Just like financial markets, sporting contests are ripe with investment and trading opportunities.
For a sporting event, commodity, equity, or currency to be traded there must exist two simple requirements. There must exist a market with sufficient liquidity, and a price that is subject to fluctuation. For soybean traders, news of an especially dry season approaching might be enough to shift the price of their chosen commodity and therefore create trading opportunities. Will a hot South American Summer lead to a worldwide shortage of soybeans or an oversupply?
For stock market traders, fundamental analysis centres on financials like its price-to-earnings ratio, the prevailing strength or weakness of a company’s market sector, and macro-economic factors such as changes to GDP and interest rates. Changes to these underlying factors is what drives price fluctuations. How will higher interest rates affect the housing sector? Which companies are most susceptible to a sharp fall in GDP or tourism or manufacturing?
For oil traders, basic supply and demand numbers will dictate price changes. How much will OPEC nations pump in the coming quarter? How much oil is likely to be consumed by the world’s economies? Will there be disruptions to supply? Will the OPEC cartel successfully control its members and their possible tendency to over-pump? Each market has its own drivers, and traders must be able to identify and interpret the possible ramifications.
For sports traders, the main driver of price changes is the scoreboard, specifically, which team is winning the game at various points during the contest. This may prove somewhat deceptive as some teams are known to be slow starters while others may suffer flat periods during a match’s middle quarters. However, beyond the scoreboard, there is a host of other much more subtle factors that create trading opportunities.
Profitable trades may result from an ability to read the body language of a contestant, or understand the influence of a home ground advantage, or the knowledge that a certain team is lacking in fitness and might fade in the later portions of a game. The keen-eyed sports trader may notice that team A is just a little more persistent in its efforts off the ball than team B. This will not be evident on the scoreboard until the hard work is converted into points or goals. Rumours of injuries to crucial players will influence the market. Traders will hold their collective breath when Lionel Messi is tackled heavily and slowly regains his feet. Will he be substituted for an inferior player while the game hangs in the balance? How much will that affect his team’s trading price? Who is the likely substitute and how will he perform under pressure?
For the uninitiated, many sporting contests appear random and chaotic. Women hit little white balls into golf holes. Thirty-six men chase an oval ball around a huge, muddy field attempting to kick it between four white poles. Ten men in helmets and protective clothing skate around an ice rink chasing an invisible puck. But rest assured, thousands of sports traders see something entirely different. There are contests within contests, subtle changes in momentum, shifts in confidence, and coaching decisions that might alter a sporting outcome. Every little tiny detail provides a potential trading opportunity.
Profit may be derived from a dropped ball, a careless foul, a stray kick, a missed putt, a hard landing, a shower of rain that favours one team over another, a captain who can summon the best out of his weary players, or a moment of rare brilliance from a previously overlooked participant.
These are but a fraction of the elements that drive sports trading. Correct analysis of such minutiae is what separates the winners from the losers. These are the tiny details that are missed by a weekend audience cheering for its favourite team while enjoying a hot pie and a cold beer.