How much of a market-watcher are you? Do you have a feel for the way the Dow Jones Industrial Average ebbs and flows? If watching the numbers is your thing, you might find it profitable to trade those numbers too.
TradeSports, a P2P exchange which has been in the news lately for offering its customers a contract on Saddam Hussein - they can speculate on how long he will survive as Iraq leader - now has a comprehensive list of financial props to trade also.
With more and more people joining and liquidity excellent across a huge range of events, the appetite for market action among TradeSports members is such that props on the Dow's performance have become hugely popular.
Bulls and bears come together thanks to the power of the internet and the result is a dynamic trading experience. How does it work? Let's take the props offered on the Dow's performance on Thursday, February 6.
The previous day the market had closed at 7985.18. Traders were offered a choice of three contracts. The first was on the DJIA closing DOWN by 100 points more, the second on the market being UP by 100 points or more and the third was on it simply being up on the day - by even a fraction of a point.
Traders knew that Secretary of State Colin Powell was due to address the UN on the Iraq issue. That would be the day's most decisive event. The market was also pressured by tensions with North Korea and new productivity figures were also going to have an effect, one way or the other.
All over Wall Street was an air of wait-and-see on Iraq. Investors, nervous about entering the fray, stayed away. Speculative trading dominated. In such circumstances, the TradeSports contracts were always going to be volatile - and such was the case.
The DJIA dipped as soon as it opened, falling to 7953 and there was a corresponding rise in the odds on the TradeSports Minus 100 prop. After opening at +160 (or 38 on the 0-100 odds scale) it climbed to +122 (or 45). This meant the market believed there was a 45 per cent chance of the DJIA closing 100 points or more down.
The Dow recovered, but then quickly slumped again. The bulls were nowhere to be found: the contract for the Dow finishing up 100 slumped to +430 (or 19 in 0-100 odds), after opening at +230. Click here for an odds conversion table.
But when Powell spoke, telling the UN of proof that Iraq was hiding banned arms, the market rallied and reached 7,990, a little higher than the previous day's close. If you were betting on it finishing the day down 100, that was not good news. Naturally, the contract shed points quickly - and was soon trading at 20. Meanwhile, optimistic traders pushed the Plus 100 contract up to 50.
Next on the world stage, France killed the rising market by saying the UN inspections process must be strengthened. The gains disappeared. The market fell to 7782 - 103 points down on the previous day. For bearish traders, this was the breakthrough they had been waiting for and the Minus 100 contract rocketed 35 points up to 49.
Would the market keep falling or would it recover? That was the choice TradeSportsmembers had to make. As it turned out, the correct play for those bears who had bought the Minus 100 contract was to sell right there at 49 and take a profit. The market had been as low as 10, so profits could have been handsome.
The bears who decided to hang on, hoping that the DIJA would finish the day 100 points down and the Minus 100 contract would 'settle' at 100 - meaning greater profits for them - were disappointed.
Soon after, the market rallied again and finished the day at 7929.40 - down 55.88. In other words, not enough to make the bears' day. It was, though, a nice payday for the bulls who took them on.
What would the next day hold? The data for Friday, January 7 included non-farm payrolls and jobless numbers for January. Economists expected a gain of 60,000. And so, on TradeSports, began another frenzied day of speculating on the rise and fall of the Dow. Sometimes profitable, sometimes not - but always exciting.
Article by Alan English. TradeSports is a person-to-person (P2P) sports betting and trading exchange.
