Binary options payouts and sport betting odds

Some time ago, before the introduction of a new law concerning betting in Spain, there were good conditions to do betting there.

So to speak, the conditions were ECN at least in Betfair, the betting company of that time.

Those days you could see how the quotas were changing and there was market depth as if it was the real stock market.

The odds used to be very good and Betfair would keep 5% of the gains.

Sometimes you could see bets with a spread (difference between bid and ask) close to 0.

Binary options and sports betting, not very different to casinos after all

It was not uncommon to see tennis or basketball matches with 1.99-1.99 odds which was the equivalent of having a “two pips” spread.

Even with that 5% that they kept it was possible to have decent conditions and if you won 99% of a bet you would keep 94% for you so to speak.

Not a bad payout after all.

Other betting houses of that time rarely went beyond 1.90-1.90 for the same kind of match.

I never understood why people kept opening accounts with those betting houses having betfair.

I guess most people do not even bother studying those things.

Anyway.

There was also a Dutch house quite good but I do not remember the name.

As the market was not “regulated”, the Spanish government stepped in to “save” the customers and end with that jungle. Obviously, the Spanish Government did a horrible Games Law, which immediately ended the business of Betfair in Spain because the taxes imposed on the companies were so big that the company could not keep offering the “ECN” conditions.

There were people who left the country, the professional bettors of the country.

Binary options and sports betting

Let us say that with a 94% payout there were good opportunities for those with some talent in discerning possible inefficiencies.

With the new law, the odds that the Spanish betting companies started to offer were quite similar to the payouts offered by the binary options companies, from 70 to 90%, and 85% being quite common as the highest offer.

If you checked some of the other betting companies for matches like tennis, basketball, boxing and all the sports that offer bets in pair (the easiest way to see this) you could see things like this:

  • 9 – 1.8
  • 85 – 1.85
  • 86 – 1.86
  • 80 – 1.91
  • 06 – 7.25

Similarities between sports betting and binary options

As we can see the majority of bets come around 80 to 91% of payout, more or less the same that binary options brokers offer.

It must be that it must be close to the number they can afford to put in the market and make a good business and let the company grow at the same time.

There is a lot of competition in those markets, so increasing the payout 1 or 2 points might mean having customers surviving for a few days more and that can be costly for the company actually.

Perhaps the number of customers they would win by increasing the payout from 85 to 88 is not worth trying it considering the benefits they keep from having customers going belly up quicker.

The search for the equilibrium is quite delicate.

Although the business is very easy since they have hundreds of customers every day willing to lose their money, they still need a certain amount of them losing that money in certain time, otherwise they cannot cover their operating costs.

The case where you can see the bad situation of the betting market in Spain is that of the odds in very easy to predict games, where there is a clear favourite, for instance a match in which FC Barcelona or Manchester United plays at home against a small team.

I have seen cases like that with odds of 1.01 – 15.

If you understand numbers you would immediately see that it is an aberration.

To be fair in that case we should get something approximate to: 1.01 – 98, something similar to what used to be the odds at Betfair in Spain before the law came.

Nowadays the betting houses try to cut as much as possible the odds of the least favourite team, so we have cases paying 15 when they should pay 100.

You can see that there is a spread of 85% there, or seen in other way, a payout of 15%.

Ridiculous.

That means that some of the money to be made in sport bets was in the long leg of the trade, in those betting for the small team or dog.

In the current conditions there is no way you can win in the long run there.

The most you can try is to get some bonus and go home.

I suppose the average duration of a betting sports account will be similar to that of binary options brokers.

Conclusion

So, we can see that when the Government tried to put order in the market what accomplished was the destruction of the market, or in other words: a much worse market than before.

The government takes for granted that every bet needs to be taxed, as if it was some sort of Tobin Tax, and destroys the odds. They do not even wait to see if you have won or lost, which would be much fairer.

Only those who win should pay, obviously.

Why taxing those who lose?

Unfortunately, the State is extremely hungry and will keep coming with ways of screwing the customers in a way that seems to be legit: after all they are “regulating” the market.

The novice customers go to the betting houses thinking that they can beat the house: “it is not that difficult” they think, “I am very good at sports, I am going to win” and so on.

Unfortunately I think there will be a day when the government will treat the world of trading in the same way, taxing those who win and those who lose with a sort of World Tobin “Fair Tax”.

Eventually it is possible that all the trading activity will be reduced to a sort of binary options trading with payouts of 85%.

Either that or invest in the long-term in stocks.

Our choice should be clear.