Hello and welcome,

I thought I'd share a few thoughts on post-ante betting on the betting exchanges.

Quite often, it seems that there is a bargain to be had in long-term betting markets.

Here I'm talking about, for instance, taking odds days, weeks and sometimes months before the event, perhaps on a prestigious horse race such as the Arc De Triumphe, or staking on the winner, promotion, and relegation markets in soccer betting, or backing a candidate for Sports Personality of the Year, or betting on the outcome of the Formula 1 drivers championship. Each of these markets represents a long-term 'investment', and has the characteristic that you are probably likely to be interested in the outcome of the event over a relatively long period!

I've had both good and bad experiences with these types of markets, and I've drawn up a list of some of the positives and negatives from my own experience.

Positives

It is possible to regularly identify trades that can be profitable in the long run.

In any market there are invariably winners and losers, hence some will always be winners. But how do you give your long range trades the best possible chance of succeeding? It may sound obvious, but I am convinced that the key to this is to become knowledgeable about the markets in which you invest, and combine this with a general knowledge of how markets move over time.

My favoured strategy, which has been taking shape over the course over the past few months is to try and identify candidates within the market which research suggests are incorrectly priced. If the candidate is an outsider with odds that you think are too long, then you back it with the aim of laying it at a future point in time when the odds shorten. Conversely if the candidate is a favourite, you lay it if you believe the odds are unrealistically short.

This may seem like stating the obvious, and indeed I'm largely paraphrasing, as a relative novice, general principles that are stated elsewhere in the trading literature. Essentially what you are trying to identify is "steamers" and "drifters", candidates that either shorten or lengthen in the market, respectively. And you are trying to identify them early, before they have stopped "steaming" or "drifting", and preferably before they even start to move in the market. Other than taking advice from others knowledgeable in particular markets, the only way to achieve this is to do the research yourself.

I have some successful examples.

Example 1: Arc De Triumphe post ante betting 2006

Three favourites emerged in post-ante trading in this market. Scirroco, Hurrican Run, and Deep Impact were each strongly favoured. I did a bit of research which revealed that they were jointly ranked 1st in the world. What I couldn't understand is that if they were ranked joint first, why was Deep Impact a longer shot than the two other horses. On that basis I staked a largish (25%) proportion of my bank on Deep Impact in the weeks before the race in the hope that his/her odds would shorten. Luckily they did, quite substantially, and a profit was made by a lay bet once the odds had shortened.

Example 2: Joe Calzaghe and the BBC Sports Personality of the Year award

Joe Calzaghe was available at 50-1 for the title just 2 weeks before a world title fight that was to be his umpteenth defence of the title, and a few months after putting in probably the best performance I had ever seen from a British boxer. Having studied the SPOTY market for some time, it seemed clear that the publicity surrounding this event would promote a shortening of these odds (as described in an earlier blog post), and they did shorten, to the extent that his lay odds were available at 10-1 in the hours before the contest, and 8-1 during it. It was therefore possible to take a lay bet on Calzaghe that guaranteed a profit in that market regardless of the outcome of the SPOTY award.

I have some other promising "irons in the fire" at the moment, and a largish proportion of my time spent on this trading hobby is spent trying to find new leads. For me as a football fan this largley means studying tables of football league placings and attempting to evaluate how the teams within those leagues might move up or down, and especially trying to identify teams that will challenge for promotion or who could become involved in a relegation battle. My particular specialism's at the moment are the English premiership and Championship. I've got some interest in Colchester United to stay up this season, and Plymouth Argyle as long shots for promotion.

Colchester United are still strongly backed for relegation, despite having had a pretty successful season so far, as indicated by a goal difference that is much more positive than many other teams. I don't think they will go down, so I've taken a lay bet on them (they lost to Coventry this evening, but they gave it a good shot, which was encouraging). Unfortunately, I'm only playing with small stakes here, but I'm tipping them to stay up, and I expect their price to lengthen within the next month of so (presuming that they keep up their current form).

Plymouth are long shots for a play off place, but I took odds on them which did not reflect their good results.

Negatives / cautions

1) It is hard work finding value.

2) It is easy to think you've identified a good value bet, which soon turns out to be less than good value.

3) Beware of impulsivity in betting in these markets.

4) Keep such bets to a sensible proportion of your total bank, unless you have money to burn. 5) In a market with several contenders, it seems sensible to "dutch" your selections, but if you do that, then really spend serious time in working out all the angles, unless you are just taking a punt, or, as mentioned earlier, money is no object. Dutching in a long term market can also be a drain on your bank.

6) Be aware that like any investment, you will probably be keeping a long term eye on the outcome, and this if you do this, it will eat into your valuable time, and may also incur other psychological penalties.

6) Buyer beware!

Some examples from my own experience

1) I worked for a large Telecomm's company, and there was a great guy who worked in my "pen" who spent much of his day following his investments. These were intended to provide him with a retirment "nest-egg". Much of his stock was in high-tech and telecomms companies. These took a dramatic nosedive around 2000, which wiped out most of his investment. He spent days and weeks analysing the data which he held on screen and deciding what to do. He decided to remain in the market when it nosedived, rather than to get out of it and keep most of his original investment. In the course of a couple fo weeks or so his investments were worth only a small fraction of what they had been. This illustrates psychological factors relating to hope, and also fear, which can often lead to inaction. Not taking an objective view of what is happening to your investment, and letting attachment to your investements inform your decisions can be bad news. Often, when your investments turn out not to be good ones, the best path is to cut your losses and get out of the market.

2) I got carried away with the hype at the start of the premiership this season. Man Utd were "obviously" going to finish at least second, and Liverpool "should be good for third place". Hmm.. it seems I missed Arsenal out of the portfolio there! I backed out of the Liverpool market with only minor losses when the warning signs were there after 4 or so games, but am now gambling that Manchester United will finish above Arsenal, which to be honest, I'm not happy about, and I wish I hadn't done! I'm now considering tying up more of my bank to minimise losses should Arsenal keep up their good form, and challenge for a top 2 (or indeed top), place. I fully expect them to, so it looks like I'll have to trade out of that market for another loss. I'm just glad I didn't bet on Chelsea to win outright, as at such skinny odds it would not feel comfortable at all! I guess the moral of this is that Odds can seem very safe and alluring at times due to an psychological phenomenon which can be described in some ways as "feeling safe in a crowd". Trouble with that is that crowds are not often very safe at all, and just provide a sitting duck!  There was a case in point the other  night in the betting on the outcome of the Super middleweight boxing championship (or at least, 2 of the versions were being contested). It could easily have led to the crowd losing, though in the end the crowd were ok.

Joe Calzaghe was 1.10 on Betfair to win his title defence against Bika last week, and still attracted a truckload of money as if he were a complete certainty to win. I can't believe all the backers knew much about boxing, and then during the in play betting, things went from bad to worse for odds on backers. Joe, who was trying hard to make an impression for the US audience, and was distracted from this usual game, was fighting a younger man you was superbly fit and strong as a bull. Bika had a void fight in his last contest, a world title fight for a rival version of the super-middleweight title in which he roughed up the incumbent champion Beyer and inflicted a cut early in the fight which allowed Beyer to retire hurt, but still retain his title, because the cut occured in the early rounds. Joe was cut in round 3 or 4, and was in a lot of discomfort. I've never seen Calzaghe so close to losing. Good for Joe that world title bouts are decided over 12 rather than 15 rounds. Still, Calzaghe did a decent impression of an Italian Stallion to hopefully get him his big pay day. He deserves it for all the punishment he has taken, and the entertainment he has provided.

Market sentiment can lull one into a false sense of security. When this happens in a short-term event, such as a football game, a boxing bout, a tennis match, or snooker match, at least it is over quite quickly and if you've lost, you've lost. In the long term markets, there is plenty of time to regret initial miscalculations. And I guess that is for me the worst thing about long term markets.

3) I don't want to paint a wholly negative picture here. Personally I'm up on these markets, I've won a couple of end-of-month top and bottom of the premiership table markets, and also taken profits on the Arc De Triumphe and SPOTY markets. But psychologically I don't like being in these markets long term as they can take up a lot of your attention. When they take up that much time, you might as well be on for higher stakes than I am!

F T

 
Boxing / Calzaghe v Bika : Match Odds 14-Oct-06 21:30  -3.60
Soccer / Newcastle v Bolton : Match Odds 15-Oct-06 16:00  0.00
Soccer / Plymouth v Derby : Over/Under 2.5 goals 15-Oct-06 13:15  6.19
Soccer / Liverpool v Blackburn : Match Odds 14-Oct-06 15:00  1.90
Soccer / Portsmouth v West Ham : Match Odds 14-Oct-06 15:00  -2.00