FIC Weekly 28.09.20

The market had been fairly quiet in the build up to the potential Football Index birthday bonus and then suddenly spreads tightened quickly as traders threw bids at value throughout the market.

However, by Sunday evening once all of the weekend's games had been played - spreads opened up again, even wider than they had been prior to the bonus announcement.

Why did spreads widen?

Sunday sell-offs have been common on Football Index pretty much since PB was introduced. Once there is no longer the speculation of immediate, short-term rewards many become eager to sell and this may have had a knock-on effect. It can be a great time to hoover up value players at discounted rates and this appears to have happened with spreads tightening again today.

Although the current Football Index Birthday Bonus is an exceptional offer to those with cash available to make use of it, it seems many traders have most of their cash already tied up in players.

Furthermore, with the platform changing a considerable amount, many traders are now selling up. The combination of traders either wanting to sell up completely or sell during part 1 of the bonus to then take advantage of part 2 of the bonus (By putting money back into players) is leading to widening spreads.

Maximising the bonus period

Originally, I had personally intended to attempt to sell some shares in part 1 to then buy shares in part 2 and benefit from the bonus period. As mentioned above, it looks like many other traders who found themselves in a similar position with a lack of cash balance are attempting to do the same.

For maximum returns, it may be best to therefore avoid doing what the rest of the market are doing. Whilst others are looking to sell, it may actually be the best time to buy. Most importantly, a lot of spreads on value players are much wider than just 8.25% and because these could close once demand increases in part 2 of the bonus - it may actually be even more profitable to just buy whilst demand is particularly low.

In addition to this, we should soon have an improved platform. Football Index have promised huge developments in the platform and if these are smoothly added next month, confidence could be restored leading to an increase in demand and therefore price rises. It could be best to buy ahead of this.

Buy low, sell high

This may sound extremely simple. But, it can be more difficult to execute. Nevertheless, the above two sections both discuss how the demand for players is changing rapidly at the moment.

To buy low and sell high, we need to do the opposite of the market.

On Sunday night when traders are looking to sell, it is best to buy. On Friday's and throughout the weekend when traders are buying, it is best to sell.

Shift towards PB players?

Although we don't know exactly what Football Index have in store for us over the upcoming weeks, we do know (Almost certainly) that there will no longer be the 5X IPD payouts and so the common theory amongst many is that money will shift into more proven PB players.

Although, I think that this could be the case to some extent, I believe it will be the players that perform particularly well over the upcoming months that rise in price the most. Some strong PB performers, likely to earn dividends throughout the full season may become particularly attractive holds if their prices are neglected due to failing to hit high PB scores in the short term.

Confidence is going to be key over the upcoming 6 weeks. We need stability, we need liquidity and we need it sooner rather than later.

Football Index have told us that there would be market makers and that depth of the market will be added. This should help restore confidence of many in the platform. If so, it is likely we will see a shift towards many of the best value PB players.

Dividend Yields

In terms of dividend yields and intrinsic value, it really is the best time to buy. As long as you have long-term confidence in the platform as I am sure the majority do, it is a time to be very optimistic about the future of the platform. The last few months have been volatile, confusing at times and frustrating.

But the underlying dividends offered by Football Index that underpin the value of every player have increased considerably. If timed right, this may well be the most profitable season on Football Index. What is holding a lot of traders back is the issues around liquidity, but this is so important that it is hard to imagine Football Index not finding an appropriate way of sorting this out. They have already spoken of their biggest market campaign and with the combination of liquidity providers, the platform could be in a much better shape in a few months time.

By avoiding emotions, avoiding simply doing what the rest of the market is and constantly buying players with a real chance of earning dividends in the future - we can be extremely profitable throughout the 2020-2021 season.


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