Inside the Trading Room
The latest and greatest news, articles and thoughts from the Sporttrade team.
August 20th, 2021
Trading the Aaron Rodgers Drama
By Alex Kane
It took me a few seconds to make sure I wasn’t reading an article on The Onion when it finally set in. Aaron Rodgers, one of the greatest quarterbacks of our generation, was seriously considering retiring from football because he thought he could be the host of Jeopardy? I’ll take “Crazy NFL News in July” for $200 please.
Speaking of $200, was there still time to throw some money on the Vikings to win the NFC North now that the Packers’ season seemed to be circling the drain? I tapped on one of my sportsbooks apps and quickly navigated to NFC North futures, only to discover that it wasn’t there. I opened up another app only to find the same result. NFL futures were open to bet on seven of the eight division titles, but the books collectively decided with the uncertainty of Rodgers’ plans, they were simply not going to offer odds on the outcome of the NFC North.
Like so much of the current state of the sports betting industry, this made no sense to me.
Can you imagine if Robinhood or Fidelity paused trading on Tesla every time a news article came out about it? But therein lies one of biggest differences between a sportsbook and an exchange. Traditional sportsbooks are betting against their customers, while an exchange is facilitating transactions between customers.
(READ MORE: What is a sports betting exchange and why are we building one)
On an exchange, like Sporttrade, the Aaron Rodgers drama would have played out much differently. Before the breaking news of Rodgers’ potential retirement, the Green Bay Packers would’ve been trading at about $55 (contracts settle at either $0 or $100 where probability = price) — a heavy favorite in an otherwise weak division. With the breaking news surrounding Rodgers, the value of the contract would’ve plummeted to somewhere in the range of $41-44 per share, as reliable NFL insiders confirmed that his retirement was a serious possibility.
If you believed that Rodgers would likely return to the team, you could’ve traded into that outcome while other sportsbooks had it off their board entirely. Let’s say on July 26 — with a Rodgers retirement seeming like a real possibility — you bought six contracts for the Packers to win the NFC North at $41 for a total of $246.
On July 27, Rodgers reports to training camp, assuaging fears of his retirement. The price of the Packers to win NFC North contract quickly begins to rise closer to its initial value, but perhaps not all the way back because of Rodgers’ lingering discontentment. The price of the contract is now trading at $52 and the value of your position is up $66 from your initial investment.
At this point, what you want to do with your bet is entirely up to you. Close out the entire position and lock in $66 before a single snap of football is ever played? Sell off half for a $33 gain and let the three remaining contracts ride? Or just show some diamond hands and hold them all the way through the season, finishing the year with a tidy $354 profit if Rodgers leads the Packers to another NFC North title?
All of these options would be available to you while most sportsbooks would have the same positions entirely off the board or with the good ‘ole lock symbol on the screen.
The Rodgers drama is just one example of traditional sportsbooks acting in their own interest rather than the customer, which is perfectly reasonable for them to do. It’s their entire business model!
In the current setup, you are a shopper walking around a sportsbook’s supermarket in which they set the price on every item. If they get word that avocados are about to become scarce, or that future avocado shipments could be delayed, it's their right to prevent you from purchasing them until they decide what they want to price them at.
But in an exchange model, you are in a farmers market of sports betting. You can go from stand to stand, finding the best price for avocados. What Sporttrade is doing is providing the space for users to facilitate their transactions.
If you want to speculate on Rodgers’ Jeopardy hosting career, buy the Dodgers to win the World Series during the trade deadline, or sell the Chiefs moneyline during the fourth quarter if the Chargers are looking frisky, it’s entirely up to you. It’s your portfolio, trade it how you see fit.
We’ll take “A Better Way to Bet” for $1000.
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