Trading The NFL part 2

In this post we're going to look at some possible entry & exit points pre-match & in-play.

3) Trading Opportunities – Pre-Game

The Odds for NFL games are essentially established by Vegas (as in Las Vegas) – I use http://www.footballlocks.com/nfl_odds.shtml and reflect not a book but what Vegas thinks are prices that will attract punters. Both BF and Pinny reflect these prices but are then heavily influenced by the market – the base is Vegas.

Most NFL games are not trade-able given the poor liquidity, but the 5 televised games per week on SKY are liquid and the ladders are complete.

a)     Most movements will take place on the day of the game (unless there is a injury to the QB during the week) and are usually the result of an injury or rumour about the teams Quarter Back – the most advance information you can get is from Tweet Deck (Twitter) or the regular team injury reports available on the web – Pinny and BF will not act immediately as the information takes time to filter into the markets. Movements in respect of QB information can be upto 30/40 ticks for the better teams.

b)    Teams also have a number of key players = mostly on the Offensive side of the team – i.e. key running backs and receivers – a list of these need to be on hand during the season so that any injuries during the gameor training can be assessed for the next game. See http://www.ourlads.com/nfldepthcharts/depthchartpos/QB for a full list of starting NFL players.

c)     Review the pundits for mismatches between the BF/Vegas prices – i.e. where prices are close – say 1.9 / 2.1 – and the majority of pundits are going for the 2.1 shot –possible drift in the favourite on the day of the game.

d)    There is a coin toss 3-4 minutes before the game which will determine which side will have KO – this decision can move the price by 5 or 6 six ticks depending on the game as the receiving side has possession and has the opportunity to score. Once the KO team and receiving team is known – either lay the KO side or back the receiving side. This is a one off trade and needs to be closed out before KO – you are trying to catch the swing directly after the coin toss as prices reflect the change or continuation of possession of the football.

4) Trading Opportunities – In - Play

a ) Some golden rules:

-         As the result of the game is either win or lose – no draw – Backing one team is the same as Laying the other Team.

-         The basic principle that applies in tennis  -where you don’t back the server – is the same in most cases for the NFL - you don’t back the team in possession of the football as the market has already priced to a large extent that they will retain possession – i.e. the price will drift more if they lose possession than steam if the team retain possession.

-         As per my stats from 2014/2015 –  70% of the starting favourites will win whether they are home or away. Out of the 256 games last year – 154 starting favourites were leading at Half – Time (HT), 20 of these starting favourites ended up losing at FT, however 42 starting favourites who were losing at HT ended up winning. Be very careful when laying a starting favourite In - Play as their price may not come back.

-         The prices will be more volatile during the second half of the game with prices moving from say 1.5 to 3 with just a change in possession in the last 2-3 minutes of the game.

b)  Using the Stats to trade

         

-         In the main prices move with a change or potential change in possession. The stats to use here are First Down and Third Down performance - http://espn.go.com/nfl/statistics/team/_/stat/downs - this is the ability of the teams Offense and Defence to convert / prevent First and Third Downs – ( i.e. to retain possession the Offensive team has to move the ball 10 yards). Using the stats of both teams create the position of the expected outcome – if the offense retain possession their price will steam – if they lose possession their price will drift.

-         Fourth Downs – in the main teams will punt the ball if they have not gained 10 yards at the end of the third down. However where the team only needs 1 or 2 yards on the 4^th down – or near the goal line – a team will attempt a 4^th down (see link above for stats per team in 4^th down conversion/preventions). Using the stats of both teams create the position of the expected outcome - if the offense retain possession their price will steam – if they lose possession their price will drift.

c)Trading Opportunities In - Play

-         The Red Zone – this is where the Offense have possession 20 yards from the Defense goal line. The prices have already anticipated that the Offense will score at least a field goal – i.e within this range the Offense is already almost guaranteed 3 points – i.e. if they fail to score at 3^rd Down and they don’t need a touchdown (6+1 point) the Offense will be able to attempt a field goal from at most 38 yards  - this yardage is calculated by adding 18 yards to the yardage to where the 3^rd Down has finished – i.e. if third down failed at the Defense 10 yard line – the field goal attempt will be made from the 28 yard line. The nearer the goal line the Offense can progress to - the more price will anticipate 7 points rather than 3 points. If the Offense fail to get a touchdown or lose possession the Offense price will drift significantly. Usual trade – depending on the strengths of the teams is to lay the Offense when in the red zone given that the drift will be more than the steam if the Offense fail to score a touchdown. Note that the Offense is more likely to score within the red zone – so caution needs to be exercised. The price movements in the red zone will be more volatile during the second half and in particular if the scores are close.

-         Possession in the last 2/3 minutes of the 2^nd quarter approaching half-time. If the team in possession of the football with 2 minutes or less to go in the first half and also will be receiving the ball in the second half – this team has effectively 2 chances to score – this will create a significant steam in the price – as the market realises the situation.

-         The receiving team from the second half KO - following from the point above – should experience a small steam at the end of the first half as it will gain the first possession in the second half – this steam depends on the relative scores in the game – if the scores are close i.e within say 3 points the effect will be more than say where the scores are 10+ points apart. Leave this trade as late as possible as positions created too early are exposed to late scoring at the end of the half.