cpfc4me Joined: 30 Mar 04
Replies: 200 24 Dec 10 07:49 


[...]Unless you are overstaking, or again not betting at value, then it makes no sense to lay off at anything other than value. Long-term, you are giving away money [...]

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This isn't always true. If you're fully extended in a market, it makes sense to green/red out at less than value *if* you have a reasonable expectation of being able to play the market again at value that exceeds what you've given away.

I do this a lot, in a couple of markets I feel like I understand - both in terms of true value and likely movement. it's a form of risk control, really.

A treeeemendous machiiine: the commission example still works cpfc, say for example you backed a fair coin toss at 2.2 (which would still be value after commission), your expected profitability would be higher greening out at evens than letting it ride. the mistake most punters make is greening out at a very poor price

The commission example given doesn't work. It's a poor play to back at 2.04 when you're on 5% commission, because your only chance of being profitable with this strategy long-term requires that you find a bigger fool (or someone on less commission) who finds your 2.02 a value back.

If you could bet on a coin toss at 2.2, at what price would you lay-off and why? No sane person (on 5% commission) would back your lay at anything below 2.06, so you would be better off letting the bet run.

viva el presidente! to my comment "Unless you are overstaking, or again not betting at value, then it makes no sense to lay off at anything other than value. Long-term, you are giving away money"
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This isn't always true. If you're fully extended in a market, it makes sense to green/red out at less than value *if* you have a reasonable expectation of being able to play the market again at value that exceeds what you've given away.

If you're fully extended in a market, then I would suggest that you are over-staking.

kenilworth: cpfc, quite an extreme and highly unlikely example but I'm sure some people would be looking to get out of that bet at many stages
between 500/1 and 3/1, value or not. I almost never green up and I am sure it pays me to be that way. The problem is, when do you green up ?
For instance, backing 'unders' pre kickoff, there is a profit within a couple of minutes of play, so when ? For me, the answer is to stake,and 
be prepared to lose.

The example was intentionally extreme to make the point that on rare occasions, greening-up at less than value is a reasonable course of action. It's an insurance premium if you like. I wanted to remove the possibility of greening up earlier, which is why I put our unfrotunate friend into a coma for a few months!

To summarise, if you are backing at a value price, with a stake that is appropriate, you should never green-up unless you can lay at a less than value price. Taking small profits is easy, but it's not good trading practice to lay off simply because the position is profitable.

If you're fully extended in a market, then I would suggest that you are over-staking.

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no, that would be over-extended.

the logic of what you're saying is, if you stake your limit on a market, you've gone over your limit.

Not quite true Kenilworth, since there are often changes in circumstances that make a bet that was at one time value, no longer value. The Lakers at 1.8 pre-game might be considered value, but if Kobe Bryant is knocked out after five minutes, one would probably change that opinion. There's nothing wrong with greening up - or reding up - so long as there is a good reason to do so, i.e. the second bet is value.

I liked FAFH's comment that the opening bet is more likley to be the result of "exhaustive, objective analysis" than the closing bet. That's a good point.

It's a rare event where nothing happens! The true probability of an outcome does change as an event is in progress, and the price available changes also. In the same way that you made your initial bet after "exhaustive, objective analysis" and determined the price was value, the same approach should be used in determining when, or if, to exit the position. If the price at which you can lay off never drops below the price you consider is currently value, then you should never lay off.

cpfc4me
What if you take a " good value " position which then , due to unforeseen circumstances, goes very much awry,and short of a miracle will not turnaround, why not then exit at any price to salvage a few pennies ?

I believe you have.
But your point is solid, subject to commission saving factors.
I believe Investor and Bayes et al have sound, well argued points on that angle.
Or do you disagree entirely on that matter ?

cpfc4me
24 Dec 10 07:49 Joined: 30 Mar 04 | Topic/replies: 204 | Blogger: cpfc4me's blog
The commission example is flawed since commission needs to be factored in before deciding whether or not a bet is value, and no one in their right mind would back at 2.04 and let it run if their commission rate is 5%.

Could you clarify what you mean by this? I thought the example pretty clearly demonstrated an instance where expected return was positive with greening up at worse than fair value, but negative with no greening up. That was the only point of the example.

Contrarian
Date Joined: 19 May 03
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When: 23 Dec 10 11:40
The BF commission structure is such that (ignoring Premium Charge considerations for the moment) is it ALWAYS rational to green up at fair value. In fact, as long as one is paying a non-zero rate of commission on winnings, it is rational to green up at slightly worse than fair value (the precise amount worse depends on one's commission level).

Greening up is what enables a trader who is paying 5% commission on winnings, say, to run a profitable trading system in which he only has a 1% edge.

Yes, the PC distorts traditional risk /rewards characteristics. If "customer A" wins £100,000 and loses £20,000 and "customer B" wins £500,000 and loses £412,000, they both have a profit after commission (2%) of £78,000.

Assuming for the sake of simplicity that all bets placed are uncorrelated, the return characteristics of customer A are obviously far superior to those of customer B.

With the introduction of PC customer A is incentivised to mimic the returns of customer B if possible to maximise net profit.

I can't think of any other area in betting or finance where a similar situation exists. Does anyone else know of any?

Backing at 20 in the situation you described would be a very poor decision in all but a very small minority of cases.

zipper, I am not one to green up, but making a point
regards closing at a 'below value price'. I think in
certain circumstances it can be justified.

Kenny  "value price"... whats value   you got  12/1 a horse you thought  should be  7/1  you ok with that  but it got beat  with a 6/5 shot  take your value ticket to your bookie and he will say  sorry  son that horse lost " you cannot eat  value " sounds brutal but its truthful

If you need to "free up" funds would you not consider that an issue with your money management, perhaps too high a percentage of your bank on one market. Each to their own but i personally don't allow a red figure to be greater than 5% of my bank on any particular outcome at any time, its a rule that has stood me well.

KEN: can't agree with the 20/25 argument, i would consider backing at 20 when i figured the correct price to be 25 a bad move. Its a marathon not a sprint and all that,surely price is everything in the long term?. Clearly it is tempting in the short term. Regards.

When you start talking about 'freeing up' up money,
that is another matter, that can be justified with
any price situation. BTW, what do these people who
need to free up money do when there positions are not
such that they are able to do so ? For example,
their 2.44 lay is now 1.12 ?

Contrarian: Just to elaborate slightly: your comment that "commission needs to be factored in before deciding whether or not a bet is value" is wrong.

The whole point of my example is that you can't factor in commission to decide whether a bet will have a positive expected return, without considering what the exit strategy of the trade will be. Obviously, backing 2.04 for a coin toss may or may not be a good idea, for someone on 5%, depending on whether or not they will be able to lay off at evens later on.

I don't see how my statement that one needs to factor in commission before deciding whether or not a bet is value is wrong. To use your coin toss example, for someone on zero commission, 2.02 is a value bet. For someone on 5% commission, 2.04 is not a value bet. If everyone was paying the same rate of commission, this would be a no brainer, but we're not, so what is a value bet to one person is not a value bet to another, so we have the situation where you can back at poor value (to you) and still make a profit so long as we can lay off at a lower price. A 5% payer backing at 2.04 could lay at 2.02 to a 1% payer for example, because the 2.02 is value to them.

But in the real world, backing at anything less than value to you is risky. You may not be able to lay-off and so it seems reasonable to me that rather than assume a 'greater fool' will be found, you in general limit bets to those that are value. I say in general because, while a Premium Charge payer at 20% would need a price of 2.26 on his coin toss bet to be 'value', there is a very reasonable expectation that he would be able to lay this off for a profit at 2.04 or so since most people are paying far less than this. An illustration of why it doesn't make sense for Premium Charge payers to punt on Betfair, but only trade.
 
Zipper Greening Up is for Whimps . this is a gambling game  Real men dont green up

If you are unable to comprehend the opportunity that being able to green-up offers, then you are missing out on a key ingredient for being profitable. If you read the entire thread, there's some good information in here. Greening up at less than value is (with the one exception I gave) not a good idea - greening up when it is value to do so, is a good idea.

If you're a PC payer on 2% then a punt on a 2.00 shot at 2.00 is value.

An illustration of why it doesn't make sense for Premium Charge payers to punt on Betfair, but only trade.

I guess it depends on your percentages and whether or not your punting is profitable. When I am paying the PC, I punt elsewhere. My total charges of a little over 20% after six profitable years mean that the commission on punts barely dents that number. (Finding the same edge on punts that I can find in-play is very tough, but that's for another topic another day).

This thread

Your initial "trade" is surely a "punt" or am I missing something?

Your initial "trade" is surely a "punt" or am I missing something?

To me, a "punt" is a bet-long commitment - you are betting on the final outcome. A bet made for trading purposes is simply your entry point into the market. It can be a bet that you never lay-off if it is never value for you to do so, but usually traders will have an exit point and no intention of letting the bet run.

I frequently lay large amounts at short odds in sports like American Football, not because I think the 1.06 shot is going to lose, but because I think it is too short a price and will, at some point, trade higher. I certainly wouldn't call that a "punt".