Exiting Times

There were a few questions / comments from my most recent post:

SU does indeed mean Straight Up, at least in this context.

I think there’s some confusion about the game I was writing about when I wrote “The Lakers are too short at 1.27 SU against the Suns. Lay, with a view to trade. I do think the Lakers will win, but they will trade higher.”

This was written for Game 5, already in the history books, with the Lakers very lucky to prevail by 2 points courtesy of a tip in at the buzzer.

Paul and Anonymous may be looking at Game 6 tomorrow, where the price is currently around evens.

Anonymous said...

I read comments all the time from you so called "traders" like the one you made here - expect them to win but will trade higher etc. etc. It seems that all traders get the higher price without fail. Am I correct?

If there is anyone out there, be they punter or ‘so called trader’, who claims to get these calls right ‘without fail’, a healthy dose of skepticism would be in order, but one can be reasonably confident that any traders who have been around for a while get these calls right more often than wrong.

For Brian Bee who asked “how many ticks higher would you aim for?” it’s hard to give a definitive answer since every game has its own personality, and the pat answer is that I aim for as many ticks as possible and trade out when (and if) it is value to do so.

When I started out, one of my strategies when laying low odds pre-game was that if the price hit my lay price * 1.5, I would reduce my exposure by approximately 50% . The other 50% was layed off at the lay * 1.75 mark, and then I might look to green up at lay * 2, but while this sounded good in theory, in practice, it wasn’t that straightforward. I liked the idea of having a pre-determined exit point, but soon found that when it comes to in-play trading, any rules tend to go out of the window. Every game is different.

You have to adjust for events that are unfolding as the game goes on. For example, in last night’s game, a key player for the Lakers (Kobe Bryant) picked up two fouls early on, something that made me a little more confident in my position given that Bryant then had to sit on the bench for a fair while.

Other times I will wait for a momentum change or a time-out when the prices settle down before trading out, and other times I will take a loss. It’s (relatively) easy to lock in a profit for the sake of locking in a profit, but if you are not exiting at a value price, then you are costing yourself money in the long run.

Sometimes the value price means closing out at a loss. It happens. As I said at the beginning of this post, no one gets calls right 100% of the time and while the concept of value in sports is subjective, if your account balance is not steadily increasing, then you aren’t finding it.

For anyone looking for an example of how my initial exit strategy would work, in last night’s game, where the lay was at 1.27, my lay of 100 units saw me exposed to the tune of 27. I would have been looking to lay off 14 at around 1.4, the other 13 at 1.48 and green up at 1.54. It’s always a little annoying to see the initial lay end up a winner, but in this case it would have worked out well. The Lakers hit 1.6 but went no higher (at least not that I noticed).

I spent some time a couple of years back reviewing charts of basketball price movements for Peter Nordsted, and laying pre-match at short prices was clearly a profitable strategy. How to maximize those profits, i.e. where you choose to make your exit point, is a personal preference. We all have different levels of risk tolerance.

Laykers, Tiger And Spin

The Lakers are too short at 1.27 SU against the Suns. Lay, with a view to trade. I do think the Lakers will win, but they will trade higher.

A paper by economist Jennifer Brown has reached the not-too surprising conclusion that playing in a tournament with Tiger Woods reduces the performance of golfers by a full stroke. Hardly a huge margin over a four day tournament, and in fact had I been asked to guess a figure, I would have gone higher.

A more interesting study might have been the performance of players in the same group as Tiger, especially on the final day, but that is yet to be done so far as I know.

Brown calls this an "adverse superstar effect" - in the face of a superior opponent, pro golfers have less incentive to compete.

And finally, an interesting way to spin a loss. From the SBP's mail earlier today:

We had a bunch of plays on Wednesday and we ended up losing a couple units, but we're still moving in the right direction in the MLB.

To be fair, his results overall recently ARE moving in the right direction. Just not on Wednesday!

Letchworth Betjeman

Rob the Builder's blog is usually a good read, but he really has gone too far with his latest post.

He writes:

In the meantime I'll console myself that I've developed a fairly unique betting blog. Many blogs come and go when the task of winning is found to be harder than planned. Other blogs are written by the habitually successful. I've developed a fairly longstanding blog, yet have made bugger all for many months! The stubbornness of the Yorkshireman I suppose.

Am I the only one to notice that he produces not one shred of evidence to back up this claim to make 'bugger all'? The last screenshot he included on March 1st clearly shows a profit on the day, and anyway, as we all know, these screenshots can be easily faked.

It seems to me that these modest claims of 'under-achievement' only go to show that he's really a winner like the rest of us. Don't be taken in by this pretence of Rob being an honest guy regaling his ups and downs in the world of betting, even if his words are at times almost pornographic. This, from 19th February could have been ripped straight from the pages of Playboy:

And often I seem to have an ‘out-of-body’ experience when following women’s tennis. Part of my brain is telling me to lay low, but the instinct to back my selection is too powerful. By the time I finally regain control of my body, the odds have swung against me and I take a disgruntled all-red.

Disgusting.

Lazy Lakers

A nice win tipped for the Suns last night at 2.48, a very generous price against a team as moody as the Lakers. On their day, they are the best team in the NBA, but they have a habit of going to sleep and did so again last night with the Phoenix bench essentially winning the game for the Suns in the fourth quarter.

As I wrote yesterday, this win makes game 5 very interesting. The Suns have the momentum and with a win can close out the series at home in game 6. If the Lakers keep going as if the series is a “slam-dunk” they will lose.

Unfortunately, I shall be away for that game and a potential game 7 for investment purposes.

I was trading the game on BETDAQ (liquidity sporadic, but occasionally there was value) where they suddenly suspended the game for site maintenance. Unlike Betfair, who don’t turn games in-play when there is scheduled maintenance, BETDAQ do, something to be aware of unless you suddenly want to find yourself exposed.

Suns Coming Up

The Boston Celtics -5.5 was another loss yesterday for the SBP yesterday which makes six consecutive losses and, of course, back-to-back ‘system’ losses.

I took a loss on the game myself thinking that the Magic showed signs of giving up in game three which I thought might continue into game four. It didn't happen. Helped by some dubious calls (the NBA doesn’t like sweeps because it costs them money!), they prevailed after overtime.

Rick did actually acknowledge the run of losses today in his e-mail, better late than never I suppose.

The Celtics and Lakers will both win their series, (and not just because the NBA wants a final with these teams in it) but if Phoenix can get a win tonight, it will make things very interesting. The Lakers still have home court advantage, but they can be sloppy. The line tonight is Suns -1.5 are 2.48 (or -1 on BETDAQ). Worth a few bob in my opinion, but I'll see how the game goes before going in too big. If Bynum is out for the Lakers, as rumoured, that would be another plus.

The Betfair play-off basketball markets are a little odd. The over/under for the Suns v Lakers game four in a couple of hours is 221.5. Fair enough, but then Betfair add markets a full 10 points either side of this number so that the under 231.5 is at 1.33. Maybe it generates more interest but lines are usually set at where the expected result will be, and if the prices show that the line is off, then the line moves by a point or whatever and a new market is added.

Not too much going on right now, and I'll be taking a few days off at the end of the week to get some hiking in with the (almost) Mrs. Cassini, so the blog will go quiet for a while. I went out for a run yesterday, GPS and watch recording speed and distance (got to love those numbers) and it turned out to be a run at a blistering pace. Unfortunately, by that I don't mean that it was an exceptionally fast run, but rather that I ended up with a big blister on my heel. I still have a few days to recover before the trip.

This time of year seems like as good a time as any to get away from trading, although I'll miss a few basketball and ice-hockey games, but there's always something going on in the world of sports so it's a case of choosing your poison.

Baseball's still slow right now with poor liquidity in-running, and so is the ice hockey. Occasionally BETDAQ have some decent liquidity on these ice-hockey games, but other times there's literally nothing. Strange.

Credit where credit is due, and th SBP's baseball picks did improve last week, going 16-11 for a gain of 392.37 to a level stake of 100. For the season his record is 67-74 for a loss of 815.89.

I had another winning week, but I'm still holding the Premium Charge at bay for now with my total charges at 20.47%.

With so little going on, I have been trying to catch the Elo ratings up to the end of the season. I'm up to the end of March for the major leagues, but it's all very time consuming. Kind of interesting though. I'll have some observations in due course, and try to make some comparisons with Talkbet's interesting Powerstats season summary. I suspect his automated process is similar to my manual spreadsheet process, so it will be interesting to compare findings. Well, interesting to me.

I also cleaned up the blog rolls so that a few extinct ones have now been removed (amazing how many blogs fall by the wayside) and I also created a seperate list for the primarily horse-racing blogs. John the Gambler's blog will soon be on its own in a new Walter Mitty section. If his bets are to be believed, it looks like he took a hammering on the golf at the weekend, but 'if' can be a big word.

Punting Psychology

Continuing from the last post, and the favourite-longshot bias, just why should it be that even if it doesn't make financial sense to do so, people continue to support the underdog?

The conclusion of studies appears to be that it's not simply because we get some special pleasure from playing the horses at 100/1; it's because we tend to overestimate the long shots' chances.

This bias might be explained by a tendency that behavioral economists have labeled the "availability heuristic": We make judgments about probability based on whatever data spring most easily to mind. The examples you remember are the ones that influence your beliefs. If you've just watched hours of footage about 9/11, for example, you might think you're more likely to die in a terrorist attack than in a car accident.

A study by the Broadcasting Standards Council found that Crimewatch UK increased the fear of crime in over half of its respondents, and a third said it made them feel "afraid".

We are apparently quite easily influenced. A few years ago, a graduate student named Nadav Goldschmied invited students to read a fake newspaper article about an upcoming rugby match. According to the article, odds makers had given one of the teams just a 30 percent chance of victory. When asked to make their own predictions, the students were more optimistic. Instead of pegging the underdog's odds at 30 percent, they guessed it was more like 41 percent. If the article specifically referred to the disadvantaged team as an "underdog," the effect was even stronger, with the students pegging the chance of victory at 44 percent.

Goldschmied repeated the experiment twice more, replacing the rugby teams with mayoral candidates and then a pair of businesses competing for a contract. In each case, the results were the same: The mere act of labeling one side as an underdog made the students think they were more likely to win.

Last Favourite

I'm not a horse racing man by any means, but some of you out there might be interested in this post.

Most serious bettors are aware of the favourite-longshot bias in horse-racing, a phenomenon that was first observed in 1949, and 60 years later continues to be seen.

I remember first hearing about this while I was studying my 'A' Level in Pure Mathematics with Statistics. My Pure Maths was crap, but I did rather enjoy the Statistics part. A pity I'd forgotten most of it by the time Betfair emerged, but the Internet's a wonderful thing.

A recently (2010) published paper from the National Bureau of Economic Research in the USA reviewed the results of no less than all 6,403,712 horse races run in the United States between 1992 and 2001 and some of the findings are very interesting.

The rate of return to betting on horses with odds of 100/1 or greater is about -61%, betting randomly yields average returns of -23%, while betting the favorite in every race yields losses of 'only' 5.5%.

They then also included races from Australia (2,725,000 starts) and the UK (a mere 350,000) which also showed the same favourite-longshot bias. The chart is included above, along with the findings of other reports.

I also remember being told at a tender age that the favourite in the last race was seldom value because it was typically over-bet. It seemed logical, with the explanation that punters were losing by that time, and were looking for a lower risk selection in the last race to recoup some of those losses. According to the report, this was first mentioned in a study made in 1956 and cited in other subsequent studies, but all these were based on small samples.

Not many people would consider 6.4 million a small sample, and it was interesting that this study did not show the last-race results to be statistically significant from other races. So there goes that theory.

I'm noticing a similar trend with baseball, but I haven't yet researched 6.4 million matches, (could be a while), and my sample is way too small for any conclusions.

Self-Exclusion, Self-Delusion

A cheeky, and somewhat tongue in cheek, comment recommended John the Gambler's blog for a "real gambler's blog" and while I do include this in my "Other Blogs I Read" blogroll, in part because it's one of the longer running blogs out there, and in part because it can be quite entertaining, a gambling blog it is not.

John gives the impression of a traditional on-course / betting shop gambler who discovered Betfair, had some initial success and then found out the hard way that winning in the brave new world wasn't that easy.

Some of his wins / losses are no doubt true, but there are too many contradictions to take him seriously.

On 29/3/08 he wrote

"All round one of those days where I will be happy to settle for 50 quid profit. I only need just over 100 to hit 5k for the month, so I will be taking it very steady till the end of March.

I would welcome suggestions/comments on how to make money over the next couple of days, as I say I cannot see many. What I call a quiet end to the month."

Then a few hours later, a very brief and dramatic post (John loves drama) read: "Just had a really bad day on Betfair. Time for a long break. Catch you all later. I am afraid this blog is dead. Bye for now. :-)"

We never heard how bad the day was, or what the loss was, but today John writes: "I self excluded when I stuck 10K on a US geggee. Very stupid. Was still 10K up on month but very stupid. Thought the break would do me good. I was 20K up on the month, but lost half midway through the month with one stupid bet."

So in 2008 we were 28 days into the month and "a little short of £5k", but two years later and the profit for the month was actually £20k?

It's a tendency of problem gamblers to remember their wins but forget their losses, and it seems that time has softened the loss for John. The size of the loss is of course irrelevant. I think the important things to note here are that it was serious enough to prompt a request for self-exclusion, and that John is not being honest with us, and possibly himself, about the loss.

£10k on a US horse race? Really? Leaving aside for a minute the fact that without any specialist knowledge, or any history of betting on these markets, this would be a ridiculous market to bet even £2 in, since the post was written late-afternoon (5:41pm), and it was thus still morning in the USA, I have my doubts that US horse-racing was the market where the loss occurred. The truth is out there.

You Punter!

Am I a trader or a punter? A recent post apparently produced “evidence if it were ever needed that you are not a trader but just a punter”.
I think it was meant as an insult. “Just a punter!” Oh the shame.

Actually, as Matt said “Aren't punters and traders the same thing? :) It's all gambling”.
Does it even matter?

Traders are clearly “taking a risk in the hope of gaining an advantage or a benefit”, the definition of gambling, and the outcome of a trade is uncertain, and so are punters.

Given that trading and punting are just two (sometimes overlapping) approaches at solving the same problem, I’m not sure why a trader should be held in higher regard than a punter. I would think it more appropriate to base any respect on profitability.

What do most people mean by a ‘trader’ or a ‘punter’ anyway?

If I back something pre-game and then lay off at 1.01 two minutes from the end, am I trader?

If I start trading an event, and decide that there is no value in the price to lay off at and let the bet run, am I a punter?

And then there’s the question of trading styles. All traders do not trade the same way. (This is a good thing!) Some trade a couple of ticks, others are swing traders, others are momentum traders and so on. Some trade pre-off, others in-play.

So it seems to me that it would be rather silly to limit my options to just one style or the other, for no good reason. Winning at anything can be achieved in different ways. Find a style that suits your risk tolerance and if it’s profitable, run with it, but no extra credits are awarded FOR style. It’s an individual choice. Play to your strengths. For most people (not all) a job title in itself is meaningless - it's the salary that matters.

Where do I fit on the trader-punter scaIe? Definitely well over to the trader side in terms of money, (or the trader targeting Premium Charge would never be a problem), but certainly not averse to punting on certain markets or on events that might be running parallel to a trading event if I consider it value. My Elo selections and those of Football Elite fall into this category.

One limitation of trading is that only one event can be traded at a time. Sure, there are the 2.5% of the population I was reading about who are “super-taskers” but unfortunately I’m not one of them. I get distracted or bored often enough as it is, with just one event in-play!

Quantum Leap

From the pages of the NZ Herald comes this:

Fear not, fans of the Three Lions, the World Cup is yours. Financial analysts at JP Morgan have crunched the numbers and found that England will triumph in South Africa.

Bank boffins Matthew Burgess and Marco Dion used quant methodology (that's the use of mathematical data to assess investment opportunities - do try to keep up) to find that Fabio Capello's men will end 44 years of hurt by downing Spain in the final. According to their numbers, Holland will finish third. No word on the All Whites.

"Having developed a rather successful quant model over the years," Burgess and Dion say, "we intend to introduce it to our readers and also use its methodology to apply it to a fruitful field for statistics: football and the World Cup."

Swiss bank UBS sees things differently. They're predicting Brazil will triumph in South Africa. Using economic theory, the Swiss bankers rate Brazil a 22 per cent chance of lifting the cup and Germany an 18 per cent chance (this was before the exit of Michael Ballack).

The fondue-munchers have calculated England won't make it past the quarter-finals. Again. And, again, no word on the All Whites.

Home Run

A couple of good wins last night put my baseball investing for the season into the green for the first time. After my documented bad start on April 17, my tried and tested slow and steady style has recovered that loss so it's onward and upward from here. I hope. Given the SBP's record in this sport, I was glad to see that one of my selections was opposed by one of his seven. (He did go 4-3 last night, but still 57-67 on the season).

His basketball selections are on a losing sequence of five, so anyone following his A, B, C progressive staking system is on the verge of a second system loss, but what does he have to say about it? Nothing. Very telling too, how he completely ignores the losses, but never misses an opportunity to tell us about a win. Not the behaviour of someone with any confidence in his selections.

It's been suggested that I am 'obsessed' with the SBP, but I like to think the word is, or rather was 'intrigued'. I was admittedly intrigued by how his NBA picks worked, in particular what were the key spreads that he felt were favourable and why. Well I now know what they are, and accept that over the past few years, these may have performed better than average, but there is no explanation as to WHY these spreads should be more profitable, and no rationale for his bizarre A, B, C staking system.

It is my opinion that the Professor is not an expert in Sports Betting, but in Marketing, the subject in which he received his degree. He has no edge, and fancy staking plans might disguise that fact for a while, but bad value catches up with you sooner or later. And anyone selling a Craps system clearly doesn't have the best interests of his customers at heart, as well as sending the message that he thinks we're all idiots (as opposed to simply curious!)

What a contrast to the SBP is Matt at Football Elite, the one service that I do pay good money for. I missed the start of the season, only joining at the end of November, but since that time he sends out not only the tips each week, but also a follow up update e-mail. Some weeks this can't be a pleasant task, but Matt does it, secure in the knowledge that his clients know that he has an edge, and that when there is a disappointing set of results to report on, there's no point hiding from the fact. His end of season review was very interesting too. Well written, thoughtful and above all, honest.

Long-time readers of this blog will know that I am naturally very sceptical of tipsters, in a healthy way of course, but Football Elite have been a breath of fresh air. The SBP hasn't. Very simple.

Number Crunching

A couple of days ago, I posted some numbers that I had calculated last July, showing the daily average that one would need to make on the exchanges to earn the equivalent of the UK median and mean incomes.

Anonymous very kindly pointed out that my figures assumed a higher tax rate than is actually correct, so in the interest of accuracy, I am revising them to reflect the current tax and National Insurance rates for anyone earning this amount.

The median UK full-time gross income as of 2008 is £25,123.

The net is £19,259.07 which works out at £52.76 a day.

If you choose to trade just 5 days a week, then you would need to make £74.07 per work-day but I suspect that most full-timers actually work for at least part of most days.

Even as a part-timer, there are very few days in a year (24 on average) when I have no activity on my Betfair account, although the time spent might vary from a few minutes to several hours. Two days off a month doesn't sound like much, but trading is something I enjoy and to quote Harvey MacKay “Find something you love to do and you'll never have to work a day in your life”.

To achieve the mean full-time gross income of £31,323, you would need to make £64.66 a day (or £90.53 per day for a five-day week).

Unfortunately for those who are looking for (close to) the same steady profit each day, trading is not like that, at least it's not for me. I have a definite 'season' when I make the majority of my profit - October through March accounts for a lopsided 76%. The Spring and Summer months are a relative struggle, and I suspect that most traders have their better seasons too. The two worst months are April and May, and June and July aren't too much better.

If only I could seriously get into trading tennis or golf but finding value in those sports really is work, at least it is for me.

In 2006, golf was my top summer sport, (followed in order by baseball, cricket and tennis), but by 2009 golf had dropped to last, with the top three in order being baseball, cricket and tennis. Evidence that what works well one year doesn't necessarily work so well the next. Evolve or go extinct I guess.

The Yanks Are Coming

May 18 (Bloomberg) -- A glimmer of common sense in the US perhaps. What next - an openly atheist Presidential candidate?

When U.S. Representative Jim McDermott went looking for revenue to improve foster care for kids, he said he stumbled on what may turn out to be a jackpot: a tax on Internet gambling.

McDermott is seeking to impose taxes on online poker and other Internet gambling that could bring the federal government as much as $42 billion over 10 years, according to a congressional analysis. States may collect as much as $30 billion, McDermott’s office estimates.

“It’s a human activity that people are going to do, and it’s a good place to pick up some dough,” said McDermott, a Washington Democrat, in an interview. “I’ve gotten a thousand ideas pumped at me about what we should do with the money.”

The House Ways and Means Committee tomorrow will consider his proposal, which depends on passage of a separate bill to legalize some Internet gambling and roll back a law designed to block wagering beginning June 1. That bill would let U.S. residents gamble online with companies licensed by the Treasury Department.

Twenty Questions

Are you a problem gambler? Twenty questions for you.

1. Did you ever lose time from work or school due to gambling?
2. Has gambling ever made your home life unhappy?
3. Did gambling affect your reputation?
4. Have you ever felt remorse after gambling?
5. Did you ever gamble to get money with which to pay debts or otherwise solve financial difficulties?
6. Did gambling cause a decrease in your ambition or efficiency?
7. After losing did you feel you must return as soon as possible and win back your losses?
8. After a win did you have a strong urge to return and win more?
9. Did you often gamble until your last dollar/pound was gone?
10. Did you ever borrow to finance your gambling?
11. Have you ever sold anything to finance gambling?
12. Were you reluctant to use "gambling money" for normal expenditures?
13. Did gambling make you careless of the welfare of yourself or your family?
14. Did you ever gamble longer than you had planned?
15. Have you ever gambled to escape worry, trouble, boredom or loneliness?
16. Have you ever committed, or considered committing, an illegal act to finance gambling?
17. Did gambling cause you to have difficulty in sleeping?
18. Do arguments, disappointments or frustrations create within you an urge to gamble?
19. Did you ever have an urge to celebrate any good fortune by a few hours of gambling?
20. Have you ever considered self destruction or suicide as a result of your gambling?

Those questions were probably conceived long before betting exchanges, and some of those questions are rather vague, (Number 14: Yes, the game went to overtime), but you get the idea. If you answered yes to any of them, then apparently you "might" have a problem. Three or more, and you are a problem gambler.

If you are a problem gambler, you will think differently from other people about your betting. You will tend to believe that:

■you are more likely to win than you would expect by chance
■in a game with random numbers, like roulette, certain numbers are more likely to come up than others
■winning twice in a row means that you are on a 'winning streak' – so you bet larger and larger sums
■you are more likely to win at a game of chance if you are familiar with it
■certain rituals can bring you luck
■having lost, you can somehow win back your losses by gambling more.

Speaking of which, I was reading the other day of someone who said

"Sometimes I wish I had my old Betfair account back again, but unfortunately I have been banned. Remember that old Betfair slogan "Betfair don't ban Winners". You don't hear it any more."

What the person in question failed to mention is that they banned themselves! Betfair are simply doing what they were asked to do. They don't (yet) ban winners, but they do ban losers who ask to be banned. Seems responsible enough to me.

Rude Americans!

I recently mentioned my disgust at the Sports Betting Professor's attempt to promote a Craps betting system, and I wrote a reasonably courteous e-mail to him which read:

Please don't insult my intelligence by sending me sales pitches for a game that has the odds weighted against us. Admittedly betting the 'wrong' way is the best strategy there is, but the advantage is very slight (1.4% house edge versus 1.41% house edge on pass/come bets) and the information is available for free on the Internet.

Craps is a great game to play for fun, but you do yourself a huge disservice by trying to sell a system that claims to be a winning system. It isn't. It's a losing system that just happens to lose at a slower rate than any other craps system.

Please desist sending me this nonsense.

I actually received a reply, rather terse I thought:

Next time, just delete the emails you don't want to read. Very simple.

Regards,
Rich

His Complaints Department must be overworked. If I had actually paid for any of his, frankly rubbish, selections, I'd be demanding my money back, but since they're all arriving free of charge, I shall continue to monitor and report on them. As of 17.May, he's 53-64 on the MLB, for a loss of 11.2096 points. Six of eight in the last three days though to be fair.

He also had the Orlando Magic to beat Boston Celtics by 6.5 in Game 2.

Easily Said - Not So Easily Done

One quick post to address a recent comment that “£30-40k a year wouldn't be worth the hassle of being full time, you could easily make that part time”.

I suggest that whether or not making £30-40k a year full time would “be worth the hassle” rather depends on where you are in life, and what other options you might have.

I would also suggest that making that amount is certainly not something that can be done easily but something that requires not only a commitment of time but which also requires a number of skills and an interest in sports that not everyone has. If it could be done "easily", everyone would be doing it, but not many are.

The official figures for 2009 are not yet released, but as I posted last July, the “mean” gross annual earnings for all full-time employees in 2008 was £31,323 and the “median” for full-timers was £25,123.

A 30-40k NET income from trading would thus be a significant pay-raise for more people than not, but there are other things to consider.

Future earnings are a big consideration. While £30-40k might be a good pay raise for you right now, how much more might you be making in 20 years time? In most professions, a whole lot more.

Legislation / Regulation: The furore over the Premium Charge showed just how dependent many people are on one company – Betfair. If the same happened here as recently happened in France, as unlikely as that is, a lot of people would be left high and dry if they have all their betting eggs in one basket. There are other risks too. Betfair could (in theory) change their commission structure to resemble that of the financial exchanges and charge per trade. Betfair could decide that they want to move more towards the bookmaker model, and ban winners. Who knows what the future holds. Ten years ago, how many of us had even heard of Betfair? It would be a downer to quit a job Friday, start trading full-time on Monday, only to find our projected income reduced, slashed, decimated or eliminated.

The perfect scenario is one where you are able to supplement your income by trading part-time although this requires a sacrifice of leisure time.

Of course it depends on your occupation, but many businesses are now flexible in allowing you to choose the hours you work, and where you work, at least to some extent.

I certainly wouldn’t recommend for anyone to give up a steady job for the insecurity of full-time trading. It all sounds very glamorous, but the reality is rather different, at least based on my part-time experience, and the sums mentioned are attainable on a part-time basis.

For what it’s worth, I calculated last July that, very approximately, taking into account taxes and National Insurance, you would need to make the following daily totals trading or betting to be at these levels:

Median: £38; Mean: £48; Top 25%: £58; Top 10%: £82; Top 5%: £108; Top 1%: £216

Apple Picking Jobs

It surely happens to all of us traders at some time, but the next time you feel bad about bailing out of a position that appears to be a lost cause, going red-all-over, only to watch your original position recover and go on to win, spare a thought for Apple’s Steve Jobs.

As the Yahoo! Finance page today tells the story:

Jobs and other employees were feeling the pinch. Stock options they had been granted during the boom now seemed completely worthless. After all, Apple stock would have to climb all the way back up to those giddy heights before the options even started to show a profit again.

So Apple employees were allowed to swap many of their options for a smaller number that became valuable at a lower price.

As for Jobs: He volunteered to cancel all his options in return for a far smaller number of shares, worth about $75 million at the time. The trade made sense -- unless Apple boomed again.

Ahem.

The shares Jobs received are worth $2.5 billion at today's stratospheric prices.

But what would those options have been worth?

Digging through the old proxies reveals a remarkable tale.

Jobs held 15 million options at an exercise price of $9.15, which meant they started to gain value only if Apple stock exceeded that price, and 40 million options at an exercise price of $21.80. Apple at the time was little more than $7 a share. (These prices have been adjusted to reflect the subsequent stock split.)

Total value: $12.8 billion.

In other words, Steve Jobs missed out on $10.3 billion in extra profits.

Those are big numbers of course, and although I don’t like to discuss specifics, I will admit that my net worth is less than that of Steve Jobs. Really, it is. I could provide screenshots, but there will always be those who say I am faking them and pleading poverty...

But seriously, whatever one’s net worth, it has to be extremely painful to look at your net worth and think that you could have been worth some four times that.

Vive La Tax

If one of the goals of a blog is to be thought provoking, the latest post seems to have done the trick. However, as rich as the vein of comments it generates might be, the time has come to bring the curtain down on the debate over whether or not P&L figures belong in a blog such as this.

No argument has been presented as to how they would add anything to the blog, and as the old saying goes, I’ll be damned if I do, and damned if I don’t. As a commenter said, I would “satisfy nobody – too little and you’re a chump, too much and you’re lying”.

Exactly, and as Matt says “time to put this one to bed”.

I did find this comment from Dave worthy of a wider audience.

Until you mentioned it, I did not realise there were net worth sites. Having said that, I recall that in France around the late 70's early 80's, the country was trying to raise more taxes (sounds familiar). Apparently someone in the French Finance Department suggested imposing a one off wealth tax, on people who had a net worth of over a certain figure. The government of the time implemented / introduced the tax. This obviously created a big outcry, however the tax raised more than anticipated, because people inflated their net worth so as to pay the tax then of course complain to all and sundry how much tax they had to pay so as to impress family and friends etc. The Net worth site would be interesting especially to those bright young things in HM Revenue and Customs.

That’s a great story, and very revealing about human nature. I suspect the effect of Betfair introducing their Premium Charge might have been similar. When the e-mail showed up in my inbox revealing Betfair’s plans, I have to admit that there was a certain (brief) boost to the ego to read that I was in the 0.5% of their customers that would be affected, although how true that number was is still not clear.

Of course, I know now that it’s not the big winners that the Premium Charge is targeted at, but the frequent winners. It’s how you win, not how much you win. I’m sure that my profits aren’t in the top 0.5%, but my trading style meant that I was caught in the net.

Anyway, over the next few days, the Betfair forum was full of people protesting their outrage, and one could be excused for believing that it was 99.5% of customers that were affected, not 1 in 200.

Clouding, Or A Dense Fog?

Once again, our Anonymous friend completely misses the point of a post.

Yesterday's post was in part about why straight comparisons of P&Ls are in themselves meaningless. I am accused of trying to "cloud the issues by talking about runners and ages etc. That has no relevance whatsoever to gambling". The relevance is that in the same way that it is meaningless to compare a 20 year old male runner with a 60 year old female runner (a fact acknowledged by the existence of age-graded tables) it is also meaningless to compare betting or investment P&Ls without some context.

Posting a Betfair P&L showing a £10 profit means absolutely nothing to me. Some examples why.

Was this the plus side of an arb, and the 'winner' shows a loss on BETDAQ or WBX or a bookies of £9.50?

Did the poster spend 18 hours trading to make that £10 or was his profit the result of five minutes work and a single punt?

What does that £10 mean to the bettor? Is he a multi-millionaire? Unemployed with a zero net worth? Retired? A student with a job at MacDonalds earning £10 an hour? A computer professional earning £100 an hour?

Anonymous continues:

If you don't want to compare yourself to other traders/gamblers you certainly aren't going to learn anything by comparing yourself to anonymous posters on networth type sites on the net. The only real comparison you can make are against your peers that you know socially.

I'd be very interested to compare myself to other traders/gamblers, but only if the comparison is relative. There is simply no point in comparing my results to a full-time trader. There is no point comparing my results to those of someone who operates bots. It would be a waste of time comparing my results to those of an unemployed 18 year old with no savings.

Now if Betfair would publish a table showing the results of all their customers, that would be fascinating reading for me, but they won't for obvious reasons. The fact that I frequently have to pay the Premium Charge tells me that I'm doing better than most, but I have no doubt that others with more time/experience/money than I have do even better, and different betting styles mean that many bigger winners don't pay any Premium Charge.

Unfortunately most of my peers that I know socially either don't understand the principles or aren't prepared (or allowed!) to put in the time to learn how to trade on the exchanges, so there's no one to compare myself with there.

I'm also not expecting to LEARN anything from joining a NetWorth site. When did I say that? I'm not thinking of joining to learn; I'm thinking of joining because the idea of a league table (even one where results are not audited) appeals to my competitive nature.

Finally Anonymous said "Basically you are saying I'm not going to post any evidence that I make a profit. Wonder why that is?"

Wonder no more, because I didn't say that at all if you actually read the post or previous posts. I simply said, (though apparently not simply enough, and as I have said many times before), that it is meaningless to do so. If anyone can give a good reason why I should do so, and how this would be in any way meaningful, or serve some purpose, please let me know. I can see why my results might be meaningful to others if I were selling a system, in fact they would be essential, but I'm not. My results only mean something to me.

No Comparison

A comment from Anonymous on my last post regarding comparing yourself with others.

Considering plenty of blogs out there are willing to post up pnl statements on a regular basis I'm sure you've already compared yourself but happy to keep that to yourself :)

There actually aren't that many blogs that list exact profits / losses. There are some, but several talk about "points" which is always a little "pointless" it seems. Blogs also have a habit of disappearing once the going gets tough. It's human nature to find it easy to post up wins, but not the losses.

Besides, some of the claims on blogs have to be taken with a pinch of salt - a timely example, who really believes The Gambler's claims?

Last weekend was awful. Let us leave it that. Last weekend's golf. I won 4K on Tim Clark but it was only a cover bet, covering part of my stake. Lee Westwood would have won me 4.8K, and Robert Allenby who fininshed a very unlucky second one shot behind Tim Clark would have won me 15K.

Anyone who has followed his blog for a while, and is aware of some of John's past problems, could be excused a little scepticism over those numbers.

Anyway, as I have written before, the problem is that P&L statements by themselves are meaningless, and not just because the profit or loss could be down to an arb. It only becomes meaningful if you know more about the bettor - their net worth, age, income, years on the exchanges, hours spent etc. I don't get excited about my P&L being better or worse than anyone else's for that reason, but the websites in the article I linked to allow you to compare your net worth with others by age, location, education etc. which is rather more meaningful.

If someone posts on the forum or in a blog that they won £50, what does that really tell you? Nothing, unless you know more about the person.

It's why athletic events have individual age / sex groups. A 50 year old runner is unlikely to beat a 23 year old runner, but both can compare themselves with others in their age group to get a more meaningful idea of how good their performance is.

The financial world is the same - share funds are compared with other similarly structured share funds. Small company funds are listed together for example so that prospective investors can compare like with like.

The problem with sites like networthiq.com is that they are more likely to attract successful people than less-successful people, so it's not a reliable indicator of how you are faring, but when you see others not too far ahead of you, it does give you the target of trying to surpass them.

I stayed away from the Cup Final earlier today. Last year my balance took a big loss on this game, £1,758.18 for those who like numbers, and this year, the bet I liked and nearly took was Over 3.5 goals, but in the end decided to stay away. It was a good call. When May 30th rolls around, at least my year average will move up!

Net-Worth Obsession

The New York Times had a fascinating article yesterday about a number of things of that interest to me - keeping records, investing, tracking net worth and seeing how these compare with others. 

One guy is referenced with: 

"His highest achievement in record gathering, however, is contained in a Quicken file, where he has tracked his personal finances for 16 years". "There was the $3.38 he spent on chips and dip on March 16, 1996. A birthday card for a friend a few weeks later cost $3.18". 

I can identify. For years when I was into running, cycling and triathlons, I kept a record of miles run / biked / swum and the time spent, weight, alcohol consumption (Yes or No). Nowadays my focus is more on money, and for several years I've maintained a spreadsheet with my finances being updated on (almost) a daily basis, for the same reason as I maintained my fitness records - it's motivating.

Although I haven't yet signed on to any of the websites that apparently allow you to compare yourself with others, it's something I might do. I enjoy competition whether it's running, betting or investing. 

As someone in the article is quoted as saying: She admits that some of her pleasure is fueled as much by competition as self-satisfaction. "I'm not that far off from the person right above me" on the NetworthIQ list, she says. "I can probably catch them this month. And maybe next month I can get to the next one." That attitude I can identify with.

My Betfair spreadsheet only goes back to January 2006 when I decided to get serious and not only is it a comfort to look back on when times are hard, but it's motivating to see the numbers climb, and try to reach the next target.

Anyway, I'm sure this keeping records and tracking spending, investments etc. isn't for everyone, but I suspect many of us can identify with some of the article, at least in part, and I also suspect that accurately keeping records is a pre-requisite for being successful on the betting exchanges.

Crap System

The Sports Betting Professor just keeps going down in my estimation. He is now pushing a Craps system in an e-mail with the Subject: Finally, You CAN Win At Craps. Well yes, we CAN win at craps, same as we CAN win at roulette or the National Lottery, but to suggest that there is a system for consistently winning at craps is just plain dishonest. Any reasonably intelligent person knows that it is statistically impossible for a player to win over the long-term. The game is stacked against the player in favour of the casino. Same as roulette.

Having said that, craps IS my favourite casino game. If you avoid the sucker bets, it is quite possible to play the game profitably in the short-term. It's tremendous entertainment, and very exciting when the shooter gets on a hot roll, and I enjoy playing it occasionally for those reasons, but for the SBP to suggest that there is a system for this game is simply further evidence that the guy is clueless and for all the talk, has absolutely nothing to offer but a slick sales pitch.

From a quick look at the web site being promoted, it looks like the author is promoting "wrong betting" - the "Don't Pass / Don't Come" approach to Craps which is admittedly better value (very slightly - 1.4% house edge versus 1.41%) than the more common Pass / Come approach taken by most gamblers, and a lot better than the sucker bets that tempt the novice player. It's hardly a new idea, and anyone promoting such nonsense deserves to be treated with total contempt.

Still no mention of his recent basketball losses, or his terrible baseball season to date, but very quick when one baseball tip does actually win. (The Florida Marlins at 1.8, 3rd winner of 13 tips this week). And now e-mails discussing American Football and Craps!

What next - tips on staying hydrated?

And before anonymous claims that there are professional craps players (in addition to the supposed pro roulette players) there aren't. There could be players who play the games all the time making a small fortune I suppose, but they would have to have started with a big fortune.

Social Drinking - Water

A couple of good comments on my last post about ‘social betting’. Jason commented that [financial] investing is a social activity, citing CNBC and stock forums as examples of where traders and investors air and share their views. I agree with all this, although I’m always a little wary of someone talking up a stock or fund in the same way that I’m always a little wary of someone tipping me a horse!

The financial programs on TV tend are often comprised of company CEOs who are hardly impartial, and reports looking to entertain rather than inform. Let’s face it, serious financial reporting would not make for exciting TV.

A lot of the ‘social’ side of financial investing is the human need to be one of the crowd, but following the crowd has been shown to be a poor choice many times in the past. (Just look at religion). In the past I know I’ve been guilty of investing in something because everyone else was. I guess a shared loss was considered less of a concern than watching from the sidelines as friends and colleagues made money. (Same reason why so many people join lottery syndicates I suspect).

Nowadays though I am older and wiser. Financial, and betting, decisions are made by myself, after doing my own research, and it’s better that way. One of my (many) faults is that when something goes wrong, I have a tendency to try and shift the blame. I think I’m getting better at not doing that, but the last thing I need is a ready scapegoat.

It’s true that I do subscribe to Football Elite, but I also read newspapers and Investors Chronicle with their share tips. I don’t buy or sell all the shares tipped, but I do take on board some of the more generic advice given. It’s true that I do back most of FE’s selections, at least in some way, but the decision to do so, and more importantly for how much, is mine.

"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one." – Charles McKay in Extraordinary Popular Delusions and the Madness of Crowds.

As for listening to any of the tips on the betting exchange forums, well you can forget that because as (sensible) Anonymous says “The useful information on the Betfair forums can probably be counted on one hand”. One finger more like. There are a handful of intelligent posters on there, but most threads are a complete waste of time – full of pointless challenges, "free money" and other attention seeking claims.

When I first joined Betfair, I thought the Forum was a good place to go for ideas, tips strategies etc., but no. Admittedly some of the other betting forums out there are better, and occasionally there's a golden nugget, but for the most part betting is just not a social activity. For all the good intentions that some of these “Betting Clubs” are set up with, does anyone really profit from them? Well, other than the organiser of course.

How is Adam Heatchcote’s service working out – anyone know? His latest post cracked me up. Here’s one of the (self-proclaimed) ace traders, and his latest advice is this – “Stay Hydrated”

One of the most important factors when trading is to stay hydrated. It makes sense and it's the same for anything else you do. I've always noticed that when I'm not hydrated, it's that little bit easier to get irritated or your decisions will start to worsen; ever so slightly your competitive edge is lost. So keep a pint of water next to you at all times. I always make sure I have water beside me, and the times I don't (when I forget) it soon starts to show in my results and slowed decision making. What's worse is that if you're trading and you don't already have the water beside you and you trade a bad race, the first thing that comes to mind is to make it back up on the next race instead of going to the kitchen to fill your glass, the number of times I do this; it's probably been my biggest sin. So choose the latter and get the water straight-away once you notice; it pays of in the long-run. I decided to write this post because I made that mistake today and paid for it.

Also, about one in 50 days I have 'slow hand'. It's like my hand has decided to have a chillout day and I just can't get my reflexes in it to work properly; it feels laboured and is very frustrating! All in all the combination of the mistake and the 'slow hand', today is not going smoothly - but at least I'm not into negative territory.

Stay thirsty my friends. Free advice from the world's most interesting blog...

Social Betting

I thought this was an interesting piece from Ruud Verdellen on www.egrmagazine.com

Social media and web 2.0 appeared on the horizon five years ago and ever since then the egaming industry has seen a lot of companies trying something dubbed ‘social betting’, including BetArcade, Betfair’s Taikai, and Pikum, backed with £4m from Virgin, to name but a few.

And while companies like Smarkets and Betable are still trying, all of those others have since gone out of business. Why?

Having been involved with the Taikai product and social media in general over the last few years, I believe that one of the main reasons is that betting is simply not a social activity.

A director at Unibet came up with the word ‘moneytainment’ which sums it all up: you bet to make money and you do it for the thrill of winning. You don’t bet for friendly banter, or for the fun of it.

While you might enjoy winning a few quid from a mate, would you enjoy it when your mate is losing his whole income to you?

Would you like to be reminded by friends when you lose a bet?

Probably not, I think. You’d like to delete that losing tip you put in a Tweet or status update.

What many of you might now respond is that Betfair runs a very successful forum, on which thousands share their tips and comments on each other’s bets. This is true. But the main reason for the forum’s success is... it’s anonymous.

Everybody can pretend to have placed a winning bet and nobody cares about giving losing tips. This is very different to the things you would be doing in your social environment.

The second reason social betting has failed is an obvious one: liquidity, as with no liquidity, it will be difficult to attract new users and to offer existing users an exciting proposition.

But there are new opportunities on the horizon for social betting, when Facebook launches its virtual currency platform in June.

That could solve the liquidity issue, as companies would have access to 21m adult users in the UK, assuming Facebook would only allow gambling companies to access the platform.

The million pound question, then, is who will come up with the right betting proposition? One thing seems to be clear: it will have to be a less conventional type of betting than we have seen before.

Pikum, as you may have read, folded earlier this year. The truth is that for many people, betting is a bit like sex - something done in private (and in the case of Anonymous - something done alone).

Joking aside, for anyone serious about investing on sports, it's not an activity that lends itself to teamwork. Who in their right mind would find an edge, and then reveal it to others? Once the word is out, the edge vanishes. It's an ideal occupation for the mathematically inclined nerd, who has the inclination and patience to search for edges, often in the most unlikely of places, and the balls to commit money to the venture.

I noticed on yesterday's Betting For A Living blog, the auther posted

I can't say too much without giving away my strategy (which I would rather not do in order to protect the edge I may or may not have)...

well, as he's talking about in-running horse-racing, I'd be willing to bet that unless he has inside information (which he hasn't mentioned) it would be quite remarkable were he to have uncovered a strategy giving him an edge in such a well followed and, shall we say, 'dodgy', sport. Not impossible, but highly unlikely, at least in my opinion.

An Interesting Day*

The Sports Betting Professor's basketball strategy is to have A, B and C bets, stopping at a winner or after three losers. Since I started following them on 16th March, he's dodged the bullet of a third consecutive loser 4 times, but his luck has run out with a current losing sequence of four.

It's strange that his daily "NBA Update and MLB Picks" e-mail fails to mention this. It opens with "Heck of a day on Sunday going 2-0 and picking up 2.05 units for MLB. We have no play for hoops for Monday, as neither of the games fit the system." A heck of a day? Well, two winners from two games is good I guess, but at an average price of 1.93, nothing to get too excited about, especially when considering that he ended the week with a 7-9 record and an overall loss. At least Matt at Football Elite holds his hands up when results don't go well, but the difference is that Matt has a long-term edge that I don't see any evidence the SBP has.

It's been a fascinating day following the political situation. Cameron has shot out to 1.36 from 1.06 to be the next PM as Clegg ponders his next move, which I think will be to the blue corner. As much as I don't like Cameron and his background of privilege, jumping into bed with Labour would not endear Clegg or his party to many in the country. Consecutive unelected PMs would not sit well. The offer of a referendum on the Alternative Vote system from the Tories should be enough for the Lib-Dems, which makes that 1.36 tempting, but whether such a deal can last for long remains to be seen.

It does rather trivialise politics when it is considered a sport for betting purposes and every bit of news makes us think of the effect on the markets rather than on the country's future!

Meanwhile in the world of finance, one of the best days in years for share holders, with the FTSE100 up over 5% after the EU loan deal. A much needed boost of confidence after last week's misery, but the way the Euro moved against the pound and the dollar suggests that concerns over Greece and the other PIGS have not toally been erased. Not to rain on the parade, but the markets are still well down over the past few days, and more likely to go down again before they go up. In my opinion.

Back to sports, and the Spurs went down 0-4 to the Suns and the one-eyed Spurs (Tottenham) fan which cost me a few quid after a hitherto good week. I expected a better effort from the Spurs and made the mistake of convincing myself that they would come back after falling behind. They never did. No team has ever won a series after going 0-3, and it would be understandable to perhaps subconsciously give up a little after falling behind.

Same scenario later tonight with the Utah Jazz trailing 0-3 in the series to the Lakers and playing at home. The Jazz have scored a total of 14 points less over the three games, so the teams are closer than the series score suggests, and again I think the home team should win tonight. I will not be falling in love with my position this time though.

My half-time back of 4.5 goals or more at 2.12 in the Chelsea - Wigan match was one of the easier wins I've had. Never in doubt in fact, as Chelsea topped 100 league goals. Three sevens and an eight certainly helped!

* “It was an interesting day” —President Bush, recalling 9/11.