As you will all be aware, the Corona Virus has had a huge impact on Football Index over the last week.
All PB eligible games and European Tournament games have now been suspended until the start of April.
Why are spreads so large?
Football Index want to keep money in the platform
Football Index Risk Team decide the spreads to protect player's prices from collapsing
Disincentives traders from panic instant selling their players
Why have players dropped in price?
Fear of future drops due to fixture cancellations
Withdrawals as some people may need the cash due to the impact that the Corona Virus can have on some people's income
Lack of fixtures - less opportunities to earn dividends in the short term / less opportunities for players to rise in price due to strong performances etc
Knock on effect that the initial decreases in some players caused
A lot of recent sales in players has been caused by the negative impact that seeing player's drop in price has on the brain.
When shares drop in price this fires up the amygdala which is the part of the brain responsible for processing fear and anxiety and so it is only natural for many traders to feel anxious and worried about the future of their player's prices when players are dropping.
Studies have also shown that the emotional response of pain caused by losing money is twice as strong as the emotional response from making money.
Therefore, it is not surprise to see many traders selling due to fear of further pain caused by further potential drops in price.
Selling when players are dropping in price due to the above reasons is often not a great way to react and given the current large spreads and lower prices of players - it would not be wise to sell currently.
*It is also worth pointing out that some traders sold before the increased spreads which in hindsight may have been the right call in the short term if players were sold at higher prices, especially if this money was then put into players likely to earn media dividends.
Though, it was difficult to predict that the Corona Virus would impact football so much over the last 3 days causing so many fixtures to be postponed and the timing of this portfolio transition would have been difficult.
How to react to the market?
There is still a lot of uncertainty around when fixtures will actually be played and it is looking increasingly likely that EURO 2020 will be postponed. However, with the knowledge that fixtures are being suspended at least until April - some of this uncertainty has been cleared up and Football Index will continue to update us on their plans for the following weeks without fixtures being played.
As explained in Adam Cole's recent update, which is here, we are very likely to see all fixtures eventually played out and all shares are a 3 year bet and so although in the short term, the situation is far from ideal - Football is forever and the impact of the Corona Virus is very unlikely to impact the actual value in player's prices longer term.
Short Term Approach
Due to increased spreads and recent price decreases, it would be very unwise to sell players now unless cash was urgently needed.
Buy when others are selling and sell when others are buying.
In the short term, it is likely we will see a select few players at the top end of the market continue to rise in price due to hoovering up plenty of media dividends.
However, buying these players now may still be fairly risky given they have already increased in price and their market prices already very much reflect their chance of earning plenty of dividends in the short term.
These players are undoubtedly some of the best players to buy for media dividends, especially in the short term, but timing the sale of such players is key to avoid being caught out by the recency bias, caused by lack of fixtures, towards these players.
Therefore, it may be best to start considering lower priced players who could potentially earn media dividends and actually return a huge amount of their price over the next few weeks. Doing so is difficult as it can be hard to predict, outside of the obvious higher priced players, which players are going to earn media dividends.
Players who gain transfer links up until April may rise in price and so these type of players are certainly worth looking out for and many transfer targets will be highlighted in blog posts throughout this month.
*Again timing the sale of such players will be key as we are likely to see huge temporary rises as traders desire earning media dividends up until matches are being played again.
Long Term Approach
As explained, the Corona Virus is very unlikely to negatively impact holds longer term and so it is somewhat surprising to see plenty of young players, who were unlikely to earn dividends over the next 3 weeks anyway, drop in price so much.
This does create a great opportunity to buy some of the quality, young players that have been dumped recently, due to many of the reasons explained further above.
Strong PB performers could also be very much worth buying now if being bought as longer term holds (At least until games are being played again). It appears the worse of the drops may be over now and so over the next 2/3 months we may well see plenty of players start to rise considerably in price again especially once games start to be played.
*We often see planning for the new season take place very early and so it is likely strong PB performers will start to rise at some point over the next 3 months in anticipation for this.
It is also worth pointing out that there is a huge bonus on at the moment and so unless the Corona Virus has a longer term impact on Football, which remains extremely unlikely given the situation in China, it is arguably the best time to invest in players on Football Index.
Now is a time to remain patient and use the dips in the market to buy at discounted prices.