Thursday, 11 March 2010

Premium Charge Avoidance

Not too much action today, although the Burnley v Stoke City game finished a draw and as I've mentioned before, games between teams in the same group are worth backing as a draw and under 2.5 goals. I'm almost certain the Elo ratings would have predicted a draw for this one too.

It's really rather depressing reading about all the clubs that are folding or in danger of folding these days. Chester City went under, now today Farsley Celtic have gone, and also in some degree of trouble are Cardiff City, Southend United, Portsmouth, and most troublingly of all - Crystal Palace. 

I am too young to remember Accrington Stanley folding, but I do recall Third Lanark and the original Aldershot going bust a few years back. Clubs actually folding used to be something of a rarity, but these days it's one after the other! Relegation used to be the worst that could happen to your team. Not these days.

To cheer myself up, I've been searching around for some workable ideas on Premium Charge avoidance, and pretty much come up empty.

Incidentally, for the person who asked "How much do you have to make to pay the premium charge?" the answer is that the Premium Charge is not related to winning size, but rather the ratio of wins to losses. Unless you are a trader, you will be highly unlikely to ever face this charge, but you can make £0.50 in a week and be eligible for the PC, or you can make £50,000 and not pay it.

Of course, you can make £50,000 in a week and pay 20% and then lose £50,000 the next week, but don't expect a refund. Just one of the unfair things about it.

As of right now, my charges make up 19.91% of my gross P/L, and unless I can get this above the magical 20% figure, I pay each week. On the 3rd December I avoided it when my charges hit 20.01% but it's been under that number again every week since, so the only time I don't pay the PC is if I have a losing week.

On the face of it, it would seem an easy task, but the problem is that if I make £500 in a week, I am 'only' generating about £20 in charges. If I lose £500, I generate exactly £15 in charges. Clearly with a win, the percentage of charges to gross P/L gets lower, but while a loss helps by increasing charges at the same time as reducing the gross P/L, it is not a desirable option unless the loss has been arbed somewhere else, but this is easier said than done. Losing on Betfair, winning on BETDAQ... but how do you know on which site the winner will come?

This is one of the ideas floated on the forums:

"I read about a simple but ingenious way to avoid PC - have a couple of big, big loss on Betfair, which are negated on Betdaq. You lose only the commision paid on Betdaq, and any transaction costs incurred. But your account is in a loss so you have room to win in the markets where Betdaq is no match."

"Unfortunately this doesn't work. On exchanges the price is effectively meant to reflect the real value of an event happening. They make their money off the commission not the odds. So you cannot "lose" in the long run (only via commission). So if you were going to have £1,000 on a 10/1 chance (especially if the odds are the same on another exchange which means the pricing is likely to be correct). You would lose 91 times out of 100, but win 9 times and effectively break even. Although, on reflection this would lower your ROI if you did this frequently which would put you below their threshold."
I have tried some 'almost' arbs using the Handicap and the Match Odds markets to 'almost' guarantee a win, but having nearly had the one margin of victory hit me for a sizeable amount, I decided that method was too stressful.

There are other opportunities in the football markets, for example the 0-0 score can be backed or layed in several markets, but the perfect arb is hard to find.

Besides, when you have been trading for several years as I have, making £100 in one market, and losing £100 in another doesn't make much of a difference to the percentage.

Betfair seem to have worked this one out quite well unfortunately. I'm open to any ideas from sharper minds than mine as to how I can effectively avoid this each week.

"A horse never goes as fast as the money you put on it"


ferdinand said...

If you are a fairly pure trader there is little point trying to avoid PC IMO. Avoidance costs more in time and effort than just paying.

Arbing is good but will lose excessively as you're competing against those on 2% commission.

Anonymous said...

So Cassini, you're actually a trader then? Not someone who punts away on correct scores, winning margins and draws and has no chance in hell of paying premium charge. In which case, what's this blog all about?

SleazyNick said...

He stated many a time, he trades on betfair but does his straight bets on betdaq.

I think he mainly trades us sports, but i might be mistaken?

Anonymous said...

Depending on your commission rate there's plenty of things you can do to avoid PC and maintain a low comm rate in the bargain :)

You'll be competing against the 2%'s but there are plenty of interelated markets on betfair if you want to put the effort in

Cassini said...

Correct Nick. For Anonymous (1), I draw your attention to the entire history of this blog, but a summary from a couple of days ago may help your understanding of the situation:

Although much of the recent focus has been on football, long-time readers of this blog will know that this sport is just one of many strings to my investing bow. I have a quiver full of arrows that I unleash in various amounts at any number of sports, with the amount determined by the edge I have. The Betfair Premium charge is the price I have to pay for the ability to trade in markets that other sites either do not have at all, or that lack the liquidity I desire. For outright punts I almost always use BETDAQ these days. Having paid the Premium Charge every single week so far this year, there's no benefit in taking slightly better odds on Betfair and then losing 20% in charges!

For Anonymous(2), if effective PC avoidance was that easy, I really think someone would have found a way by now. The charge has been in effect since late in 2008 and there's no reason why any loophole would not be common knowledge and the fact that nothing effective is out there speaks volumes. I do accept that there are ways to reduce the charge, but avoiding it is a different matter.

Anonymous said...

a lot depends on if your a trader or a punter

if your a punter its worth checking a site like oddschecker before placing bets and see if you can get similar or better effective odds (odds compared to those at betfair after commission) elsewhere

if your a successful trader your either stuck with the charge or you could find someone who you trust and who has a large losses on their betfair account and come to an arrangement whereby you trade on their account and give them say 1% of their total losses in exchange for it...

the big problem here is the trust part