Tuesday, June 23, 2009

Finding Relative Value - a case where NFL betting helps read charts

As an nfl punter with a decent track record, my usual week of picking value bets in the nfl go along the lines of

- see all the matchups and quickly eliminate the games where there is an overwhelming odds, and try to find the best lines out of the middle pack of odds.

Then I apply a simple mental decision making value analysis on the remaining teams with questions such as

1/ are they on a winning streak that is reflected in the odds?
2/ do they have a home team bias, when the teams are relatively equal in skill?
3/ Are there any hidden factors that give value in betting for the underdogs?

Then I will pick a basket of team 4-6 where they are all underdogs and try to pick mostly underdogs, with odds close to, but above 2 to 1.

What I've noticed by following a selection of stocks and indices within the last few weeks, is that stocks tend to underperform or outperform on a daily basis in reference to the index - which allows some entry points based on key levels on the chart.

What makes the game even more interesting/challenging is probably the fact that the index itself is moving in reference to the SP500 index, and the inter-related part of each asset class is probably what differentiates finding value in prices for assets.

Today, where the day has gapped down and the market tends to have a shorter trending range, you would look for stocks that you could sell into any short term strength.

You would also want to short the stocks on a strong down day, in a sector where you expect the most weakness - i.e within the banks, you would expect to short WBC/ANZ rather than CBA/NAB as they are falling relatively faster (albeit not that much difference)