15th November 2001 - issue 8
1. Introduction
Intrade.com is the new p2p site owned by Queensland Press, an associated company of News International, and therefore forms part of the Rupert Murdoch empire. Whilst Intrade facilitates the placing of sports bets between two individuals, which they call sports trading , its approach is so radical and so far removed from the traditional idea of sports betting that the comparisons end there. Like the now defunct Play2match, Intrade have taken the concept of sports betting and put it into a futures trading market framework. This creates a whole new gambling experience and it will be interesting to see if Intrade can make this succeed where Play2match failed.
Rather than water down their product so that it will appeal to the wider gambling public, Intrade have remained true to their vision of replicating the futures market as closely as they can in a sports event context. They have come up with a very sophisticated and specialised product that will surely appeal to those with a city trader background. As these people are renowned for their betting activities and their huge salaries and bonuses if they can corner this market, Intrade will have secured an excellent business. The downside of this is that by creating a site with "all the sophistication of the worlds largest trading exchanges", Intrade have by definition created a site which may be daunting and unfamiliar to anyone from outside this background.
Intrade have identified city traders as their key target audience and claim to have been very successful in beginning to capture this market. At this time they see the conventional sports betting market as very much a secondary target to the extent that they have yet to advertise the site in the Racing Post, the principal publication for sports betting enthusiasts. When they do go after this market, the biggest challenge that Intrade will have will be the education of the non trading betting public.
The question Intrade will need to answer is why would anyone want to leave the safe surroundings of their familiar p2p sites to venture into this alien environment? The simple answer is that if you take the time to familiarise yourself with Intrade, it has a lot to offer, with a number of very attractive features and characteristics which are unique to the site. In addition, the more sites you are a member of, the greater your chances of finding exceptional odds or arbitrage opportunities. Earlier today I sold contracts (more on this in a moment) in the Manchester United Premiership for 36, ie risking 64 to win 36. In conventional betting language this equated to laying them at 2.63 whereas I could go straight to Betfair (2.85) or Flutter (2.875) and back the same outcome for a guaranteed profit. Those who refuse to stray outside of their comfort zone will be denied these opportunities.
2. Using Intrade
Whilst the site has been designed in a way that seems highly specialised and technical , there is nothing in it which a normal person with average intelligence will not understand if he takes the time and effort to get to grips with the site. When you sign up there is a complete on line demo which takes you through all the main features of the site. Go through this carefully, step by step, and this will give you a good basis in the mechanics of the site. In addition there is a glossary which attempts to explain some of the technical terms used on the site. If there is anything that you do not understand then you can call and speak to a member of the exchange staff on +44 0 207 3659795 for further advice. In the Contact Us section it says that this number is for urgent enquiries, but I am reliably informed that the staff here are more than happy to also deal with routine questions about the site.
It is not my intention in this review to explain everything about the site, but I do feel it is worth demystifying some of the key phrases which are used on the site and explain what they mean in conventional gambling parlance.
2.1. PIX Contracts (Percentage Index Contract)
This is essentially the same as a conventional wager, where you bet for or against your favoured outcome. A PIX contract expresses the likelihood of the stated outcome as a percentage representation. A 100 price would be a positive outcome, ie a win and a 0 price would be a negative outcome, ie not a win. Each unit is known as a "tick". The price of a tick on PIX contracts is 10p. Therefore, a price of 100 ticks in the event of a positive outcome would be £10.
The market price may fluctuate before and during the event between 0 and 100, based upon the orders and trades made on the exchange. These are in effect, 'predictions' of the final outcome of the event and this is the method that Intrade uses to express odds. If the market is 40 bid this means you would pay 40 ticks ie £4 for a potential total return of 100 ticks ie £10. To convert this to conventional odds, you need to compare your potential profit against your amount at risk. A profit of 60 against a return of 40 equates to odds of 6-4 or 2.5 in decimal odds.
This is a completely different way of looking at odds, and it takes some getting used to. Thinking about it objectively, however, what could be simpler than equating the odds with the percentage likelihood? The advantage of this is that it gives us the opportunity to identify and cash in profits from market movements quickly and easily, which is something that Intrade consider to be a key factor when betting in running as discussed below. To help members understand the relationship between the market prices and conventional odds they have an odds converter at the bottom left hand corner of the Trade Centre page. In addition they have an excellent odds converter mouse mat which they will send out free of charge to any member who requests it.
2.2. Buying long:
"LONG: A net position where more contracts have been bought than sold. A long position is initiated if the trader believes the price will go higher." (Intrade glossary definition)
eg You buy Everton long in the PIX at £3 (30 on the PIX)
This is one of the technical terms market traders use. To the rest of us it simply means that we are backing an outcome, ie betting that it will happen. The way that this works on Intrade is that if, for example, you want to back Everton, you buy contracts in an Everton victory. The price of this will be somewhere between zero and £10 per contract (100 on the PIX). The closer to 100 the price is, the more likely the market feels it is that Everton will win. This price will fluctuate until the result is known, at which point the contracts will expire. The value will be 100 if the outcome predicted by the contract proves correct (ie Everton win), and the value will be zero if the outcome proves incorrect (ie Everton lose or draw) If Everton win your contracts will mature with a value of 100, bringing you a profit of 70 ticks or £7. If Everton lose or draw you have lost your bet and the contracts will expire with no value, meaning that you lose your stake of 30 equalling £3.
2.3. Selling short:
SELL SHORT: When a trader sells a contract he does not already own, thereby creating a net short position. (Intrade glossary definition)
eg You sell Everton short in the PIX at 32
When you sell an outcome short you are effectively laying it. The way this works on Intrade is that your opponent buys contracts in his chosen outcome from you. The fact that you do not actually have the contracts to sell does not matter, so long as you are able to fund the potential ultimate value of the contracts then you are in a position to trade. In this example your opponent buys contracts in an Everton victory from you at a price of 32. This is effectively his stake, and therefore your potential winnings. At the end of the match when the outcome is known, the contracts will be worth nothing if Everton fail to win. Obviously this means that you do not have to pay your opponent anything and the 32 per contract becomes your profit. If, however, Everton win and the contracts mature with a value of 100 (£10), then you are obliged to pay your opponent this value (this transaction is automatically processed by your account by Intrade), which with the £3.20 deducted means a loss for you of £6.80 . Therefore this contract is equivalent to laying Everton where you are risking £6.80 to win £3.20.
2.4. Closing out
Throughout the trading period, right up to the final whistle you have the option of closing out your position. If you are long in a market, ie you have bought more contracts than you have sold, you close out by selling contracts equivalent to your surplus. If you are short in a market you have sold more contracts than you own, therefore to close out you need to buy a quantity of contracts equivalent to your surplus. If you close out and the price has moved, then you have made a trading profit or loss, depending on your position and which way the market has gone. It is possible using this technique never to actually bet on the outcome of a match but simply to bet on what you consider to be likely future price movements in the market and to always close out your position before the outcome is confirmed. This is the classic buy low sell high philosophy on which the financial markets are based. When you close out a position the effect of the contract is reflected immediately in your account, with your profits or losses instantly being credited or debited. The ability to close out quickly and easily is a fundamental feature of Intrade and central to the philosophy and design of the site.
2.5. Expired contracts
Whilst the option to close out your contracts is a key feature of Intrade, it should be stressed that there is no obligation whatsoever to do so. The alternative is to allow them to run full term to a positive or negative outcome. The technical phrase for such contracts is "expired". These are simply bets which have resulted in a conventional win lose outcome and are the closest thing on Intrade to a conventional win lose bet on a regular bookie's or p2p site.
2.6. Totals contracts
These are essentially the same as spread bets, where you try to predict the number of goals, runs or points that will be scored by the stated team or player. If you buy long you are predicting that there will be more goals, runs or points scored than the level at which your contract has been set. Your contract will expire at a value determined by the number of goals etc multiplied by the tick value. If you bought long and the value exceeds what you paid then your profit will be equivalent to the differential. If you sold short, then you will of course lose an equivalent amount.
These contracts are split into event contracts and season contracts which are discussed in margin contracts below. Each contract has a maximum and minimum exposure which caps your potential profits and losses, which means that your maximum losses can be frozen in your account pending closure of the contract.
2.7. Margin contracts
These are contracts which apply over the course of a season, eg number of premiership points for Arsenal. When you apply to become a member you have the choice of becoming a risk margin member or a full margin member. If you are accepted as a risk margin member Intrade does not require you to maintain 100% funds to cover the worst possible scenario in these bets. Instead they take a view on what a realistic worst case scenario is likely to be. If your positions hit a bad patch, and before you are likely to lose more than you have in your account, they ask that you deposit more funds. If you are a full margin member, you need to always have 100% of potential loss on deposit. The margin accounts work the same way in which the traditional futures markets where members place a deposit against the likely risk. A gold contract may be worth $27,000 US, but the margin is only around $5000 US. If your position get close to losing $5000, the member puts up more funds, or the position will be liquidated. This is a progressive and imaginative approach, which enables us to get involved in contracts that we could not otherwise consider. It also gives us leverage by maximising the use of the funds in our accounts. The next step which Intrade are currently working on is to offer full credit facilities to qualifying members.
3. Intrade in running
The concept of in running is absolutely central to the whole philosophy of Intrade and the way it has been designed. Every event which appears on Intrade continues to trade in running until the event expires. In keeping with this, any positions that you offer will remain on offer until you cancel them, they are accepted, or they lapse unmatched. Remembering to cancel your unmatched contracts prior to the start of an event unless you plan to trade in running is a key discipline that you will need, especially if you are used to betting on the other p2p sites where your bets are cancelled for you before the event starts. If you are trading the day before the event you can overcome this by making your offer GFS which means Good For Session, ie that it will lapse if it remains at the end of the current session.
The ability to close out previously held positions is of limited value during pre match betting as price fluctuations are generally not too dramatic. However, once the events actually start, price movements can be dramatic and the opportunity to liquidate profits or to cap losses becomes a key feature. This facility already exists on Betfair and Flutter, but Intrade argue that the odds system used by these sites makes it very difficult to really understand your position, in the event. With the PIX contract system if you bought at 50 a contract, and they are currently trading at 80 then you know you have made a profit of 30. If, on the other hand you had backed an outcome at evens then in running the odds moved to ought 1-4 on, it is less easy to calculate what you need to do to liquidate your winnings.
The most radical feature about in running betting on Intrade is that the market continues to trade when a major event such as a goal occurs. This again is a feature resulting from Intrade remaining as faithful as possible to the trading markets, which for example continue trading through an announcement or a press release by the company involved. This makes it very risky for anyone brave enough to offer contracts, without whom there is no market. To counter this Intrade have an instant cancel all button, and in the near future will introduce a freeze all button which allows you to put all your contracts on hold until the danger is passed at which point you can reinstate them if you wish, or adjust your prices accordingly.
Whilst offering odds in running in a very risky thing to do it does make for a much more interactive and exciting betting experience. It also offers interesting possibilities for those brave individuals who have the courage to take this form of trading right to the edge. If a goal is scored, unless the scoring team already has a comfortable lead the market prices will dramatically shift following the goal, because the likelihood of them winning the game has increased considerably. If you are selling contracts in the team who has scored, the value of the contracts that you have sold will rise making your position much worse. If your opponent is able to buy your contracts after the goal has been scored they are taking a risk free gamble. However, before the ball actually hits the back of the net there will normally be a build up which indicates that a goal is likely and eager traders are likely to snap up your offer before the goal is scored to pre-empt the market and get take advantage of the value before other traders beat them to it. The problem for your opponent is that however likely a goal looks, until the goal is scored and the referee confirms it, anything could happen. Therefore there is the chance that your opponent will match your offer in the expectation that a goal is about to be scored when in fact it isn't.
This creates a whole new dimension to in running betting which is not possible on any other site. A bookie free bettor with a good feel for the probability that a goal scoring opportunity will actually result in a goal has a great opportunity to hold back from cancelling his contracts at a key time, so long as the price he has set for them offer him good value with all factors taken into consideration. When he perceives that the likelihood of a goal is such that his contracts offer greater value to his opponent than him, then he has the opportunity to cancel his bet, unless of course they have already been accepted. This really is betting on a knife's edge and is not for the faint hearted, but it does offer great opportunities to anyone who can master it.
When a goal is actually scored the market goes crazy with everyone desperately trying to buy contracts in the team that has scored. In the scramble to buy these contracts there is a high likelihood that some members will go too far and accept a price that represents poor value despite the goal that has just been scored. The shrewd trader may recognise the possibility of a goal, and used his knowledge and experience to calculate what the true price should be after the goal is scored. He could then offer a price which is below this level in the hope that someone in the chaos following the goal will get swept along and pay an artificially high price for the contracts despite the fact that a goal has been scored.
This is all pretty dangerous stuff and the inexperienced or ill informed trader could lose heavily following these strategies, and until you are really confident that you know what you are doing you could make a real mess of things. The safe option in the meantime is to only accept other people's offers when you recognise what you consider to be good value, or when you see an arbitrage opportunity with another site. One factor to take into consideration is that you may seek to accept a contract and be beaten to it, in which case your contract then becomes available for other members to accept. If this happens you either need to cancel it or be ready to cancel it if a negative event looks likely. As an alternative you can use the very useful "Fill Or Kill" order option in which case your order will be automatically cancelled if it is not instantly matched.
4. Other features of Intrade
4.1. Personalised portfolios
As with all bookie free sites, going from one bet in which you are interested to another can be time consuming and inefficient. Intrade's solution to this is to introduce a search function which enables you to specify a team, which will then list all contracts featuring your team. Even better than this is the excellent personalised portfolio facility enabling you to group together all the events you are monitoring into up to three portfolios. This enables you to view in one place all the markets in which you are interested.
4.2. Market News
This gives regularly updated information about latest price movements, both in statistical form, and in some cases in article form. These articles not only detail price movements but also explain some of the factors and latest news which are influencing the market. A typical example was the news that the England win PIX for the Sweden friendly rose when it appeared that Michael Owen was likely to play. This was followed by a subsequent article stating that the market had fallen when Kevin Phillips started the match. As well as an overview section of market news, there are also sections for each sport. These contain well written and well researched articles by independent columnists which give guidance about possible future price rises. Bookie free bettors should make a point of reading these on a regular basis, as the information contained in them will help them not just with their Intrade activities, but also with predicting price movements on other sites. If you find that you actually disagree with the advice given this could mean a good opportunity for you by going against the flow. Because the information contained in these articles is very likely to influence the prices on Intrade, the particularly well informed Intrade member who disagrees with the article could secure a good statistical advantage by betting against the advice on offer. As well as appearing on Intrade these features will soon be appearing on Reuters, Yahoo and Planet Rugby as well.
4.3. Telephone cancellations
If you are trading in running and you lose your internet connection you are in a very vulnerable situation. Intrade have addressed this issue with an emergency telephone cancellation feature. Details of this, along with your personal cancellation code, are issued to you when you join.
4.4. Interest paid on large current accounts
A unique feature to Intrade is that subject to a minimum balance they pay interest on current accounts. To qualify you must have a minimum account balance of £5000 and interest is only paid on any balance above this level. So you have to be a big player to qualify, but if you are it's a good incentive to leave your funds where they are to take advantage of any excellent trades which suddenly become available.
4.5. Intrade news by email
For those who want to opt in Intrade send out a daily email listing that days events and detailing the main action from the day before. In addition on a monthly basis they send out a more detailed and lengthy newsletter which also includes feature articles.
4.5. Commission
As the concept of sports trading can be quite difficult to grasp, the impact of commission has not been discussed in this article as I believe this will over complicate things at this stage. However, on some bets the commission structure on Intrade can have a bigger impact on your potential profits than on other sites. This is explored in depth in issues 12 and 14.
4.6. Opening hours
A serious frustration for me about Intrade is the fact that it is not available for trading 24 hours a day. Perhaps I am in the minority but it is often the case that I wish to bet at 1.00am and I can do this on the other sites with no problem. Intrade's current stance is that if they are open they feel they should have someone there to answer the phone to anyone experiencing difficulties. At present they do not feel that there is sufficient demand during off peak times (eg after 10.00pm unless an event is trading in running) to justify this facility. If, however enough people asked for it then they would make this facility available. The other option they would look at is to make the site available without staff, which I imagine (and I am sure the other sites will correct me if I'm wrong) is what happens elsewhere. I personally would be comfortable with this, but I expect they would canvass the opinions of a number of their members before considering such a step.
4.7. Selection of events
Intrade cover the normal selection of popular sports, with new events being added on a regular basis. At the time of writing markets are available of soccer, american football, golf, horse racing, tennis, ice hockey, rugby league and rugby union. On soccer they stick to the main competitions eg at present there are active markets on the English and Scottish Premier Leagues, Champions League, UEFA Cup and the World Cup. Taking the example of the English Premier League there are markets available on every match, as with all the other sites. The significant point however is that you can trade in running on all of them. Whether you would want to trade in running on a match which is not being featured live on the television or the radio is another matter, and these games understandably have low liquidity while the match is being played.
In all football matches they have PIX contracts on all options, win, lose and draw. They also have totals contracts on numbers of goals. They are also planning to launch an action market on which points are awarded for numbers of goals, corners and bookings etc that a team accumulates during a match. This should make for extremely interesting in running trading when this feature is up and running.
In other sports they have PIX contracts on all the main contenders in a tournament, and in the Volvo PGA they had an additional market where you could buy or sell contracts in a selection of players against the field, an interesting option which is unavailable elsewhere. This is also offered in other sports.
At this stage the selection of markets at this stage does not compare with Betfair or Play121, and it would probably be fair to say they are not seeking to compete with these sites on this level. However, with over 200 markets available at any given time it dwarves the very limited offering that was available at Play2match which was one of the reasons why it failed to attract the necessary numbers of members to succeed.
5. Summary
Intrade is an exciting and innovative site, and could be an indication of how we bet in the future, especially if it succeeds in building the media relationships, which will bring it to a potentially massive audience sports trading interactively on their TV. Because the site is so different from our current conception of sports betting, it is not an easy concept to understand and the faint hearted could easily be put off, as indeed I was when I first saw it. Apart from using terminology that is virtually a new language to those without the benefit of a traders background, the Intrade system also requires people to fundamentally rethink the way in which they perceive, and measure the likelihood of a sports result in a betting context. Looking at it objectively the Intrade method of measuring outcome probability is logical and clear, and if you were starting with a blank sheet of paper and an open mind, the idea of expressing it as a percentage is probably as good a system as you would come up with. The difficulty, however, will be selling this concept to the public who already have a system with which they are comfortable despite its limitations. Intrade Chairman and CEO Ron Bernstein sums it up quite well when he says
"we are competing against hundreds of years of the betting language……but evolutions and revolutions do happen!"
Intrade could quite easily have gone down the established sports exchange route. This would have been a less risky route and given the resources at their disposal and the expertise they have would surely have succeeded. The fact that they have chosen to stick their necks out in this way shows the strength of their vision. They have a huge amount of confidence in their approach and clearly expect that ultimately they will prevail.
So far as bookie free bettors are concerned I don't believe we can really afford the luxury of avoiding this site if we want to maximise our potential returns. If you decide to join, you really need to spend some quality time learning all aspects of the sites and experimenting with the various features. Once you are happy that you know what you are doing then take the plunge and start making small contracts. When you are really comfortable with what you are doing then you can give some serious thought about how you can use Intrade in conjunction with the other sites to really boost your bookie free profits.
To switch between this site and the others will require considerable mental dexterity as the Intrade's pricing system is completely different to the other sites and does not lend itself to easy comparison. Those who do make the effort to really learn how the site works and how to compare the odds with other sites, are likely to be well rewarded as there will be less competition due to those who have been put off. It is certainly the case that bookie free bettors who are looking to maximise their statistical advantage need to be playing on all sites, asking for the odds that they want from as many people as they can. Therefore whilst it may be appear complicated at first, if you are serious about bookie free betting, then you really need to be a member of Intrade.