In this week's edition of Tricks of the trade, I caught up with Ryan Pearce to discuss one of my most used strategies on Football Index, trading transfers. A simple yet hugely diverse strategy that can be used to target Media and Performance dividends, can be used long term or short term and can definitely be a profitable plan. Ryan has frequently used it successfully in the past and currently has a sizeable section of his portfolio dedicated to it ready for the summer.
Here's what we spoke about:
First a bit of background, how has your time on Football Index been so far?
Ryan: I first signed up to FI during Euro 2016 as a poor uni student. I think I had £10 spare at the time and thought it looked interesting. How I wish I’d have had more money to put in! I pretty much left it until summer 2017 when my £10 had become £50 and that’s when I decided to take things more seriously. After many small deposits over the last year and a half, I currently sit at £11,000 net deposits, with a port worth just over £40k.
How would you describe your strategy in your own words and how much weight of your portfolio is dedicated to it?
Ryan: I would say it is a mixture of careful trades that are very low risk and completely instinctive punts. I tend to try and buy players that have more than just a potential transfer in their favour, such as strong PB stats or a bright future, but sometimes you just have to go all in on some breaking news, which can obviously be very high risk/reward! At the moment maybe 30-40% of my portfolio is transfer-based but there have been times it has been solely based on transfers.
Which is more important to you in looking for a transfer target, the hype it might receive in the news relating to media dividends or their performance capabilities at the club they could be joining?
Ryan: I’m going to be honest, I’m absolutely useless with Media dividends. It has never been my thing! Although, a big club or sometimes just any Premier League club can provide great opportunities to profit from the capital appreciation side of things, people often get completely overexcited. I think on deadline day, we saw Lazar Markovic roughly double in price from 57p to over £1! (see below) Mostly, I tend to go for those whose Performance capabilities will be boosted with a move. For example, a PB-capable player that is currently playing for a weak team, in a non-PB league or in a negative system.
It used to be that only players moving to elite clubs would see a rise on Football Index, now we seem to see rises for all kinds of moves, how do you pick which transfer targets to buy?
Ryan: Before a window, I always try to have a few players that have had rumours surrounding them for the last few months, usually either a ‘hypey’ buy or one with a bit of PB potential as mentioned above. Asides from that, it’s usually fairly evident that certain positions on the pitch are high in demand in different transfer windows. 2017 had the striker merry-go-round with Belotti, Morata, Lukaku and so on and the window just gone had a few teams scrambling for CMs, namely PSG and Chelsea. Of course, there are a few random ones in every window. I flipped Jordan Lukaku when it was reported he had signed a deal to Newcastle. There’s no real logic (in reality he’s worth no more there), however you get a feel of when other traders are going to buy after a bit of practice!
Saga’s often go on for a long time and these can often fluctuate player’s price as differing news stories break, how do you decide when to cut your losses or hold strong on a potential transfer?
Ryan: There are lots of things to consider when a transfer drags out: quality of the source giving info, potential market reaction to the info and the actual likelihood of the transfer going through (club finances etc).
Overall, I think it’s a case of constantly judging the potential upside and downside of the transfer. It’s not worth holding for a 10% rise if the downside is –50%.
Also, don’t get greedy. It’s something that still catches me out! One key thing I would really stress for a new user is DO NOT look at YOUR buy price in these situations. Always evaluate from the CURRENT buy price and don’t be happy to hold just because you’re currently in good profit. Likewise, if you get caught in the red, try to apply the same logic. If you think they will rise, hold them. If you think they'll continue to fall cut your losses and sell them.
Now the January window has closed, how many players are you planning to hold for transfer saga's in summer?
Ryan: I’m currently holding between 10-15 in a circa 40 player portfolio. It would usually be more, but with the current state of the market and the impending share split, I don’t want to go too heavy into anything in particular. If you’re not the sort of person to hold for a few years without trading (I’m not at all), then I feel you have to have quite a flexible approach at the minute.
Do you think it’s easier to profit from transfer speculation by buying early (ie now for summer) or trading during the market? Is the latter more risky?
Ryan: If you’re patient, it’s incredibly easy to profit from transfers long term. I actually think that will be my general strategy for my entire portfolio in the future. You’re less reliant on the transfer actually coming off and you can sit back and take the rises when the inevitable rises come. The latter is without a doubt much riskier and much harder. However, who doesn’t like the thrill of potentially making hundreds within a matter of minutes? As with the whole of the index, it’s down to the individual to find what works for them, with how much time they can dedicate to it. For me, it’s a mixture of both!
A tactic I’ve used before when one of my players have been involved in transfer saga that couple possibly go against me is to hedge my Index holding with an actual bet (on SkyBet for example) for that player to transfer/ not transfer, is this something you’ve ever done? Any thoughts on this strategy?
Ryan: I think it’s a really clever move! It’s definitely something that is underused on FI. I’ve had it quite a few times where you can get a massive upside on a player on the index, wait for bets to flood in on the bookies and then hedge with decent odds against the transfer! On the flip side, a benefit of getting breaking transfer news is that even when the move does nothing for a player’s value on FI, you can often get decent odds on SkyBet/BetVictor etc. You definitely need to be careful in picking which sauces you're going to trust though!
What impact do you think the impending share split will have on your transfer strategy?
Ryan: I’m very excited for the effect of a share split on transfers for a number of reasons! Firstly, with the date set as the 26th March and the season drawing to a close soon after, I think we could see a big transition to potential summer transfer targets. I feel it would be natural for some money to move out of the players who have risen a lot lately, with the football ending for a few months and as people search for the next big rise.
My other reasons involve quite a lot of speculation but bear with me. Assuming we have a 4 way split, we’re going to have some very nice looking entry prices. For example, Perisic who was linked heavily to Premier League teams recently will be 40p. Now, as every player price will have been divided by 4, comparatively, Perisic won’t actually be any cheaper. However, as we know logic often goes out of the window when it comes to transfers and trader psychology is massive.
Traders often ignore the current price and any potential dividends that come with a transfer, focusing completely on the fact that a transfer will see a price increase. With such an accessible price, people are much more likely to jump on the rumour as they see large room for growth. I believe initially, we will see some pretty inflated prices because of this, as players rise massively above their actual worth once the transfer is confirmed. Currently, I couldn’t imagine Perisic rising to £4 off a Prem transfer, however 40p to an initial £1 doesn’t seem quite as crazy despite being the same percentage increase.
Another hot topic here, spreads. They've been a recurring topic on the index for some time and we’ve started to see them creep into some transfer targets, Higuaín in January was a great example of this, with a spread above 60p at one point. Does this deter you at all from certain players? Especially if there’s a chance a deal won’t go through?
Ryan: It’s just my opinion and I know not everyone will agree but I believe they do very little, if any good to the index. Regarding transfers, some of the spreads in January left a really bad taste for me, whether I owned those players or not. We saw Higuain, Perisic, Fabregas, Pulisic and a few others with massively exaggerated spreads. I owned Higuain when the spread was put on, at about £2.80, I think. Upon seeing it, I sold them to market as quickly as possible and it prevented me from buying him at any point after that. I know many others who were the same, so I can’t imagine how much commission FI missed out on, as well as how many opportunities were missed by traders who would’ve bought and sold with more instant sells.
In the same time period we’ve had Carrasco drop from £2.28 to £1.35, Nkunku £2.26 to £1.48, Vrsaljko £1.96 to £1.10 with a very standard spread of around 3%. It just makes very little sense to me and creates uncertainty in a market which thrives on clarity and confidence. I don’t believe that Football Index owe us an explanation when they put a large spread on a player but at the same time, I think it would be beneficial for us to understand their thinking. Overall, I would just prefer consistency, so we all know where we stand.
Finally, If you could hold just one player for a future transfer who would it be any why?
Ryan: Oh yes, a guilt free pump, HERE WE GO! Given the current market I’d say Carlos Soler. He's only just turned 22 and already playing at a club with European football but was linked to Barca, Man CIty and PSG recently. Very little downside at £1.80 and potentially a huge upside given his price hasn’t moved much lately and the potential to be 45p after the share split!
In case you missed the the previous editions of tricks of the trade check them out below!
Edition one with Big Don and his 1000+ player portfolio catch it here
Edition two with dividend powerhouse Stamford is here
Edition three with Sunday to Friday trader Pierre is here
If you’re new to Football Index and want to continue to learn the ropes, check out my free guide here!
I hope this article has been as interesting and useful to you as it was for me. We’ll be back next week with another top traders story!