A Predictable Focus on Big Hitters

As expected, the relentless grind of Gold Day’s has focused attention on some of the big hitters involved in recent European ties. 

It’s hardly rocket science as these games have been scheduled for weeks and yet if we need another example of how short term minded many traders are here it is.

Lining up your portfolio with the upcoming events that matter in good time is a fairly straightforward thing to do but it gets results. The hard bit is having the discipline/confidence to go for such players when they are unpopular. And of course, knowing who the good players really are.

Not because these players are definitely going to win, we can never guarantee that. But we do know that traders tend to over emphasise what happened last week and what is coming up this week. And wins for obvious good players like Lewandowski can blaze the trail for other similar players like an Immobile to follow in due course.

My first main observation is that some embarrassingly easy profits have been possible. They have flown mainly under the radar because when that player has done well we have seen a rapidly closing spread rather than a major price rise. 

These rises are less obvious as they don’t appear on the FI front page like a big Blue Button price rise does. 

Yet, if you bought at that low bid price before they were popular then 25% to 100%+ profits in recent weeks were easily acheivable on pretty damn obvious players like Muller and Lewandowski. I’ve been banging on about these players for months. Or slightly less obviously – Reguilon from the Europa preview who had dropped again back into value range. 

These are not exactly my most brain taxing finds we are talking about very well known players. But not every trade has to be sexy or new – these profits are possible mainly through having the confidence to go for them at a time when it seems that the majority of people are desperate to sell them.

We knew they were in the CL in August. And we knew they were likely to win. If we have money to spend there is no reason not to just sign them up – don’t wait for it to actually happen and pile in with the rest! This is particularly difficult to do for people who are easily distracted by following the latest social media trend. It eats up their available balance and makes forward planning impossible.

That’s something we want to bear in mind as we prepare our portfolios for the calendar ahead. Who are the players who are unsexy now yet have good reasons to be desirable next week or next month?

We have the remaining CL/European games, Ligue 1, the next Team of the Month, Internationals, then restarts of the new seasons. So buying quality players who are still available on low bids that hit those boxes is as close to a slam dunk win as we are ever going to get. 

And we don’t need to buy the ones who won already. In many recent winners there is still definitely value there. But, we’ve seen lots of good performances from players who were very close to wins yet missed out through little more than bad luck. I’ll cover those when I review the CL/Europa games soon.

We should have been signing up such players for weeks if not months if we had the funds. But the Matching Engine plus gloomy sentiment from many is giving us a longer window than usual to buy great players at value. 

Wins are driving prices. For good players and bad ones.

My second main observation from the last week is that many people still have a very hard time telling the difference between a win for a quality player and a fortunate win for an average one. 

Usually, on a normal Gold Day with hundreds of players in action we need the real cream of the crop – those incredibly FI suitable picks that are capable of regularly getting head and shoulders above the pack. 

But in a single match any goalscorer has a decent crack at the win. The better FI players are still more likely to win and we have seen plenty of expected winners in August. De Bruyne. Lewandowski. Bruno. Neymar. Kimmich. Muller. Banega. The gang’s all here.

But this format also allows relatively poor players to gain traction with soft wins and this is why we need to know who the real quality is through Scouting in order to trade effectively. Brandon Williams an obvious example. Still tanking from his absurd £2+ high but the win closes the spread a little and gives people hope. It shouldn’t. He’s an awful FI fit. 

Alphonso Davies another high profile example. Wonderful, eye catching performance and a soft win has arrested his predictable price slide and given people false hope. If you are judging this objectively by the numbers – that was only one more game amongst many that shows he is a bang average FI player. You don’t score points for being nice to watch. 

You can of course make the argument “but he can develop”. Sure – but for me it is a red flag when a player is playing well and yet is average or worse at FI scoring. It makes an FI friendly change to his style of play less likely because there is no real world need for it. He can do what he does slightly better in future but it’s unlikely to make enough difference to matter.

The difficulty I have with the “he can develop” argument is that it is most frequently used by people who feel forced to justify an overvaluation of a player who isn’t good enough. 

Of course we should speculate on the development of high potential players on the basis of good evidence. But the point is when we are speculating we need a low price that matches the risk of that player not developing as hoped. Most promising young players are going to fail to make it big and even less of those who do will suit FI. We shouldn’t be blind to that.

If we are paying a very high price for a player that must improve significantly to justify it we put ourselves under a lot of pressure. Even if it happens we only got a fair price not a great one. And if it doesn’t, which is more likely, we significantly overpaid. It’s just a bet that is very hard to win and easy to lose.

Huge IPD payouts open up short term opportunities

I am primarily someone who trades over weeks and months rather than hours and days. But with IPDs VERY generous until the 30th September and with more free time than usual I did more of this (apparently I can’t help myself even when on holiday). 

In general day trading is highly time consuming and once you factor in commission and spread doesn’t leave you with as much as I think some on social media make out. 

But the higher IPD’s compensate at the moment. So for example I decided to abuse the tiny spread on Lewandowski before the Barcelona game midweek to sell and then buy back instantly. I needed 2 goals/assists in the Barcelona game to just about cover the cost of that swap which fortunately I got. So anything he gets against Lyon and potentially in the final is all gravy. 

I’ve bought a little free bet with a player I wanted anyway. Am I going to retire on this proceeds? No. But if you have a little time to play around with this it might grub up a few more % profit and why not. If there are tight spreads on players with strong IPD potential it can be worth it at the moment, though it gets less attractive come 30th September when IPD’s return to normal rates.

This I think particularly applies to Ligue 1 which is getting a long run at uncontested dividends and inflated IPD. 

I shake my head when I see that one of the players with the tightest spreads right now is my underdog favourite Ben Yedder at just over 3%. £1.19 Blue Button now, or £1.15 on a bid. 

A couple of weeks ago I did the Ligue 1 preview and he was available for around £1 on the bid. He’s scored or assisted 22 goals last season and Monaco have soft opening fixtures. He’s scored 2 and assisted 1in 4 pre-season friendlies recently.

He can return 5% of that value each time he contributes to a goal. He can also win the match day dividends overall with such limited competition.

You could sell for a 10-15% profit now before he’s even kicked a ball if you want. 

Who are these people selling him for £1 when all of these facts (bar all of the friendly performances) were available weeks ago!? It shouldn’t be this easy to make money! This is enabled by pure short sightedness and should be exploited.

Humble Ben Yedder must be one of the most potentially profitable yet low risk players of the last 12 months when you consider how often it has been possible to refresh his IPD window and buy and sell on the peaks and troughs. And yet hardly anyone talks about him. 

Treacherous Transfer Trading. And Sancho.

Transfer trading is a fickle friend.

If you persist with holding too many gambles into the window itself it’s thrilling when it’s going your way and absolutely frickin’ miserable when it’s not. It’s generally an exciting way to achieve very little.

I’m sure Sancho has been much discussed when I’ve been away and things are certainly on a downer for him after a good run. I wouldn’t pay too much attention to the latest gossip. I didn’t believe it when the deal was a “sure thing” and I don’t believe that it’s definitely off either.

All I care about as a trader is whether the price I’m paying matches the risk/reward.

One of the issues with this trade at this point is that I wasn’t even sure what the good outcome was. He is struggling now the deal is in doubt. But if it went through would the price rise or fall? For every true believer in Sancho there will be a transfer flipper waiting to take profit and you can’t trust these rats! It will need everyone to co-operate to maintain a price this high and it’s not easy.

The personality that chases this sort of thing late in my experience tends to be very fickle and easily influenced by a price drop or negative social media chatter. So throwing your lot in with that at the wrong time is a bad move. 

I underscore at the wrong time for a reason. Because trading in Sancho is absolutely fine to do and even desirable but it’s a case of picking your moments. I think a mistake people make with these is becoming a “fan” of the player. Don’t go down with the ship and get obsessed with “proving you were right”.

If you are sticking in to get that extra dividend – you are allowing others to sell first and then when you want to sell your extra day or two of dividends has likely been wiped out by that hit you take. And you have likely missed an opportunity for an incredible rise or an IPD win in a decent player that doesn’t come with the huge risk of a drop.

This is why I was happy to buy Sancho in January at £7 but went cold by May/June at £13+. You’ve locked in the majority of the profit but haven’t sweated on any of the recent risk.

With transfer trading buying early then selling before the link can really break down is hands down the most reliable way to profit. It is so obviously the correct course of action with most players including Sancho from a rational trading perspective that it is barely even worthy of debate by this point.

We have seen this cycle play out so many times before where the market becomes obsessed with a particular player. It usually, though not always, ends badly for the true believers even if the hoped for hype event does happen.

I don’t think the hype for him is going anywhere though. Another transfer window will come if he doesn’t make the move this time. Ironically this may be exactly what holders want. 

It’s a real danger period for holders if he does move to Old Trafford. He will actually start having to prove he is worth this money and whilst he might, that’s a lot of pressure and holders can bet social media trolls will be lining up waiting for him to fail. Good traders stay well clear of all that in my opinion.

Something I don’t often mention with these trades is how silly the fear of missing out really is. Let’s say by some perfect combination of dramatic improvement and dividend increase Sancho is worth £30 this time next year. 

First point – if Sancho genuinely proves himself worth £30 on a rational valuation we should have no problem paying it. Much as it’s perfectly acceptable to add Neymar or Bruno to your portfolio now. Big price sure, but they warrant it.

Second point – if capital appreciation is what you are looking for getting Sancho from £15 to £30 is extremely difficult and relies on huge dividend increases (not to mention perfect development and performances from him). If we do see dividend increases of that magnitude then Sancho doubling in price will not be even close to the biggest percentage riser by that point. Not. Even. Close.

I think by and large Sancho will stay in that premium bracket – there is lots of genuine true belief out there and it’s not entirely baseless. Even if things start going sour it will take a lot to bring him down because people love him. Mbappé survived for a long time in recent years on little more than hope for example.

But for long periods he did just survive – and was often left behind as others surged ahead. I suspect this may be the outcome for Sancho from here, at least for a little while. If the move is back on there should be a bump but as above once the move happens the pressure is really on to deliver.

In general the FI community are spending way too much time talking about Sancho. Even I am doing it right now. It’s so hard to avoid. He isn’t even the most profitable player around in recent months. Far from it. And he’s not going to be the most profitable player from here in the future either.

The danger is we get sucked into thinking too much about one individual or group of players. It wastes our time and misdirects us. It’s a little like how before the Share Split all anyone wanted was Neymar and a few select others. 

In the very first site Key Strategy I disagreed and instead of following I went to the place everyone would naturally want to go once they were done with the short term hype of the Share Split. That worked out extremely well.

It worked well precisely because everyone had paid too much for a small group of players – leaving me free and clear to hoover up lots of highly desirable yet currently unfashionable players on the cheap.

And I think that’s what we need to do now – forget about chasing transfer rumours or who is winning media this week and just concentrate on setting up a great portfolio for the coming season. 

There are some exceptions on transfers. 

By the window itself I generally want rid of any players that are reaching a silly price that rely on a particular move to justify it. But it’s a different story if they can be held at the existing club. 

Thiago for example I’ve been happy to hold throughout. Liverpool is great if it happens but I largely don’t care where he goes. PSG fine. Stay at Bayern, fine. I’ve very little to sweat on here because I have no reason to believe he will go to anything less than a top tier club.