Wednesday 11 May 2016


Baz (and I want to be absolutely clear, not James) writes:

But isn’t a trade just a bet on which way the market will move? Get it wrong and you lose like any other bet.
No it isn't. By definition, a trade requires two opposite actions, buying and selling – although not necessarily in that order.

In the context of sports betting, the initial action is a bet. You now have a position in the market. This remains a bet unless you make a second bet to close out your position.

If a second and opposing bet is made, your two bets comprise a trade, and your trade may be for a profit, a loss or it may break even.

If you let your initial bet run to expiry, that’s not a trade, even if your intention was to make this a trade. Again though, your bet either wins or loses or is a push.

Although I know what Baz (not James) means when he says “get it wrong and you lose like any other bet”, I should point out that a losing bet (or trade) doesn’t necessarily mean that you “got it wrong”.

Similarly, a profitable bet or trade doesn’t mean that you got it right.

It’s all about expected value.

If you are getting 5.0 (4/1) on a 4.0 (3/1) shot, the reality is that you are still going to lose 75% of the time. Does that mean you get it wrong 75% of the time?

No, because you have a positive expected value and thus, on the other 25% of the time when you win, your profits more than cover your losses.

Baz (not James) adds: 
Perhaps we are kidding ourselves by trying to differentiate between bets and trades.
I think, as I’ve tried to explain above, that there is a clear differentiation between a bet and a trade, but to Baz’s (not James') point, what matters is if your chosen strategy is profitable or not.

I do suspect that the ability to trade out of positions these days perhaps leads to less than optimal decisions being taken.

For example, while the initial bet might be taken after much research and consideration, the temptation to lock in a profit, or at least eliminate the possibility of a loss, can be hard for a novice or ill-disciplined trader to resist after just a small movement in the ‘right’ direction.

Behaviour which of course goes completely against the golden rule of trading - keep your losses small and let your winners run.

Betfair Pro Trader James has another post up, less technical than many and one that I can identify with as someone who is also close to 50 (although not as close to 50 as I was yesterday...) 

Poor old James managed to hurt his neck playing tennis, but had a few kind words:
At least the pain was relieved by a post from Cassini at Green All Over (America's #1 Sports Blog!). It was good that a recent comment of mine on his website inspired another old boy back into action. The sports trader blogosphere will be all the more barren if Cassini hangs up his quill.
Pain in the neck James' tales from the tennis court have prompted me to write about my own recent sporting adventures. 
Last month, I decided it was time to teach my 25 year old son some of the finer points of squash. Never mind that I hadn’t played in about 25 years myself, experience matters more than enthusiasm, surely. Just to be sure of success, I gave myself home advantage and arranged to play at the club in Coulsdon where I played in my youth.

It was a little surprising that the court appeared just as I remembered it, same door, same floor, same everything really, except with a quarter of a century of wear and tear and general deterioration added in. (At least the squash courts were playable – the tennis courts outside, on which I also spent many summer afternoons and evenings, were in an even more depressing state - see above).

I thought I acquitted myself rather well for the allotted forty minutes, diving to the floor a couple of times, placing delicate drop shots into the corners, avoiding getting hit, and with the 'time's up - get out' knock on the door surely imminent, was readying myself to shake hands and leave when my son pointed out that we’d actually only been on the court for five minutes, and that what we had been doing was called ‘warming up’. 

Well that's a little disappointing, I thought to myself, as pools of sweat accumulated by my feet, my head span dizzily and my heart pounded at a rate not seen since my days of running the mile in four minutes something, but there was no way out. 

Perhaps I should clarify a couple of things written above - by 'diving to the floor' I mean going into full cardiac arrest and collapse, and by 'placing delicate drop shots' I mean smashing the ball as hard as I could, but at my age, shots barely make it to the front wall sometimes.

I don’t want to talk too much about the match itself; suffice to say that I did score a few points in the eight games we completed, and that we sadly ran out of time to complete our best-of-seventeen match, which means that technically speaking, the match ended as a draw.

Admittedly it started off as a best-of-five contest, but as I felt stronger and stronger, decided to extend the match, first to a best-of-seven, then best-of-nine, then… you get the picture.

I’ll be better prepared next time. I should perhaps also mention that for the best part of the following week, I had a great deal of trouble with stairs, getting in and out of cars, and generally just moving. My parents (not James) generously loaned me their walking sticks for a few days while my muscles slowly regained some semblance of normality. Apparently it's a different set of muscles that are called into action when playing squash than those used for a little jogging (shuffling) around the park or riding my bike.

Pain in the neck James' (yes, James) then wrote:
I have only one negative thing to say about Green All Over and that is Cassini's habit of quoting you and then adding a few more quotes from other people only without attribution. This creates the impression that every quote in his post was by yourself, which is not the case in today's post, Bold Ambition. Still, it's a good article as are all the posts on Green All Over.
This is certainly not intentional. I usually put a link to the source of the quote, even if I don't explicitly name it. I find referencing the source in the text can interfere with the flow of the post, but I'll be more careful in future.

Finally, and I just knew this would happen, I (Cassini, not James) wrote yesterday that:
The BLUnders this season had an ROI% of 2.46% from 142 selections. (There could yet be more picks, but as we move deeper into the play-offs, it becomes less likely).
And just like that, selection #143 comes along, with the Golden State Warriors 12.5 point favourites in their home game versus the Portland Trail Blazers tonight. At 3-1 up in the best-of-seven series, the Warriors are hoping to clinch the series, while the Trail Blazers are probably hoping for a rule change and a best-of-seventeen series...


James said...

Thank you for clarifying that I had little input in today's missive and where I did contribute it was more than adequately referenced.

I must point out though that the neck injury was probably picked up the night before the tennis match whilst sleeping due to arthritic neck vertebrae. The tennis merely exacerbated the injury.

To help (or confound) the bet/trade definition further. In derivatives trading one can leave a position open and take delivery of the oil, the wheat or the cash equivalent (in market futures or stock options) or pay the margin if the position goes against. Alternatively, you can trade out prior to expiry for cash only.

I prefer to keep to strict financial trading definitions. Those who only sports trade/bet tend to grab at financial terminology to sex-up their activities without fully understanding them. "Scalping" is another such word. Say you are a scalper in the financial markets and you might get a visit from the FSA and the City of London police.

And finally... You are far braver than I. Squash is a no-go area for me. Even as a fit twenty-something I could walk into a squash court feeling more than capable of beating an obese female on fifty cigarettes a day and yet step out of the court later, a dishevelled wreck.

Marty said...

If I leave a position to run to expiry then haven't I effectively just 'traded out' at the price implied by the result (ie 0 or 1 in probability terms)? What difference does it make to anything what we call it?