How much should we pay for a player?
And at what price should we sell?
Two of the most basic questions an FI trader will face. And also two of the hardest ones to answer.
It depends on so many factors. Dividend potential in both performance and media. How many competitions they are involved in. Age. Trend fit. And that’s before you get into the softer stuff about predicting hype and the general madness in the market.
Making this a bit easier was a popular feature request for the site from members.
That’s when I came up with the Guide Prices on the dashboard. But the Matching Engine has meant Guide Pricing had to go on the backburner.
Pinning down prices in 2020 has been extremely difficult as they’ve fluctuated wildly. Plus with bids there is no longer a single price that makes calculating any kind of average extremely difficult.
So, answering these questions totally accurately is an impossible job.
But that doesn’t mean we shouldn’t try.
I think there are two useful concepts we can be armed with an understanding of.
The first is this: What can players really be worth? In this dividend structure, what’s the maximum we should really be paying for a particular type of player before all hope of a reasonable return is lost? I call this “True Value”.
This helps us because whilst we occasionally want to lean into the hype, staying at least within touching distance of rational values is a good trading practice that rewards us time and time again.
Secondly, it’s useful to be aware of what people are generally willing to pay. This is different from the “true value” – let’s call this “Market Value”. People are generally bad at rationally valuing players – so it would be too rigid to stick to true value alone.
Knowing what people are willing to pay is most useful when deciding how far we want to push it on a player who is rising. I may believe that the true value of Player X is £2, but if I also know that people are willing to pay up to £3 as the Market Value for this sort of player, why would I not let them do that?
Without this knowledge, we are flailing in the dark a bit. It’s impossible to trade optimally without some basic idea of those two different ways of valuing a player.
However my final point is a practical one. We don’t want to tie ourselves in knots with this. What we are looking for is a ballpark measure rather than perfect science.
Something that is simple to use in daily trading.
In this article I’ll discuss both True Value and Market Value and then consider how we might best put these to use.
True Value is what a player is rationally worth in this dividend structure.
To get an idea of that, we first make our assessment of the players prospects.
We do that through Scouting and our knowledge of all of the dozens of factors that go into that. It’s a beefy topic for another time.
That’s very hard to do – and it’s a first step that the vast majority of people are missing. This is why it should be no surprise that people consistently over value and under value players.
But without that you can’t get any kind of real idea of the True Value of a player. This will have to be unapologetically longer discussion as it’s not simple. It’s important though.
The first thing to note is that when you look at historic records of who won what dividends – there is a massive slice of luck involved.
If anyone ever says anything like “his annual yield is X because he returned £1.50 in dividends in 2019/2020” take this comment and file it under “things that are not relevant”.
For individual players the historic dividend yields cannot be assumed to be consistent year on year. A player may well have £1.50 in dividends last season but half of that may be media in an exceptional year where they were hot transfer gossip.
Once that transfer is over and it settles, the media likely drops too – it’s not a consistent yield like we are measuring the output of a company on the stock market. A company, well managed, will be expected to make steady growth each year.
FI yields are not like that – a player can be hot one year and not the next.
And for the other half of that £1.50 in performance dividends – it’s fine lines. Another player can have been equally strong for performance and won nothing at all due to bad luck.
On two different Saturday’s Player A and Player B could both score 300. On the first Saturday 300 is the highest score and Player A is Star Man. The next weekend, Player B scores 300 however is beaten by another player that day who scores 305.
Player A’s record will now show a juicy dividend and Player B has nothing.
But is Player A better than B? On that evidence, who knows? It is not valid evidence upon which to make a decision.
Equally, historic performance scores are not a valid measure either. Even in those 300 scores, there are huge slices of luck. Player A may have dropped the matchwinner and have scored his only hatrick of the season. Player B may have missed the matchwinner and be unlucky to only score 300 with a single goal.
Player B is much more likely to be the superior player in that scenario. But you’d never know it if you only look at the score – you need to know what made up that score.
This is another reason why people are generally bad at judging ability and value – they are simply measuring the wrong things and you see this all the time on social media, podcasts, chat groups. Wherever you find FI discussion you will find this stuff. So much so it often goes unchallenged now – but it’s just wrong.
It is only the trader who is observing the real match stats that has any idea how often a player is likely to challenge for performance dividends over a season.
What matters is our assessment of the player’s strength. Our overall judgement of the players likelihood of winning. Something you will never find in any spreadsheet. Spreadsheets do help and I use many of them, including ones on historic scores and dividend returns – but you have to use them correctly.
How do we work out a True Value?
To simplify, let’s assume we already have a confident assessment of how good our player is.
We think he is a strong fit for “Core Performance” from Key Strategy. We think he is for performance strength. And he’s only 21-24 – young enough that we don’t have to start factoring aging into the price.
That’s about as good as a players prospects will ever get barring a few exceptions. So, if we are right about his quality, what yield can we expect in dividends, and how much should we therefore pay?
This is where historic dividend yields can be useful. Once we start averaging them out across all players, there is some useful information to be gained there.
We know that on average, strong performance players that I’d judge to be around to will often return around 50p to 70p in performance dividends last season. With dividends doubled, we are likely to see many bringing home somewhere between £1 to £1.50 over this season.
There will be lots of variance either side as some players will be particularly lucky or unlucky. Nothing we can do about that but if the odds are stacked in our favour we will continue to pick winners far more often than we don’t – and that’s good enough for huge profits.
So, for our under 24 Core performance player with no media appeal, with an expected dividend yield of around £1.25 in performance we can consider ourselves to be getting very good value if paying £3.75 or less.
At £3.75 that’s a 33% yield in a single season on performance alone. And over 3 seasons in this dividend structure, likely to pay for himself whilst retaining resale value at the end. It’s a very rational price.
Yet, you can still stretch all the way up to £6-7 for this player in this dividend structure before it starts to get really crazy. Even paying £6 for this player we can still expect a 20% yield per season. And he’ll have resale value at the end. Again, it’s rational, certainly when compared to any other investment you can think of.
On FI though, in this market, I’d probably not want to be going for less than a possible 20% per season yield. People are too impatient, at this stage, for that. As FI matures in 2-3 years time we may be delighted with that yield but it’s unambitious for now.
This is why I keep saying how much value is genuinely, rationally, available in this market after the dividend increase. It’s astounding. Because often we are not even paying £3.75 for such players we can often pay far less particularly if they haven’t yet proven that potential to the masses.
And then plenty of other things change the price we should be willing to pay. If we make our above player also have consistent media returns we can up our potential expected return to £2.50 or up to £3.40 per season. Making rational valuations of £11 to £16 very feasible.
How does age affect the price?
However, as a price drag, age needs to be factored in because you lose resale value. This is a factor that is often overestimated – so many veterans are undervalued because of this fear. But just because it is overestimated doesn’t mean it isn’t a factor at all – it definitely is.
At Under 25 I don’t apply any kind of price penalty for age. At age 25-28 I’ll probably lop off around 15% of my valuation to account for age, quite mild. They still have years ahead. 28-30… now we’re really factoring that in and I might take off 40%.
Over 31… that gets serious. We’ll likely have to cut the price by 65% which is pretty severe.
So adjusting our above player who at 24 was £3.75 for great value for age? At under 28 he’d still be £3.10. 28-30? £2.25. Over 31? Just £1.31.
This sounds severe. Primarily it comes from a lack of later resale value. However, trading is art as well as science. There are times of year where people will be willing to pay more for older players, typically early season and ahead of big games.
So this “3 year bet” thing? Yeah. Funny joke. Traders aren’t that patient in reality. The average hold time will be closer to 3 months than 3 years.
If a player is currently winning heavily traders will suddenly care a whole lot less about age. If you are good enough, you are young enough (I think I’ll make that a catch phrase).
So, provided you are getting value, you may not have to take this age penalty quite so seriously if you are timing your entries and exits right.
But we are always keeping this rational valuation in the back of our minds – and it will encourage us not to push our luck too far particularly with higher risk players like unestablished youngsters or veterans.
Should I factor in future dividend increases?
Now, whether you factor in future dividend increases or not is really personal taste. I tend not to for a simple reason.
The “but dividends will increase” argument is typically used by people trying to justify paying too much for players. I can’t think of a single good reason to do this.
If I buy a player who is overvalued right now in hope of dividends being increased to bring that price into a rational range later… well even if it happens… am I really the big winner?
Probably not. Because following that logic the trader who is holding a player who is undervalued already by definition now has a player who is even more undervalued.
And if I have assumed a big dividend increase and it doesn’t happen – I’m in trouble. We saw this recently with Sancho. People bought Sancho on the assumption of a massive dividend increase. It ended up being a relatively small one and you could see Sancho holders furious at this “betrayal”.
It wasn’t a betrayal – it was the fault of traders who assumed too much.
However, holders did in the end get relief. Because of the difficulties implementing the Matching Engine, FI relented and came out with a second boost to dividends. But it does highlight the dangers of assuming anything.
By contrast, the trader who stayed closer to rational value really wasn’t sweating on this.
However, it is rational to expect further dividend increases once the market prices catch up with the dividends on offer.
But we have a very long way to go before that happens and I don’t think putting ourselves in a position where we need it to happen does anything good for us.
My personal approach is to disregard this as a factor and just consider it a bonus as and when it happens.
So, where would the above put us for different levels of ability and age?
These numbers aren’t meant to be a perfect science. It relies on our judgement about the players ability being correct. And there is a huge slice of luck in a players returns – but on the whole – we will find the better players come good and the weak ones don’t.
That’s the whole point of Scouting – it gives us an unfair advantage by stacking odds in our favour.
I like having this though as a ball park guide to True Value – if a player is judged high quality yet is at or under our “Strong Value Price” above – it’s a good indicator we’re making a good bet.
And if a player is flying well out beyond a rational price – we may want to consider cashing in especially if we aren’t 100% confident they really deserve that valuation.
As things stand – we’ll find that we can actually pay much less than these prices as market values are currenty low versus the dividends. As the season wears on though, I fully expect player values to routinely start hitting the upper end rational prices.
That much is inevitable in economics terms.
The only question for us is: which players will it be?
So, above we’ve dealt with rational value based on expected realistic dividend returns.
That’s a good thing to anchor ourselves to and not stray too far away from.
But we also have to consider that most people have no concept of rational value. Most often, people work out prices by comparison.
At the most basic level someone who misuses comparative value may wipe the drool from their keyboard and then tweet: “Player X is worth £12 and Player Y looks a bit like him but he’s only £4 – so undervalued!”.
This relies on both Player X actually being worth £12. And if so, Player Y has to be genuinely equally as valuable. Big assumptions.
And yet – this kind of thinking can’t be totally ignored because this kind of dumb money does move markets.
For a new trader, we may just want to stick close to True Values. It’s a good way to keep ourselves out of trouble.
As we get more advanced, we might want to bend the rules a bit where we have reason to do so.
So, going back to our example player above: Core fit, 24 or under, or better.
I may consider great value for him to be £3.75 with an upper limit of £6-7 before it starts to get a bit silly.
That’s the rational range.
But what’s the actual range?
Right now prices are generally much lower than that – the value available is huge.
So as things stand I’m more likely to be shopping in the £1-3 range, going up to £3.75 to £5 occasionally when I think it is really warranted for a very strong player. That might be Gnabry, Dybala, Depay. If we’re paying top dollar we want proven quality and strong future prospects.
So that’s point 1 – just because rational prices are quite high it doesn’t mean we have to pay them at the moment. We will later, but not yet.
Right now we are spoilt for value choices after this dividend increase and market turbulence and we’ll be able to pay much less than “true value” in many cases, in fact in almost all cases.
Let’s look at another scenario where an advanced trader might want to bend the true value rules.
Let’s say we picked up a £2 player and he’s risen to £3 – which is around about where we think his rational value really is.
However, we may not sell and stick rigidly to true value. If we judge him to be likely to win again soon, or have a big transfer up ahead, or be especially popular for whatever reason we may just push it further.
We’re taking advantage of the fact that not a lot of people respect true value or even know what it is. If people are willing to pay up to £4 and I think I can get away with it I will oblige them.
The difference between the good trader and the bad trader holding the same player at £3 is that the good trader has better knowledge of true value and the real ability of the player. This means he’s better equipped to judge when he has pushed it too far or can hold out for an even higher price.
If you don’t know the real ability of the player due to laziness or you just don’t know how to work it out, and you have no concept of true value – you can’t have a reasonable guess at how far you can push it.
This is particularly useful for advanced traders because if you have a good portfolio your decisions actually get harder.
If we have some obviously bad players that aren’t likely to recover anytime soon (not the same as unfashionable players) then what to do is simple yet painful. Sell them for a hit. Buy someone better. Easy – there are no shortage of good options.
But when we don’t have any really bad players, to improve our results further we’ll have to start juggling – selling perfectly good players to buy even better ones.
So for example – I could wait until my £3 player has established enough to rise to £6. Nothing wrong with that. But I also might not. I might decide to cash him out at £4 because waiting for £6 might take a long time and I have another target that I think is easier to get from £2 to £4 more quickly.
We’ll need to use a combination of both True Value and Market Value to navigate our way through all of these decisions on individual players.
How much is the player really worth? And how much do I think I can get for him anytime soon?
So. Let’s try and pin down some kind of ballpark average of Market Value for defenders, midfielders and forwards.
(Goalkeepers I covered recently in a separate article and we probably want to pay £1 or less for great value for a strong keeper, and we probably don’t want to pay more than £1.25 to expect great returns.)
I’ll be looking at known strong players and trying to find a level that people are generally willing to pay. This should probably be treated with a pinch of salt as market prices are currently volatile. But here goes.
These are super simple, rough numbers that I think are also very helpful as long as you don’t poke them too hard. It’s just an average price people tend to pay for generally well regarded players in each position at that age.
There is a steep drop off after 30 which in many cases is warranted – but this fear is often overblown and it frequently opens up fantastic value and huge potential profits at this end of the market. Many of the biggest profits can be found in this age range for that reason – contrary to what most people believe.
Obviously, when a player is particularly highly prized because of hype (Haaland?), or bigger than usual returns (De Bruyne?) they push well beyond this average price – up to £5-6 and beyond in many cases particularly if potential media dividends are involved.
If they are sitting below these prices, it’s probably because A) they are bad or B) they are good but people don’t know it yet or C) somewhere in the middle in that they are decent, perhaps but not quite on the level of the really top players.
And by the way, there is nothing wrong with that. It may be better to pay 70p for a player than £10 for a player – it could be the better trade in terms of profitability. Not every player has to be a superstar they just have to be value.
That’s our job as traders, to work out which ones deserve to be above or below what is generally being paid. And it’s not always easy.
In practical terms, let’s say we have a player that through Scouting we think could be really good, let’s say Asensio as an example. He’s languishing at £1.33 to £1.66 right now after a long injury and is just making his way back.
However, the indications are that if he establishes in the team, he could easily become one of the really strong players that are hanging out above the Guide Price, pushing to £4+ or beyond.
If. He has a lot to do. But it makes it a bet with a high upside because we now know how far he can go in this market in terms of what people would pay if Asensio proves his consistent strength.
And from the True Value – we can rationally expect him to be worth at least £3.75 if he realised his potential – both strong indicators this is a value trade.
As a different example, if we had bought a 28 year old player for £1.50 and he’s had success and therefore been brought up to the average price of £2.50, this could be a trigger for some thinking.
What factors make us think this player is better than your average well regarded player? Is he likely to keep winning again and again? Does he have a run of CL games coming up? Will he be in demand for the Euros? Does he have a big transfer coming up too?
If so, we may well want to keep holding with a realistic chance of getting an even bigger price.
But if we’re struggling for reasons why he should be more expensive than other good players? Maybe that’s our time to cash out.
Final Thoughts on Prices
These are some of the most difficult aspects of trading to master. “When to sell?” must be the most common question I ever see.
And there’s no real one size fits all answer.
But having at least a general idea of True Value and Market Value, and recognising the difference, gives us a decent chance of at least asking the right questions at the right time.
Which is better? Wrong question, I think. They are both useful for different things.
True Value keeps us grounded towards what the player is really worth. I could list dozens of reasons why that ends up working out in our favour and it tends to make us “lucky” traders but this article is long enough already.
For a new trader or a trader who wants to manage risk very tightly, I’d say stick close to True Value and you’ll keep yourself out of a lot of trouble. Right now in this market – I’d want to stick closer to the “Strong Value Price” end of the True Value table, rather than the upper limits. We aren’t even close to those yet for many players. But we will be.
For more advanced trading, where we’re playing the market and trying to turn decent results into great results by squeezing as much profit out of each trade as we can… that’s when using Market Value is helpful.
But there is a lot of skill involved there because of the judgements you have to make on how far you can push things or when you need to call it a day. All the Market Value price can do is prompt us that we should be considering that players prospects carefully. It is not supposed to be an automatic trigger to sell.
I’ll be turning these numbers into a more presentable format on the Dashboard, and I’ll keep on top of True/Market Value with regular updates, just as with the old Guide Prices.
I hope you have found this useful, and I’m interested in any feedback as to whether thinking of prices in this way is useful to members.