Testing times – Profit from them!
Trading on Formula One racing may seem unusual, starting to trade even before the season has even started even more unusual; but it can often present some really good opportunities.
At the start of each year after a winter break, I watch preparations for the new Formula 1 season with interest. The various teams are testing new cars and configurations and it generally leads to a mixed bunch of results. But typically that’s what testing is all about. It’s at this time of year that you will start to get a feel for how the new season will go and you can trade that.
Uncertainty
The uncertainty during testing and any rule changes that occur from season to season can throw up some unexpected results as we head into the season. So I’m always really interested in taking a deeper look at things and am preparing to take advantage of this uncertainty. From a trading perspective, I love uncertainty. Typically this trade is best used where there are major rule changes.
The opportunity
I first experienced this trade back in 2009 when Lewis Hamilton, who opened in the drivers’ championship market at 3.50, admitted during testing that his McLaren car was ‘not competitive’. If a trainer came out and said that a horse was not competitive, you would expect the price to drift quite a bit but while there was movement, it seemed to take ages to be discounted fully into the price of Hamilton, offering an opportunity to get a lay in. The price did eventually drift considerably, making for an excellent trade. His price after practice at the first Grand Prix of the season in Australia was a chunky 10.0, meaning you could back him and lock in a very nice profit. I had made a huge profit even before the cars had lined up on the first race.
Wind forward to 2014 and we had a repeat situation on Sebastian Vettel and Red Bull. It was all very predictable. The BBC often put up good coverage of the testing so far on their website, but specialist F1 forums are worth viewing if you want to get a detailed angle on what is happening.
In a season where there are no major rule changes, it’s less likely that you will see a spectacular drift. But the news flow coming out of the test tracks will give you a clear signal as to where the market is headed. With that knowledge, you will be able to trade it successfully.
Category: Motor sport, Trading strategies
