Issue 008 | Has Anything Changed?
So the share split has happened! This week, Liam, FI Trader and I are joined by debutant Buzzing Paul who will have his own section called ‘Back to the Future(s)’. Here, Paul will be profiling player performances that have predated PB as a thing on Football Index, and working out how those players would have scored!
Share Split numbers
FI Trader
With the Share Split finally done we can finally focus on the actual football. It’s been way too long.
The most important thing from it overall is not how much you made on the day or even in the week, it was the competent handling from FI that should set up a great 2019. It will be the basis of trading for a long time.
There was some initial confusion/grumbling about “capital appreciation being harder”. This was never true and I think most people understand that by now, at least from what I can see on social media.
I covered this on my blog here if anyone wants more details but to sum up, it takes exactly the same amount of money to move the price as before. Example:
- 300 shares of a £1 player before SS costs £300 = 3p old money rise
- 900 shares of a 33p player after SS is £297. = 1p new money rise
That looks confusing but the maths works out — it costs exactly the same to move the price by exactly the same %, in fact, in this example you get a £3 discount on the price.
In our new world, 1p and 3p are the same % increase, relative to your buy price. We just have to mentally adjust to this fact.
Where there is some room for interpretation is the suggestion that because price movements are now going to “look smaller” traders will think the market is more stagnant.
So where a player rises 12p before, they will only rise 4p now and it “looks” less. It’s true but the end result in terms of the money you earned from that rise is exactly the same. I am not worried about this at all.
In my view, as long as people are making good money, they won’t care and will just mentally adjust to these new prices.
The same could be said of dividends — they mostly now look smaller even though they are actually 28% on average greater than before. But nobody complains about that, people understand that it works out because you have more shares than you did before.
This will just be one thing of dozens that new traders have to get their heads around and I think the fuss will blow over.
Liam
This is the aspect people cared least about until it happened and now seems to have stolen the whole show after the share split has been completed. After some misleading and miscommunicated information, people seem to not know how to react to the fact 900 shares are now needed to be bought/sold to move a penny. Now we all know by now that the maths checks out in terms of pounds invested to profit earned on players in your portfolio, but that’s only half the story, as people are beginning to realise. Now the positive of course is that it thickens up the market and stops prices rising as quickly as they have in the past, preventing people requesting another share split in 12 months time but there are a lot more repercussions than that.
The amount of Index activity that is psychological has been underestimated and ignored until now I think. Yes, players look cheaper for new customers looking to join which is great but the switch to 900 shares to move prices has made the market look much more dormant. Rises, of course, are going to be smaller by the very nature of the move, but I think a lot of activity has been cut by more than three times since the split. As mentioned earlier, dividends now may look small as a new trader (even if in % terms they’re actually larger) and now capital appreciation has become harder to come by it makes smaller portfolios much harder to profit from.
I do think it will definitely take time to see how well it works though. Right now no one knows how many shares to buy of players and I’m sure plenty of people feel uncomfortable with holding huge numbers of shares even though it is relatively the same as before. I think people are being a lot wearier currently when entering trades as well, they know they won’t get that immediate 1p increase into the green they used to get (unless they buy 900+) and that puts them on edge. People also fear getting stuck with a ton of shares in a player they have to then try and shift at a later date in a market that currently isn’t moving too much.
One positive of that is that it may help regain focus in the market as people only go for players that “know” will rise, helping refocus on dividend winners than random 18-year-olds because trading will be most likely to happen on these players but we haven’t seen that yet really.
Overall sentiment is as ever huge for this platform and at the minute it’s a little bit negative after a huge amount of positivity in the first quarter of the year. It’s also a little bit all over the place and I think the timing has had an effect too. People want to get involved in the new dividends but have already got at least one eye on the summer and shifting capital into transfers, especially with this summer dividend announcement approaching on the 15th of April.
FIG
Traders always worry about something.
I have to be honest, when I realised that it would be 900 futures- I was slightly worried. People were arguing about two different things, as mentioned on the latest podcast, one group was talking about % increases (which are identical) and others were talking about actual (right here, right now) monetary value. Both parties were correct, just misunderstood.
What I will say is that rises have become more concentrated, but not smaller.
Take Ramsey for example on Monday night, who went up 10p from £0.87 to £0.97. You’re talking about a guy who has already had a summer move to Juventus confirmed, with quite little value (you’d think) over the summer- rising more than 10% off a Monday night goal. Now ask yourself: would he have gone up 30p in old money? I’m not asking if the capital that went into him would have taken him up that much, as we know that’s factually correct- but more so, would traders have cared that much had he been £2.61? Would we have seen him rise to £2.91? Take another example, in Rafa Varane. He went from £0.76 to a high of £0.92- a £0.16 increase which is the equivalent to £0.48 in old money. I don’t think that happens pre share split.
Are extreme rises less frequent? Maybe. Are massive rises still there? Definitely, I think that much is clear just by this weekend’s trading.
New Dividends impact / IPDs
FI Trader
As I said on my blog this week, I am warming to IPDs.
They have been the big new thing this week. They aren’t universally popular. I’ve always been fairly neutral on them.
However, in practice in the games yesterday I think there have been disappointments as the margins are so thin, and so many people are trying to flip them. IPD holders who want to get the full 30 days out of their players can be left a bit bewildered. The player can score, get an initial rise, then tank overall as people take profits from late comers.
So, there is an issue I can see here in that new traders are often attracted to this market as they see it as a way to tap into cheap players that aren’t over priced. But, it actually takes a lot of skill, player analysis and market knowledge to work the IPD market effectively.
You need to do a lot of research to find the value because the profit margins are slim, they can’t be players people have already heavily bought, and you’ve got a lot of people trying to flip on you to contend with.
New traders beware in my view.
Overall though, at current payout rates, I am starting to like IPDs as part of the market. There, I said it.
I like the effect they are having at the moment. It rewards players who are actually good at football, and offers a welcome break from the overdone search for the best bench warming 17 year old of recent months.
It’s not even that I particularly play for IPD’s myself. But IPD buyers boost prices on players I might be buying anyway.
So, you can either play for IPD’s yourself and try to find value, or you can offload unwanted players to IPD buyers at the right time. It creates more price movements and opportunities (or risks!) for everyone.
Provided it doesn’t keep rising out of proportion with other dividends, I am happy with it. It’s also quite self limiting and can’t get out of hand because to play for IPD’s alone you need to find extremely good value, and that will get harder and harder as more people try it.
But right now there is clearly some excellent value available as people get used to it, but plenty of traps too because this end of the market is a bit of a shark pit.
Liam
This week saw the beginning of the highest dividend payouts Football Index has ever given (relatively of course) and its made for quite the interesting subject to monitor. To be honest, its been hard to judge fully because the dividends aren’t the only variable that’s changed and I think the change in the number of shares needed to be bought has had quite an impact and to some extent out shadowed the dividend increase (we’ll come to that in a second).
If you take away the psychology of it all and put the price movements argument on hold for a minute, plenty of players have increased in attractiveness, especially when it comes to In Play Dividends. Never have I considered buying goalkeepers before, yet at forty-something pence, Ter-Stegan all of a sudden looks attractive with only 2p spread and 1p dividend for every clean sheet he gets could be decent with eight games in thirty days. At 33p Leno provides a similar attraction. Then we’ve had the likes of David Zapata have a decent but not out of this world performance and muster up a 198 score which along with IPD’s for his goals made him seven pence per share, which on the face of it sounds quite underwhelming (which could definitely be a problem for on-boarding new customers) but when you look at it as a percentage he’s pulled in almost 10% return on the price he started the day at (74p) and he also increased to and held a price of 81p so there’s another hefty increase. You’re looking at almost 20% return in total which is fantastic really. Interestingly though Zapata found himself in a similar position in January, where he scored four in an early kick-off before the dividend cut off and he increased by £1.20 at his peak and of course there are a few different variables to consider when comparing those two incidents but it is an interesting comparison. It would be interesting to see how attractive people feel the dividends look now. Not so much current/ long term traders but newer customers joining.
FIG
I think my thoughts on In Play dividends are pretty clear overall. I feel that they should only ever be a subsidiary part of FI, and should never compete with the long term USP that the index carries. Why? It’s really, really easy to replicate. That in itself is a massive risk for me. I mean, you wouldn’t even need to pay for Opta Data? Long term I think FI need to be super careful about how they nudge IPDs, as it could really disrupt the market should they become say- equal to PB/MB. It’s a real risk to their business model if IPDs become a large part of the proposition.
That aside, I think the market still hasn’t quite got to grips with IPDs. Whether the daily payouts will increase the dynamism, I’m not too sure. One thing that definitely won’t, is the spreads. They’re getting larger, and whilst we’ve had many a conversation about them on this blog I think FI need to balance liquidity and trading volume, with the spread size. It’s probably hindering those IPD rises to some extent, but whether or not FI think the liabilities on those payouts are too big to offer tight spreads might be something to factor in.
One area that’s been interesting, and I agree with Liam is Goalkeepers. Discussed on the latest pod, they’re not the sexiest of win- but they could prove to compound into some pretty significant wins longer term. Will they ever draw a crowd though? I’m not too sure- I guess that’s for demand to decide.
It’ll be really interesting longer term to see what FI do come July. If the market doesn’t really warm to IPDs too much (I don’t think it has to such a great extent) then maybe they have to tweak it. Who knows!
Back to the Future(s)
Hi all, before we jump into it, a quick thanks to the FIG, LM and FI_trader for inviting me on. If you have any feedback for me, I mostly hang out on #footballindex and @IndexGain Slack’s community.
Matchday dividends were first introduced near the start of the 2017/18 season. However, Premier League data matchday data has existed from much earlier. For nostalgic purposes and to (at some point) relive the Sir Alex Ferguson era, I thought it would be interesting to model historical matchday scores.
The Match: Swansea v Leicester Saturday 5th December 2015
The Report
Riyad Mahrez’s hat-trick accelerated Leicester City’s push for the most remarkable title in Premier League history.
Whilst Jamie Vardy may have been dominating media buzz for setting a Premier League record of scoring in 11th successive games. He had to settle for a supporting role as Mahrez took centre stage.
Mahrez’s opening goal was scrappy, the ball flicked on from a corner and appeared to hit his head and arm before trickling over the line. His second was a more conventional (offside) finish. His third sealed a hattrick and rounded of a great performance and another impressive win for Leicester.
The Star Player
It will come as no surprise to you all that Riyad Mahrez came out on top. His score of 287 would have won Treble Matchday dividends in 88% of treble days this season.
However, when we dig into the data it quickly becomes clear how weighted his score was towards the goals he scored.
- 202/287 points earnt for goals scored
- 3 Goals @ 40 = 120
- 1 GWG @ 40 = 40
- 1 Win @ 18 = 18
- 3 Shots @ 3 = 9
- 3 Shots on Target @ 5 = 15
- A further 11 points were earnt for 2 Shots, 1 of which was On Target
What’s more surprising is his defensive output:
- 62/287 points earnt for defensive actions
- 5 Tackles @ 3 = 15
- 3 Tackles Won @ 5 = 15
- 2 Fouls @ -5 = -10
- 1 Fouls Won @ 4 = 4
- 2 Interceptions @ 5 = 10
- 1 Offside @ -5 = -5
- 13 Ball Recoveries @ 3 = 39
And perhaps the biggest surprise of the day. Riyad’s passing output was particularly poor
- 6/287 points were awarded for passes
- 39 Passes @ 1 = 39
- 12 Unsuccessful Passes @ -3 = -36
- 1 Cross @ 3 = 3
A great performance by Mahrez, but weak underlying base scores may have severely hampered his matchday dividend prospects in Leicester’s greatest ever season.
Research, Resources, Tools & Tips:
Audio Content:
- FigCast Ep 75: Really good chat with former Football Index Marketer Nick Morris
- FigCast Ep 76: Debutant FI Focus made an appearance on this week’s pod and it was really great!
- State of Play Ep 16 (my other podcast!)- Matt Santangelo and I discuss Ronaldo vs. Messi, Youth set-ups and Nicolo Barella
Video Content
- I was live on the day of the share split announcement and you can see my raw reaction here
Articles, Reading & More:
- I made an announcement regarding the Bank Builder series on twitter
- Football Index Trader has launched a new tour of his site Members Area! If you enjoy the free content on the site, take a peak and see what else is on offer! A 10% discount is now available for 3 month sign ups too! Check it out here
- Liam wrote an article based on transfer targets at relegation-threatened teams that you can read here and the weekly blog “the week ahead” came out on Monday and you can read it here
- Europe’s leading per 90 u23 performers
- Thread of best U-19 players by position via FootballTalentSout
Have a great couple weeks trading!
