John Todora is the Head Trader at Sports Trading Systems, the author of “Zero Correlation Investing – The ScoreMetrics Secret” and the creator of the ScoreMetrics Method of Sports Investing. He has been seen on ESPN, CNBC, Good Morning America and the NBA Channel.
Hey there guys,
In the ever changing world of sports investing there is nothing more interesting than watching a brand new league pop up to show why system based investing works so well in the sports markets. Today I am going to go over a few things I noticed about the XFL’s first week from a business side and from an investing side. Unlike my ScoreMetrics systems which are based off of backtested analytics, these are merely observations, but this is really where it all starts. Sports trading is like making a cake, in that it has a recipe that you must follow; you make observations, develop theories, test those theories, test them again and then make a decision of the tests bring back the results you are looking for. Let the observations, and the conversation that comes alone with that, begin.
How did the stock react?
In case you missed what I am talking about completely, Vince McMahon’s XFL football league is back and making a play to be a real sports league again. The XFL is owned by NYSE: WWE whose stock did not appreciate the launch at all, dropping 4.48% in the 5 day run up to the league kick off. Surprising considering a new product line being introduced but maybe a sign that most investors remember the last time the XFL launched in 2001, barely making it through a first year. Time will tell if those investors are right, or if this new league can find it’s way to a profit zone.
How did the the bookmakers do?
In sports investing nothing is actually more important than this. So name times people are confused about what it is we do in that they think we are simply judging player metrics to find mismatches. Nothing could be further from the truth. While we do use some player metrics as data points, what we are really doing is looking for gaps inside the numbers that the bookmakers provide for us. If you are familiar with traditional investing, we are basically looking for price and finding mistakes in that pricing to create an edge that we take advantage of for profit.
Comparing the XFL to NFL spreads is something that we are using for this exercise. If you follow the NFL at all you will notice that the bookmakers are uncanny in their ability to predict scores and then translate that into a score differential that keeps the public guessing, and keeps the money wagered on both sided even. It almost feels like they can tell the future sometimes. This is done by using backtested analytics and current trends as well as years of experience in doing the jobs they do. These guys are the best and, to be honest, aside from the heaps of money we can make, one of my biggest joys in developing ScoreMetrics was discovering a way to beat these guys at their own game!
Anyway, the XFL offers a totally different animal for these experts. Along with a new rule structure, there is no real data historical data to analyze and no trends to follow in order to adjust their price lines. So what happened in week one?
Saturday, Feb. 8
DC Defenders 31, Seattle Dragons 19 Spread: Defenders -7.5 Actual spread: Defenders -12
Houston Roughnecks 37, L.A. Wildcats 17 Spread: Roughnecks -6.5 Actual Spread: Roughnecks -20
Sunday, Feb. 9
New York Guardians 23, Tampa Bay Vipers 3 Spread: Vipers -3 Actual spread: Vipers +20
St. Louis BattleHawks 15, Dallas Renegades 9 Spread: Renegades -9.5 Actual Spread: Renegades +6
As you can see, what happened is a total nightmare for the bookmakers and their credibility to develop lines for a sport that has no history. Not only did they miss the two winners by a mile, they actually picked two teams to win that ended up losing, one by 20 points!
So the lesson here is two fold; first of all, we all need data. The bookmaker and the investor both do, and that data needs to be deep rooted and tested, otherwise this is a shot in the dark. The results are what you see above and it’s the results that will continue for the foreseeable future. It’s a crapshoot. at best.
Secondly, and this is the most important lesson you can get from this; if you were to “invest” $1 on an XFL game this year it would be gambling, plain and simple, and anyone who tells you different is fooling themselves. You have as much a chance to win money investing in these games as you do in investing in the flip of a coin. Probably less one the bookmakers take their transaction fees (AKA the juice).
At the end of the day, I don’t believe it’s anyone place to tell someone else what to do or where to spend their money, but if your reading this, you are looking to get into Sports Trading and most people consider me an expert in the field.
My persona opinion is that I can’t wait to watch the games again next week. It was fun football and for a guy like me, who wasn’t quite ready for the season to be over, it’s going to keep my weekends busy.
But as far as investing? My professional opinion is to stay as far away from letting your resources intermingle with this new league as possible. I would rather give money away to the homeless. The chances of me getting a positive ROI are the same, but at least it would make me feel good when i was done.
Until next time, remember, if you want to be part of the 1% you need to do what the other 99% aren’t.
John Todora – Head Trader at Sports Trading Systems