By Alan English
So you like to trade. How's your portfolio doing for the year? Not so great,
huh? That's the problem with the markets. Some schmuck analyst from Goldman
Sachs says Sun Microsystems will "at a minimum" meet consensus
estimates for its fourth-quarter results. So you buy. Next thing, the same
analyst is "expressing concerns" about Sun and the share price is
sinking.
The problem is, you don't have the time to study a company inside out; you
figure that's what the analysts get paid for. You figure they know more about it
than you do so why not take their advice? Big mistake.
Most people like a balanced portfolio, so that means you've got to make
yourself an expert on everything from the oil industry to the communications
world. That takes time and lots of it. You've really got to do your homework, or
you'll get your fingers badly burnt. In this bear market, you're probably going
to take a hit no matter what you do. And a lot of people would rather watch
sports.
So here's a thought: why not combine your appetite for trading with your love
of sports? The point is, you probably know as much about football or baseball as
the next guy. Maybe you know a lot more. So why not get yourself a sports
portfolio and tell the analysts to go to hell?
So how does a sports portfolio work? Let's say your passion is NFL. You pick,
say, a dozen teams, the ones you know best. You figure you've got a handle on
how they're going to perform in the new season.
You open an account with TradeSports, the only true sports trading exchange
out there. TradeSports will quote your 12 teams in its Total Wins markets. Let's
say one of them is the St Louis Rams. You think they're a little flattered to be
pre-season favorites. You happen to have doubts about Eric Crouch, a college
quarterback turned NFL receiver. You have other concerns about them. With these
negative thoughts, you are bearish on the Rams, so you sell the Rams' Total Wins
on the TradeSports exchange.
On March 20, you could have sold the Rams on
TradeSports for 11 Total Wins
or bought them at 11.5.
You don't like the Rams, so that makes you a seller. Say you sell 100
contracts at 11 and your pessimism proves well founded. The Rams win only nine
games. The difference between 11 and and 9 being two, that means you make $20
for every contract you have sold. That's a profit of $2,000, minus commission
fees.
Of course, you don't have to hit the bid of 11. This is a true exchange we're
talking about here, not a bookmaker. You could always offer to sell the Rams at
just under the best buy price, which is currently 11.5. If you had sold at 11.4,
that would have brought you an extra profit of $400.
So to build a portfolio, you study the bids and offers on as many teams as
you want, work out where the value is and start trading! Just like the stock
market, you can take a profit or cut your losses at any point in the season. So
if the Rams start firing from week one, you can get out of your position before
it becomes an expensive mistake.
Deciding whether to get out or stay in is a matter of skill and judgment, the
very qualities required by successful traders everywhere. But this is football
we're talking about. It's all there right in front of you. It's not some company
that cooks the books to fool the market.
One other thing: managing a portfolio of NFL teams is 10 times as exciting as
keeping up to date with the Nasdaq and the Dow.
Sports trading: it's the new rock and roll.
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