Friday, 28 May 2010

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.


Anonymous said...

Absolutely cracking analysis as usual mate. Probably the most level headed and informative blogger out there.


Matt said...

Analysis, fine. Momentum in game, match factors, fine. Plucking figures (why *1.5?) at which to close a % (why 50%?).. I'm not sure makes sense, but more than likely works given the first two points.

As I commented before, you make money because the trdes you take are of implied value - created by your exit points. I have an issue with anyone blanket stating "it will trade higher"... 'why?' and more importantly - 'so what!?'

You'll consistently do your money if, everytime you think something will trade higher, fail to close at fair value or value, for a win or a loss. ie. creating said implied odds that were value for the trade.

I think you've got most bases covered here Cas, I'd say your method for squaring up and at what prices would be the area to refine for me.. Pointless closing 50% here or there, have a reason to do so. These bets are not 'thought out', they are placed simply because you have a position - and that's a very common cause of crap betting.

Great post again...

Anonymous said...

Great post. Like with any strategy you always want something that feels comfortable to you personally and we all have different views of what constitutes value.

I suppose like with any strategy you can always flip it round. If you feel a team will definitely trade higher then go on to win why bother laying at all? Just wait for the price to reach what you feel is a value and then just back. If it is value then the 'law' of value suggests you'll win in the long run anyway. You can then always lay off even lower if you feel more comfy with this or just let the trade run.

If the price never reaches your value point then just leave it alone. Obviously this style is open to interpretation that the team or player that you're backing will still win despite drifting. It appears that's what your doing anyway but instead exposing yourself by laying the favourite.

As you're always pointing out value is the holy grail so if you feel it's value then you should have no fear about losing the bet as you will win in the long run.

Not sure laying from the start isn't just a pointless exercise in exposure if you feel a team will trade higher and still win. Just take the value price.

Cassini said...

Matt - totally agree that the 1.5, 1.75 times etc is totally arbitrary. That's why I soon abandoned having fixed exit points. 1.5 times may be a value back or it may not. If it's value, trade out, if not, let it run.

Anonymous: "Not sure laying from the start isn't just a pointless exercise in exposure if you feel a team will trade higher and still win. Just take the value price."

You're thinking like a punter, which is fine, but as a trader, if you believe the price will first trade higher, it's better to ride the move up and then make your back.

Anonymous said...

Yep, fair point regarding the punting and trading which are different approaches to gambling and each to their own.

Reading back my post I think using the word pointless was a bit un-constructive.

Good post anyway Cassini. Keep up the great blog.

Anonymous said...

Such a contradictary post it's unreal. Keep it up.

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Brian Bee said...

anonymous is hilarious!

Thanks for the insight on your trading strategy.

You say you trade baseball also, so i would be interested to know if you follow a similar strategy for it?

perhaps you could do a post on how you normally look to trade these sports? As the american sports are a grey area for most when it comes to trading.

Only if it wont expose your edge of course!