• Todd Garber

How to make money trading the spreads


Trading the spreads is a very simple but very effective concept that is sure to increase your profits if executed correctly.


WHAT IS TRADING THE SPREADS?

Trading the spreads is simply selling shares at market price (or 1p below) and buying them back cheaper through bidding or alternatively buying shares cheap through bidding and then selling them for more at market price- sell high buy low. You'll end up with the same amount of shares but bought at a cheaper price leaving the left over cash as profit. Although it can be done both ways (buy shares first then sell or sell shares and then buy back) I would recommend normally selling shares you already own first and then buying them back through bidding.. This is because since bidding has been introduced, incentives for buying shares at market price has been reduced. Selling shares at market price is still very doable but takes longer and can be much more unpredictable and so if you bought shares through bids in order to sell at market there is more of a risk as you don't know how long it will take for them to sell at market price however if you do it the other way round ie after shares have sold at market price, you'll find it easier to buy back through bids as you can always go a few pennies above the current instant sell price (the one in red).


WHAT MAKES A PLAYER WORTH SPREAD TRADING?

  1. Wide Spreads - The thing you'll need to look for is wide spreads (the difference between the red and blue number). At the moment you can only sell shares 1p below current market price (Number in blue). To work out potential profit, you take market price and multiply it by 0.98. This is because Football Index takes 2% on every share sold (in the future Football Index will introduce 2% on all buy trades which will mean you'll have to add 2% to your buy back price when calculating but for now there is no commission on buying shares). After doing this you simply subtract the Instant sell price away from the number you have. It may be worth adding an extra few p to the instant sell price as when you buy back through bids, you might want to bid a few p above the Sell price to increase your chances of getting the bids matched.

Example - 100 shares of Jadon Sancho Buy Price £10.60 Sell Price £9.95

Can Sell for = (£10.6 x 0.98) x 100shares = £1038.8

Can Buy back for = £10 (I added 5p to give myself a better chance) x 100shares = £1000

Profit = £1038.8 - £1000 = £38.8

2. No matches or media attention - When you spread trade you are hoping the price of the player doesn't change during the time you enter and exit your trade. Therefore you should make sure the player you are trading isn't playing in a match that day. Anything could happen in a match, an injury, a red card, a hat-trick. All these could cause the price of your player to jump up or down. This is bad because say for example you just sold to market with the intention of buying back through bids, if your player then scored three goals and became more valuable he could shoot up in price. This would mean to get back onto your player you may end up paying more than what you sold him for which would therefore cause a loss. Same goes for media attention during a transfer window for example. If Jadon Sancho signed for Man Utd while you were spread trading and shot up in price you could end up losing if it happened before you were able to get back in through bids.


Example - 100 shares of Jadon Sancho Buy Price £10.60 Sell Price £9.95

Can Sell for = (£10.6 x 0.98) x 100shares = £1038.8

Then he scores 3 goals and shoots up to a Buy Price of £11 and Sell Price of £10.7

Can Buy Back For = £10.75 x 100shares = £1075

Profit = £1038.8 - £1075 = -£36.2

3. Don't Over expose - There always going to be risks involved in any trade and spread trading is no exception. Something unpredictable could happen at any point causing an unexpected surge or decline in demand and thus effecting the price. To avoid chances of getting caught out by this, I would recommend spread trading with a smaller amount of shares. This will mean if you do get caught out you won't lose out on much when you re-buy. Of course higher reward risk means higher reward and this is no exception but I would strongly recommend especially when first testing it out to start with smaller number of shares e.g. 1-50 shares at a time.

4. Make sure the player has demand - This will be much less effective if you trade a player who is very low in demand. This is because a player very low in demand will not sell to market. If you tried it with Petr Cech you will struggle! So make sure it's going to be possible to sell and buy back your player before trading.

WHAT ARE THE BENEFITS OF SPREAD TRADING?

Okay so obviously the profits is the best reason for trying out spread trading but there are also some other benefits. Even if you sell your shares and buy back through bids and don't make a profit, as long as you don't lose money ie break even, it's still worth it. This is because by recycling your shares like this, means your shares are now eligible for in play dividends for another 30 days. Furthermore it means they are refreshed and are eligible for another 3 years before they expire.


Be patient as this can be a time consuming process. Make sure you constantly adjust your sell offers so they are consistently 1p below market price to ensure they sell faster. Don't expect things to happen quickly but in time you'll see how it's a worthwhile strategy if you stick with it!




If you found this article useful check out my social media and youtube channel where I go into more detail about spread trading and other football index trading strategies


Youtube - https://www.youtube.com/watch?v=Np97QZOud5E

Twitter @CartelIndex

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