Sporting Index Dinner - a religious experience Wednesday, November 15, 2006
Last night I went along to a Sporting Index Dinner at Lords, which is my "spiritual" home - pun intended, albeit I am a passionate cricket fan and MCC member. (The passion began when I was 7yrs old and was taken to a test match at Edgbaston).
I was taken along by a close mate who is an energy trader at Tudor Capital and who, despite being an avid cricket fan, hadn't been inside the Lords Pavillion. So prior to dinner I showed him round - if you've any interest in cricket, you should definitely take the opportunity to do as Lords tour because not only is the place steeped in the history of the game, it's also stuffed full of memorabillia.
The dinner was held in the Long Room (pictured) and was for 73 of Sporting Index's top 100 clients. These are people who are placing upwards of 50 bets a week on all manner of sporting events from numbers of corners or yellow cards in a football game, to number of runs a player will score in the Ashes series. In fact, you can get a price on almost anything. In all case a two way price is made, which allows you to "buy" or "sell" the item in question and a spread exists between those two prices.
Example. Premiership: Arsenal v Tottenham
Arsenal came into the game in fine fettle after a long unbeaten run. Total goal quote before kick-off was 2.4-2.7.
Buy (Go High) at 2.7 if you think that the crowd was treated to a goal feast.
So I place a bet for £5 and buy goals, because I think that there will be more than 2.7 goals in total in the game.
Actual outcome Arsenal continued their run by winning 2-1 (Total Goals = 3).
Stake was £5.00
Difference between price and actual result = 3 - 2.7 = 0.3
Profit = £5.00 x 0.3 = £1.50
Conversely, had I believed there would be less than 2.4 goals in the game and bet £5 then
Sell Goals Calculation:
Stake was £5.00
Difference between price and actual result = 3 - 2.4 = 0.6
Loss = £5.00 x 0.6 = £3.00
Sporting Index are a market marker and they primarily make money by taking bets from people with contrarian views. Hence in the example above the paid out winning to someone buying was only £1.50 and the losses collected were £3. Hence they would keep £1.50 profit (spread was 0.3 and stake was £5). Clearly they will not always have a matched book and so may carry some principal risk but will try to mitigate this by moving the quote to draw punters in and/or reduce their exposure. Hence if lots of people start buying goals they will move the price up to 2.7-3.1.
The interesting thing about sports spread betting is that, unlike financial spread betting (or trading as we had to call it at Man Group plc because betting was too seedy a term!), there is no offsetting hedge readily available other than laying it off onto another spread betting firm. For example in financial markets, a spread bet on the FTSE100 could be hedged with FTSE options, ETFs or futures. Hence the financial market is normally highly liquid because of the sizeable number of market participants - which is not necessarily the case with a particular football game.
At the dinner, we were asked to guess how many bets the clients present had placed in the last 12 months - lots of discussion at the table about how many bets each person placed, which revealed some scarily large numbers. The actual answer though was 88k! No mention made of stake values.
Oh yes, Chris Cowdrey former Kent & England captain was the after dinner speaker (his family have had constant representation in the Kent county side for 48 years!) and the main competition was trying to guess from a pool of players provided which team he would pick to play in a game that would be held in certain conditions. Well, my table lost despite having correctly selected 9 of the 11 player from the pool of 35 greats. The winner got 10 right.