If you talk to any legitimate and smart trader, options traders especially, they will always make their position very clear when it comes to their feelings on trading a volatile marketplace…they love it! And they should love it. The aspects that present themselves during market volatility are the overemotional swings and subsequent crowd mispricing of tradable issues that are the life’s blood of profitable trading. The misguided crowd forces prices entirely too high (where the savvy trader will sell the issues) and then they force the prices entirely too low (where the savvy trader will buy the issues back), and this cyclical pattern repeats itself over and over and over again while the clear headed trader lines his pockets “buying low and selling high” always at the expense of “Joe average” who cannot ever seem to divest himself from his financially destructive emotions. That ideation of course correlates directly to the world of sports gaming and is described at length in my e-book: Becoming a Sports Gaming Trader that is ready to download on the SPORTSACTIONCHARTS.COM website.
In a very concise description of volatility, there are 3 major accepted types that are to be considered which include: 1) historical volatility (how much activity has taken place in the past), 2) implied volatility (how much activity “the crowd” is assuming will take place in a determined forthcoming period of time) and 3) future volatility (how much activity actually takes place in the future in a determined forthcoming period of time.) IF A TRADER/BETTOR CAN STUDY #1 AND HOW IT RELATES TO #2, HE CAN PRESUME #3. IF A TRADER/BETTOR CAN CORRECTLY PRICE #3, THAT IS HOW HE BECOMES CONSISTENTLY PROFITABLE. In the article An Introduction to the VIX, I clearly establish that THE OVER/UNDER THAT IS SET BY THE ODDSMAKERS AND “THE CROWD” IN THE SPORTSBOOK IS THE SAME THING AS THE IMPLIED VOLATILITY THAT IS SET BY THE MARKETMAKERS AND “THE CROWD” IN FINANCIAL OPTIONS MARKETS. A very broad gauge of market implied volatility is represented by something called The VIX, or The CBOE S&P Volatility Index. As represented in the chart below, it is accepted that The VIX is a “mean reverting” product, which means that it follows a fairly certain and expected pattern of vacillating lows and highs that present themselves in a very visible “channel” and present very distinct points of extreme levels that are represented by the arrows on the chart. When purchasing volatility at “the lows”, represented by the green arrows, the trader is “buying cheap”. When selling volatility at “the highs”, represented by the red arrows, the trader is “selling expensive”. This type of “volatility channel trading” is very insightful and very profitable!
Now here comes the beautiful part for anyone that wagers on “totals” or “over/unders” in sporting events…the same rules apply in the sportsbook that apply on the trading floors and trading desks. I don’t care if you have been making markets on an options exchange for 35 years or if you never even heard of a stock and just came out from living in the woods for 35 years, ALL THAT YOU NEED TO KNOW IS THAT TO BE PROFITABLE, YOU MUST BUY AT EXTREME AND IRRATIONAL MARKET LOWS AND SELL AT EXTREME AND IRRATIONAL MARKET HIGHS!!
This is where SPORTSACTIONCHARTS.COM comes into the picture with our patent pending sports gaming technology tools. As is always the case, our tools provide our members with easy to read, quickly updated, proprietary data that makes their sports gaming experience a much more informed and analytical exercise that allows them to separate themselves from the crowd and isolate extreme levels of potential “out of line” spreads, odds, and totals.
Observe the chart below:
It goes without saying that the chart above bears a strong resemblance to the VIX chart that is shown earlier in this article. This is a display of data from a 20 game period of volatility (or amount of scoring/activity) as it relates to The Los Angeles Dodgers AND The Los Angeles Angels. The obvious point to be made here is that there are evident extreme levels in this data display that mimics the trading channel of mean reverting market activity that is represented by The VIX. The wise course of action here would be “buying the over” (which is the same as buying volatility/betting the over/selling the under) at the points of the green arrows and “selling the over” (which is the same as selling volatility/betting the under/buying the under) at the points of the red arrows. A sports gaming enthusiast/bettor/analyst/trader would have been quite profitable if he was able to isolate these levels and act on them because in essence he would have been “buying cheap and selling expensive”. THESE LEVELS OF EXTREME POTENTIAL OF MISPRICING ARE CALCULATED BY THE OVER/UNDER WOLFLINE ™ AND SENT TO OUR MEMBERS THROUGH SEVERAL FORMS OF ALERT AND PROVIDE A PROFESSIONAL TRADING EDGE THAT ALLOWS THE MEMBER TO CAPITALIZE OFF OF HIGH POTENTIAL SCENARIOS OF “CROWD MISPRICING”.
However, it is indicated now to make it clear that the Over/Under Wolfline ™ chart represents a figure that is one step more valuable than what is represented on The VIX chart. The VIX chart simply displays a history of implied volatility. This is a very powerful and profit inducing graphic in itself and is recognized to be so for its historical record of mean reversion.
THE OVER/UNDER WOLFLINE™ IS EXPONENTIALLY MORE POWERFUL BECAUSE THE SINGLE LINE GRAPHIC IS A MEASUREMENT OF HOW BOTH TEAMS LEVEL OF COMBINED SCORING IN THE PAST TIME PERIOD RELATED TO WHAT THE CROWD WAS EXPECTING. IN OTHER WORDS, THE LINE QUANTIFIES AND DISPLAYS THE TEAMS’ COMBINED TRUE HISTORICAL VOLATILITY RELATIVE TO THE TEAMS’ IMPLIED HISTORICAL VOLATILITY. AS WE HAVE DISCUSSED AD NAUSEUM, WHEN THE COMBINED SCORING OF TWO TEAMS CONSISTENTLY EXCEEDS WHAT THE MARKET EXPECTS, THE MARKET WILL PRICE THE “TOTAL” AT AN OVERLY “HIGH” LEVEL RESULTING IN A “TOP”. WHEN THE COMBINED SCORING OF TWO TEAMS CONSISTENTLY FAILS TO REACH WHAT THE MARKET EXPECTS, THE MARKET WILL PRICE “THE TOTAL”AT AN INAPPROPRIATELY “LOW” LEVEL RESULTING IN A “BOTTOM”. These are universal truths of market mechanics and they exist in all markets. In a synopsis, “the crowd” habitually drives prices lower than they should be based on overheated emotion and “the crowd” habitually drives prices higher than they should be based on overheated emotion. Selling at highs and buying at lows is about as simple as it gets.
These are some bulletpoint concepts to always keep in mind
1) Implied volatility=The current point total set by the oddsmaker and crowd
2) Historical volatility=How much scoring/activity/volatility has occurred in a past determined time frame
3) Future volatility=How much scoring/activity/volatility will occur in the future(the wager/trade)
4) By successfully studying the relationship between #1 and #2, a sports trader/sports bettor can more appropriately price #3
5) To be profitable betting on “totals” or “over/unders” in the sportsbook, one must follow the crowd cycles of “highs” and “lows”, selling the “highs” and buying the “lows”
6) The Over/Under Wolfline™ isolates these extreme “highs and lows” and alerts our members to these potentially profitable scenarios.
7) For our purposes, “selling a high” means betting “ the under” and “buying a low” means betting “the over”
OF COURSE ALL OF THE PATENT PENDING PRODUCTS THAT THE SERIOUS SPORTS WAGERING ANALYST AND TRADER NEEDS ARE AVAILABLE AT WWW.SPORTSACTIONCHARTS.COM
THE SPORTS ACTION WOLFMAN