, but it’s all based on years worth of research and application in the market.
For starters: -
If you backed the draw, pretty much at random, last weekend; you would have have netted a cool profit. I know, because I did exactly that and suffered a 60% thumping as a result! I was doing some work on how diversification affects your net P&L if you are backing varying numbers of events and wanted to test something.
It drew me back to a spreadsheet I did in 2005 based around the efficiency of the market. I came up with a back the draw strategy that squeaked around a 1% margin on average out of the market. I brushed down the spreadsheet and updated it and had another look at the efficiency of the market.
I looked at 15935 recent matches and discounted the implied probability the market was giving on the draw. I then compared that to what happened. On average the market was only about 0.66% out. The chance of a draw occurring versus what the market offered at the time was pretty much spot on. It also highlighted that you could come up with some crazy system based on the draw and still end up with only a small slice of luck. A lot of filtered selections could still end up and fool you into thinking that you had discovered some edge. Check out a few e-books for some examples of this.
The main problem was not an edge though. I worked out, with a simplistic calculation, that using £10 stakes I would have lost £8686 to commission. If you imagine somebody staking in a sequential manner, their £10 per match turned into nearly -£9k. This also highlights the difference between commission on outright betting versus trading on the price movements. It is much more favourable for the latter.
If you think hard enough though, even with that commission paid is possible to overcome. It ‘only’ represents 3.9% of the total amount bet at the worst rate of 5%. Pay above 5% though and it becomes very hard indeed.
So there you have if. The market is still as efficient as ever, but this means you will need a fair chunk of data to ensure you have an edge. You will also need to ensure that edge is quite large to overcome commission. By trading you reduce some of the liability and that will help you overcome that 0.66%.
Eye Watering
Posted by Peter Webb in Bet Angel on August 25th, 2011
I’ve been playing around with spreadsheets and a number of other strategies recently. With the increase in commission charges levied against me, I figured it would make sense to look outside my normal activity. While it’s flattering to know you are better than 99.9% of market participants have ever been, it’s less flattering to give away the majority of your profit! By ‘normal activity’ I am talking ‘active’ participation. I now have a very big incentive to find less manual ways of participating in the market.
One area I have been re-examining is that of value. The reason I am examining this area is that the market on Betfair is remarkable efficient now. In fact it is too efficient, I’m struggling to see how layers can make anything at some of the prices on offer! You can often get a pretty competitive big field handicap where the outcome on the race is very uncertain, yet the market is priced very close to 100% for a lot of the time. At this level, due to the variability in returns and more normal commission rates, I think it’s possible to overturn the margin lost to the other side of the book. This is actually what brought me to exchanges in the first place.
So I blundered in last week with a neat idea that would probably overturn this negligible percentage. I got lucky as, to my surprise, I managed to not only overturn that small percentage but pick a LOT of winners. This was unfortunate as you expect this now and again with a value strategy, not just right at the start. This is the second time this has happened to me.
The net upshot is that I now find myself back at square one. Because of the higher rate commission paid, I have to take a theoretical eye watering massive loss on these positions. I could wait for things to even out, but I am not sure that I can overcome the difference between normal commission and the super premium charge. I have quickly shuffled this strategy off to Betdaq. I tried this on Betfair because I though generating commission would help lower my charges. But when you look at the detail it seems you actually need to win and lose a huge amount of money to stand any chance of paying much lower commission. So much, it looks impossible to me.
I could be wrong, if any body has done the maths, please send me a spreadsheet!
60%
Posted by Peter Webb in Bet Angel on July 18th, 2011
On the first day of trading on 22nd October 2010 Betfair shares closed at 1550p. At the time of writing this post the shares are trading at 627p or down nearly 60% from that closing high. How ironic!
I don’t want to feed that hand that bites me, to reverse the common metaphor. So, for me at least, action speak louder than words. Whether volume decreases or increases on the Betfair exchange, why will be the most pressing question. Volume will increase on Betdaq for sure. With all the risk and effort I take, I can’t operate at 60%’; as can’t many others who have contacted me. But, there are plenty that still have some way to go to be charged at this level, so I look forward to helping those Bet Angel users get there as fast as possible!
I’ll post some more thoughts in the coming days and report back on the markets as well.
