Trading ‘to be relegated’ markets…
As the new season is upon us all football fans up and down the country will no doubt have fresh hopes about what the season will bring. Transfers will have been done and hopes raised. But what is it that makes a team successful? What is the most defining characteristic. That’s simple, it’s money!
Comparing the finishing positions of premier league teams over a number of seasons and several Deloitte reports, reveals a strong correlation each year between wage bill and final league position. This meant that the league pretty much ended up with the lower spending teams near the bottom and the higher spending teams at the top. Of course there is always the odd exception to the rule but the correlation is very high.
Picking teams likely to win leagues is pretty easy and it tends to be a simple process of selecting from a small bunch of likely candidates, but it doesn’t offer much value or really good trading opportunities in my opinion. For that you need to head down into mid table obscurity and the lower reaches of the league.
A bad run can send an average team towards the lower reaches of the league and threaten relegation. The markets have historically overrated the chances of relegation with a lot of teams. Sacking an unpopular manager at this point can turn a clubs season around, especially if they have a good, read expensive, squad of players. Some clubs though exhibit the epitome of incompetence at this point and are doomed to be relegated. You also have the situation at the start of the season where new teams or managerial teams need to settle and play out. Newly promoted teams may also have spent good sums in an attempt to establish themselves and that will add a few places to their expected finishing place. The ‘shock of the new’ effect with can also occur with newly promoted teams, but this tends to wear off over the full season.
So as a consequence, my favourite play on the league is to take multiple positions in the ‘to be relegated’ market. Over the course of the season there are many opportunities to lay at short or reasonable odds. The view you should have is that the market should always be priced to 300% in a three team relegation situation, so if you get enough lays in to total a value of more than that, you will win. By laying at the lowest odds available last year, you would have returned 780%. An optimistic view, but plenty of room for error there!
Teams I am interested in at the start of the season are Chelsea, Spurs, Arsenal, Liverpool, Swansea, Reading and Southampton. You should also keep an eye on the developing situation at Portsmouth. All have interesting themes that will unfold early in the season
Be aware that relegation or promotion markets are not settled till the underlying event has happened, which could be some time in the future. But don’t let that stop you; they can be very profitable markets.
Category: Football trading strategies, Trading strategies
