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SPORTSBETTING vs STOCK EXCHANGE - INVESTMENT POTENTIAL

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INTRODUCTION 

A successful futures trader friend of mine once told me, what we do is really the same. It's just that we are trading the likes of ''pork bellies'' while you are doing the same on football. A few weeks back that same friend saw an offer we had made on the website ''Guaranteed 5% per month return''. He commented that such a good offer could be misinterpreted has a scam, something that never really occurred to us at the time. He went on to suggest that in his business some traders/brokers advertise such offers, and they are usually bullshit!


That bought me back to thinking of a comment from Billy Walters, one of the best known professional gamblers in the US. In a rare interview Walters said, i might have been sent down the wrong path a few times during my career, but you can't compare professional sports gamblers to those guys on Wall Street. When i've tried to invest in that direction, i've always been stiffed. These people are sleazy salesmen, and i for one would never deal with a ''suit'' again!


Maybe Walters has a point, i wouldn't know since i've never dealt with such people. However, we occasionally dabble on the stock market, and it's been lucrative to us. Maybe the reason for that is because we only deal on what we understand, and that's betting and gaming stock. A few years back we went ''short'' on both Betfair and Bwin, and it was one of our biggest paydays ever. We would certainly take that route again, but it would be on our own cap, we would never take advice from a person unknown to us.


ARBITRAGE


Reverting back to that offer we made of a  ''Guaranteed 5% per month''. It was over subscribed by a factor of eleven times, it's probably fair to say that we had no problem nailing the trust factor. All the same, we eventually decided to let the investors be the people closest to us. And to be honest we will never make an open offer again, we shall just keep it in the family. However, for the sake of this article, we would like to explain why it was easy to make such an offer.


This ''guaranteed account''  is zero risk pre-game trading. To explain better with a working example, we buy a bet at 2.02 and sell at 2.0. Or, we bet on both sides when the juice is in our favor, most of you will know this has arbitrage. In fact, we make thousands of trades per week using this method. Some of the bets are €5, whilst others are €5K. 


Now for the reason why we can do this but people working the stock market cannot:


- A share/currency/commodity as a single market (buy/sell) price - whereas sports bets don't have a market price

- We have multiple Asian betting accounts, and the odds vary from bookmaker to bookmaker. this can often give us a mathematical advantage.

- We often receive a small rebate, which means we could bet at 100% and still make a profit..  


To make the life of our traders easier, we capped the working capital at 100K. The reason for that is simple, the bigger the sum the harder it is to move. Just stop and think about the logic, it's almost impossible to have more than 100k trading at one time, the most we have had out at any stage was 77K.  Were's the point in having a million in the pool, if we can only place a maximum of 100K ?.


At the time of writing, we are three weeks and four days into our season, and our win so far is 13,106 (+13.1%). Since this is a no risk pool, we anticipate15-16% by the end of our first trading month. For the record, five percent goes back to the investor, and the other part is split between ourselves and our traders.  I think you will agree - it's a win win situation


Many traders run programs on the betting exchanges, and some are capable of punching a small profit. Nevertheless, we would like to believe that real traders go beyond the exchanges, our people certainly do.


However,whilst we have a proven trading concept, others don't. Take the Sydney-based Proton Trading Fund (PTF) sports betting syndicate. From what we understand, the people involved are from the stock market. And, from what we have been reading, they are either plain stupid or scammers. PTF are targeting outside investment of 10 million, with the intention of betting arbitrage opportunities on Australian sports.


Lets make one thing clear, the Australian market doesn't afford such opportunities. It's a country full of leisure focused bookmakers. In fact, other funds have had to move away because of limited opportunities.


LIMITATIONS


Priomha capital operate the Cloney multi sport fund. From January 2010 to December (2014) they claim to have grown the fund by 160%. However, in a more recent press release they told the interviewer that they controlled 3-4 million Dollars, with an annual return of around 13% . They also mentioned that they are switching operations to Gibraltar


However, they too lost credibility in our eyes when CEO Brendan Poots said he would be targeting US clients in future. His reasoning, new legislation allowed US citizens to invest in a betting fund as long as they had no influence over the bets being made. Nevertheless, their was another pre-requisite and this is the bummer. Bets could only be made within the US, which boils down to everything being done in Las Vegas. For the record, Vegas sports books have massive juice, and they don't like winners!


In 2014 Bloomsberg.com did an article on Tennis quants (quantitative analysts) . Elihu Feustel told the interviewer that he relied on data from 260,000 matches to make about 30 bets a day. Feustel also went on to suggest he could double his 500k betting bank each year by compounding his profits. This was backed up by Poots who suggested, it's easier with small amounts. 


After a lot of studying we recently took the decision to downsize our betting fund from 1.3 million to 600K. Our reasons for doing that included removing outside investment, and to avoid line slippage. We simply refuse to compromise the price by accepting lower odds. Whilst its possible to bet 20-25K on the very top leagues in one hit, it doesn't apply to the Swiss, Dutch, Austrian, Belgium or lower league English football. Our aim is to increase our annual win to over 120%, and we believe by making the pool smaller, our margins will be better!


Their are several known betting syndicates in this world, and some are more successful than others. Nevertheless, one thing is very clear, the bigger the turnover the lower the profit margin. I'm afraid moving extremely large sums is nigh on impossible without suffering slippage. That in turn means you are working against yourself. The bigger syndicates such has Smartodds or Star Lizard can use a gamesmanship to help direct the market. That's also a favorite trick of Billy Walters, and we must admit to have done the same. Nevertheless, with high overheads and low margins, the big boys need to stay very active if they wish to hold a fair margin at the end!


INFORMATION


During the first month of the new campaign, we have seen our betting bank grow by a whopping 30%. This is rather typical of our trend over the past decade. Afterall, we tend to start fast, run steadily during the main season and come again at the end. However, the latter part of the season has less to do with sports modeling, and more to do with understanding the game!


Obtaining the right information is paramount to success, and you also need to know how to analyze what you have. We subscribe to many information services, and we have other sources on the ground doing the research for us. First hand info and knowing what to do is imperative in this line of business. Nevertheless, it's a big expense and could prove too costly if not properly capped. In any case, we would advise wannabes to consider:


-One of the secrets to betting is not to over-react to team information. Unfortunately, most people do. 

-Their is also a lot of sheep in this business, people who will follow the markets and trends blindly. Inn doing so, they sell themselves short.

- Never take odds lower than what you need. Bets are like buses, the next one will be along shortly.

-Don't over rate recent form, other factors can be more interesting.


CONCLUSION: 


We know and believe Sports betting offers much higher returns than the stock exchange. Whilst the competition has stiffened over the years, its all about staying ahead of the game. Unlike with the stock exchange, we are not effected by the world economy, or currency factors !