NCAA brackets with the best names have almost as much bragging rights as the people who actually win their pools. At least that’s what we all tell ourselves as our brackets are statistically eliminated after the first weekend..
Below is a list of some funny NCAA basketball bracket names that I have come up with, heard of, seen in some of my pools over the years, or saw on a forum at some point. Feel free to add to the list by leaving a comment with your funny NCAA bracket name and show the world that even though you know nothing about college basketball (or at least not as much as the blonde from the office who had her dog make all of her picks), you know enough to get a laugh out of your bracket name.
Coming up with a funny or witty NCAA basketball bracket name is almost as much fun as watching the March Madness games and cheering for teams that you know nothing about but picked to go to the Sweet 16 because of a tip you overheard while at the bar doing your “research” for the NCAA tournament
But studies show that suicide attempts are usually made by older people with problem gambling. To experience the same excitement, he needs larger wagers or more frequent gambling.. As he spends more gambling, he requires more money to recover his losses. He may lose his job and may commit crimes to get money for gambling. Here are some useful tips regarding lifestyle changes to get rid of a gambling addiction.
‘Problem gambling’, also known as ‘ludo mania’, can destroy the life of the gambler and also of his/her family members. Researchers have noticed increased rates of mental health disorders in gamblers with severe ludo mania. Despite being aware of the serious negative consequences, or despite having a strong desire to quit, he cannot stop himself from gambling. There are chances that he has other psychiatric problems at the same time; for example, substance use disorder, mood and anxiety disorder, personality disorder, etc. Study results show that a gambler who has not been treated for compulsive gambling during his desperation phase is likely to commit suicide. Gambling addiction is referred to as ‘compulsive gambling’ or ‘impulse-control disorder’, where the behavior of the gambler is similar to that of a person who has substance addiction.
When an individual realizes that gambling is destroying his family and social life, he thinks of quitting, but in just a few hours or within a couple of days, he is again found in a gaming zone or casino. When a gambler with severe ludo mania meets certain criteria, the condition is diagnosed as ‘clinical pathological gambling’. Addiction to gambling at a young age increases the risk of suicide. He lies to his family and friends, borrows money, and loses control over his mind and behavior. Analysis of casino customer data may help identify problem gamblers, but casino owners do not share this data for fear of losing their most lucrative customers (may be 25 – 50%)
However, instead of the line rising as you might expect, it instead drops to Chargers -6. This would make Miami +6 the RLM play.
So what causes RLM when the aim of most sportsbooks is to get as close to balanced action on both sides as possible? The answer to this is quite simple: the sharp bettors; the one’s who give sports betting advice. This is where an important word of caution is in order though. Last year was a good RLM season for NFL sports betting (45-29, 60.8 percent, +11.91), but two sportsbooks that were in the top five in NFL RLM in both seasons.
The highest two-year winning percentage using RLM from the top five books belongs to College Football, which went 480-341-10, 58.5 percent, +95.10 units. The huge problem with this is that the nfl line, ncaaf line or nhl line may have moved too much by that time, and all of the value has been sucked out of the unpopular side.
Now do the sharps win every single time? Absolutely not! However, they are right more often than they are wrong, so being on the same side as the sharps is a prudent strategy over the long run, and again, the best thing is that there in absolutely no conventional sports handicapping necessary..
By: Manny G
So what we recommend is to only use the top five each season for each individual sport (in terms of units won). Keep a close eye on Canbet here, as that Australian sportsbook cracked the top five both years.
So what exactly is reverse line movement? RLM takes place when a large majority of bets are on one team, yet the line moves in the opposite direction. Furthermore, they list the RLM records for many individual sportsbook, making it easy to spot which books this system is working at and which books it may be best to ignore.
College Basketball sports betting was not too shabby either, with a two-year mark of 492-356-22, 58.0 percent, +91.96 units. We tracked the top five books for each of the pointspread sports for the last two years, as as you can see, this strategy has been profitable in every sport. Note that these records are for sides only and do not include totals.
The NFL sports betting is generally considered the toughest sport to beat, yet blindly following this method produced an exceptional 59.2 percent win rate last season, improving the two year record to 328-249-12, 56.8 percent, +59.06 units. Sure, using this approach leaves open the possibility of the line turning around and moving back against you, but as you will see in bit, betting as soon as an RLM qualifies has been profitable in every major North American sport such as the last two seasons, so if one line turns around, so be it. It should be noted that many fewer MLB games have qualified so far this season (is the whole world using RLM now?), but smaller profits is still profit.Again, these records are for Money Lines only and do not include totals.Finally, NHL sports betting has picked up 148.49 units in two years, and unlike MLB, NHL had four sportsbooks out of the top five gain double-digit units this past season. Carib ruled the roost season at 93-66-9, 58.5 percent, +18.55 units after ABC held the penthouse spot in the 2007-08 season.
NBA sports betting has the lowest two-year five-book RLM winning percentage among the 11/10 sports, but then again, every gambler in the world would kill to go 382-301-9, 55.9 percent, +48.90 units, and the 57.5 percent win rate this past season is nothing to sneeze at. Keep in mind that NCAAB was the most liquid sport in terms of top-five sportbooks however, with not a single sportsbook making the top five both years. To illustrate, let us say that San Diego Chargers open at -7 over the Miami Dolohins, and over 70 percent of the sports bets placed on the game are on San Diego.
Thus, following reverse line movements is the same thing a following the smart money.
Also, games where over 60 percent of the public are on one side, yet there is reverse line movement of at least 10 cents on the Money Line from the opening number at the top five sportsbooks in MLB and NHL sports betting has also been profitable. Quite a few RLM followers watch the moves until almost game time, and then bet accordingly. RLM takes place when more money/ sportsbook picks are bet by the small percentage of bettors that are on the unpopular side (the sharps) than is bet by the huge majority of players betting the popular side (the squares). The records quoted below are based on the bets being made at the triggering books, so beating the move by a half-point or a few cents now and then would actually make your record even better.
. All of this will be fun to follow (not to mention profitable) when every sport except baseball are going on simultaneously during the winter months.
The proper way to make a sports bet using reverse line movement is to place your bet as soon as there is an RLM of one full point (or 10 cents in MLB and NHL) off of the opening line. Another important recommendation is to use a slow moving (but reliable) sportsbook. This may enable you to get the stale more favorable sports betting line at the time the reverse line movement hits at the triggering Sportsbook. Keep an eyes on the top five sportsbooks at Sports Insights though, as NCAAF sports betting has been very liquid in that regard, with only one sportsbook (believe it or not, Bodog) finishing in the top five both years.
To back this up, our friends over at Prosportsonline.net have tracked the records for games where over 60 percent of the public has been on one side, yet there was reverse line movement of at least one full point from the opening number at the top sportsbooks in NFL, NCAAF, NBA and NCAAB
The Oregon Ducks beat the Florida State Seminoles 59 to 20 in Thursday night’s Rose Bowl.
In prior years, computer rankings and coaching polls were used to determine which teams would compete for the crown.
Thursday night’s games also drew huge live crowds: Attendance at Pasadena’s Rose Bowl was 91,322, while the Sugar Bowl in New Orleans was attended by more than 70,000 fans.
On Thursday, 28.2 million viewers watched Oregon blow out Florida State 59 to 20 in the Rose Bowl.
These numbers make the semifinal games the two most-watched broadcasts in cable TV history.
The Oregon Ducks and Ohio State Buckeyes will now meet for the national championship, which will be played on January 12 in Arlington, Texas.
The ratings are welcome news for ESPN, which reportedly paid $7.3 billion for the rights to the playoff through 2025.
The coverage did have a bumpy start.
CNNMoney (New York) First published January 2, 2015: 4:57 PM ET
Yet, the games themselves were widely praised by fans watching on social media. Later in the night, 28.3 million tuned in as Ohio State upset top-seed Alabama 42 to 35 in the Sugar Bowl.
“So that college football playoff was worth waiting for,” tweeted the sports media blog Awful Announcing.
“These record setting numbers illustrate the enormous fan interest in college football and the wide ranging appeal of the new College Football Playoff format,” John Wildhack, ESPN’s executive VP of programming, said in a statement.
While the network’s ratings are huge, they pale in comparison to the 111 million viewers that tuned in for the Super Bowl on network TV last year.
ESPN now holds the largest 18 audiences in cable TV history.
Related: TV contracts keep sports programming steady for next decade. The network’s online TV and mobile app, WatchESPN, went down during the Rose Bowl.
This year marked the first time that the college football champion will be decided by playoffs
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So, as long as your chosen pitcher starts, you will have an active bet.
Michael Hill is an avid sports fan and a sports writer who has been in the betting and price per head industry for years. Michael writes about his experience and offers tips for other aspiring entrepreneurs who wish to make a living with sports bookmaking.
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On the other hand, if you were to bet on a 20 cent line, you would be getting a +125 line on Milwaukee, which means fewer profits, and even though it doesn’t sound as a lot of cash, when it comes to losing 10 cents on every dollar during a full baseball season, losses can be considerable.
Team action: This option allows you place a wager that doesn’t depend on pitchers, although if there is a change in listed pitchers, the odds might vary.
A betting line on baseball will always depend largely on who the listed pitchers for the game are, and you are offered four different options:
Here you are betting on the combined number of runs accumulated by both teams at the end of a given game, and on baseball, runs on extra innings will also count when the game has gone over nine innings.
This is the first element we should analyze.
Specifying a pitcher: When you bet using this option, you need to choose the pitcher for the team you are betting on, the one for the other team might vary. In baseball, an experienced bettor will always go for the “Dime Line”, which is a line with a ten cent difference between the favorite and the underdog (for example, a bet with the Angels as favorites at -145 and the Brewers as underdogs at +135.
Even though it is said that you can get better profits when wagering on baseball, most people will avoid placing wagers on this sport because the betting lines might appear a bit different than the regular point spread, and because we want to shed some light on the subject, we have created this article.
Team action against a listed pitcher: This one is very similar to the previous one, the only difference is that here you need the opposite listed pitcher to start the game, the one for your chosen team can vary and you will still have action.
This one is very similar to a point spread; the difference is that in baseball you are dealing with runs and not points.
Listed Pitcher: When you are going to bet on a baseball game with listed pitchers, the ones listed for the two teams must start the game, and a pitcher is said to have started a match after throwing the initial pitch for his team. In the event of one of the listed pitchers not starting, then the wager is voided and the funds are returned to the player.
3 Alabama, No. Michigan is a perfect fit for him because of who he is, where he is in his life and what he loves.
In the end, running up the score with your star players still in the game, in the final seconds of a game that was not longer being contested didn’t even register to Urban Meyer. Here are the five big questions to keep in mind heading into the 2015 UH Football season.
John S. This may not be technically wrong, but it’s lame.
A number of schools are considering firing their longtime successful coaches, in the hopes of getting a more successful one. 4 Oklahoma, and No. When you get in, you have the typical public perception of it being kind of quirky and not that tough, but it’s not like that at all. 6 Texas A&M all bit the dust last week.
While secondary market tickets for the College Football Championship Game are the most expensive for any college game this season, it’s on pace to be the least expensive national championship game by a wide margin.
Christian leader for social change; President and Founder @Sojourners
At all levels of collegiate play, there are five things that all high school prospects should do to improve their chances of getting recruited for a football scholarship
Editor, Truthdig.com; Author, ‘They Know Everything About You’
On November 26th, the nation’s highest-profile pollster — Nate Silver of the New York Times — gave ten teams a better chance of making the inaugural College Football Playoff than the University of Wisconsin.
From a distance, it appears that Jim Harbaugh is a great coach because he is a great father, husband, son and brother, and being a great football coach just naturally follows. 2 Oregon, No. Let me preface the conversation about college cheerleading with a quick aside about cheerleading in high school.
The Colorado Buffaloes come into town for a Thursday night showdown to kickoff what could be a make-or-break year for a man beginning his fourth year as head coach of the Rainbow Warriors. No. Elson,
Even if you aren’t into the game, football fandom isn’t just about what happens on the field anymore. In this case, the red-faced rooter was a 30-something dad.
Without governance reforms that will put the players’ education and safety ahead of the coaches’ and schools’ money-making priorities, the academically elite Division I colleges’ claim to a higher ground is pure hypocrisy.. There are so many aspects to the football experience to enjoy — like the tailgating — that new gadgets have made it fun for everyone.
Attorney; Assistant Professor, UNH; Poet; Editor, Best American Experimental Writing
Last Saturday was somewhat of a day of reckoning within the top ranks of college football, with four of the top six ranked schools in the country going down. Tures
There will always be those who ignore the wisdom of others, but if more athletes realize the impact of what a 40+ year retirement will look like, they might perk up their ears just a little more.
Being a Harbaugh has given him more intimate exposure to football than most coaches, but it’s what he’s learned in life, not the Harbaugh legacy, that sets Jay apart.
In this week’s Scheer Intelligence podcast on KCRW, Robert Scheer speaks with former USC football player Anthony Davis about living with the brain injuries Davis sustained during his celebrated career.
Emeritus Professor of Law, Northwestern; former NU faculty government chair; scholarship & litigation in education & civil right law.
It’s sorta weird.
Rabbi Jason Miller
Political science professor, LaGrange College in Georgia
John A. Should they do so?
The best answer to any question
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What this series of events does show is the chasm that sadly still exists in the experiences and therefore perspectives of most white people compared to most people of color.
Entrepreneur, Educator, Writer and Technologist – “Rabbi Without Borders”
It was the waning moments of a damp September fourth quarter, and football, as it often does, had brought out the ugly side of one of its fans
“The sharps are usually members of a betting syndicate privy to the most up-to-date information on injuries, weather, game plans, and, most important, the real power of the teams involved. So underdogs tend to be slightly undervalued – except by the sharps.”
And remember, in the immortal words of “Fast” Eddie Felson, “Money won is twice as sweet as money earned.”
8. The payout is just the same as far as he is concerned.
Certainly not back into the pockets of the average bettor. Focus on Conferences – “The best way to win money betting football is to develop a niche and follow it closely,” Moseman advises. “Common wisdom says that over the course of a long football season the average man or woman will pick approximately 50 percent winners.
So, how much should you bet a game?
So, how much are we gambling each football season?
10. “If you become an expert on a smaller conference like the WAC, you have a good chance to beat the house because sports book operators do not have the time or resources to follow this conference the way you can. In fact, sports bettors must pick 52.4 percent winners just to break even.”
And where does all that money go?
2. The NFL, for example, will have very similar numbers at most of the betting shops you visit. He loses year after year, according to Dan Gordon, a top football handicapper and author of How to Beat the Sports Books (Cardoza Publishing 2005).
“A square or recreational player might have a vague plan, but after two Corona’s he will definitely run to the window and make a hasty decision on the USC-Notre Dame game because he wants to be involved in the party atmosphere,” Vaccaro says. They use powerful computers that can process millions of bits of data and produce a more accurate point-spread line than the bookmakers.”
“The biggest mistake that amateur bettors make is they increase their bets when they are losing,” Sevransky says. But, when you’re struggling, that’s when you want to reduce your bet size until you get out of your slump.
Moseman agrees and especially likes home underdogs. The only locks that exist are those that need keys to open them.”
Also, it’s probably a good idea to disregard advice from the myriad of ex-players and football experts you see on television each week. Slim underdogs regularly win outright. Money Management – “This is without a doubt the most important aspect of betting on sports and possibly the most neglected,” says Morey “Doc” Moseman, a professional gambler and sports consultant with DocSports.com for nearly 40 years. Big underdogs often find ways to cover the spread and they rarely give up toward the end of a game in front of the home crowd.”
“The talking heads on TV know nothing about sports betting,” says Sevransky.
“Most people with an understanding of football gambling bet between 3 percent and 5 percent of their bankroll, increasing when they win and reducing when they lose,” Vaccaro says. If you are going to go with a favorite, it is best to place your bet early in the week when the sharps are laying heavy money on the points. .
Betting on football games; whether it’s through a local bookie, an offshore Internet site or a Nevada casino (still the only legal place in America to make football bets), most of us have done it or know of someone who has. Locks Don’t Exist – “Anyone who has watched sports for about a month realizes that the difference between winning and losing, especially against the spread, can be infinitesimally small,” Gordon says. Avoid Chasing Bets – “Don’t do it! There is no worse way to mismanage your bankroll than to chase your bets after a losing day,” cautions Moseman on the dangerous practice of trying to immediately win back your losses. “In the NFL, a game will often be totally turned around by one or two plays, or even a single penalty. “Because alcohol clouds your judgment and usually helps you to make rash decisions you usually wouldn’t otherwise make. There are almost an infinite number of scenarios that can happen in a single football game. He is not taken in by being involved in USC-Notre Dame just because it is the biggest watched game of the day. These books change their numbers according to the betting patterns of their customers, so it is not entirely uncommon to find two or three point differences in the lines.”
So, is it possible for the average square to become a little sharper in making football bets this season? According to professionals like Vacarro, Konik and Gordon, amateur bettors have the best chance to win if they demonstrate a little patience and follow the 10 basic tips below. “Most people prefer to bet on the ‘better’ team, the one that will probably win the game.
Ted Sevransky, a well-known Las Vegas gambler and sports consultant with Sportsmemo.com, agrees.
Even Hollywood is not immune – think Two for the Money with Al Pacino and Matthew McConaughey.
Another difference between squares and sharps is how they approach betting on game day.
“A sharp or smart has a plan of what he wants to do,” says Vaccaro, the director of sports operations and public relations at Lucky’s Race and Sports Book in Las Vegas. “There will be more discrepancy in the numbers at different sports books.
Although exact figures are impossible to calculate, according to Jimmy Vaccaro, widely considered to be Las Vegas’ most influential bookmaker, Americans probably wager more than $50 billion a year on NFL and college football combined. “The key to proper money management is to be sure not to bet more than you can afford to lose.”
3. The only touts bettors should consider are the ones who talk about the long haul and realistic winning percentages, which are in the upper 50 percent to lower 60 percent range.”
However, Konik adds that there are some bettors who actually know how to beat the bookies. “Squares usually bet later in the week and they tend to pick the favorites. “If you listen to their advice, you are sure to lose. Giving 11 to 10 odds is almost always the cheapest price you can give.”
“A square is the average, unsophisticated gambler whose decision making is based on hunches, media manipulation, or spurious systems that cannot overcome the bookmaker’s inherent mathematical advantage,” Konik explains. Otherwise, you’re better off doing your own research.”
While these tips don’t guarantee you’re going to win, hopefully they can make you a little less square and a little more sharp in your picks this season. Chasing losses is the fastest way to the poor house.”
7. “For example, if you have a $1,000 bankroll for the season, you should generally bet no more than $50 a game.”
Newspapers and popular sports sites routinely publish the lines or point spreads for games, and football insiders offer their picks to viewers each week on ESPN and other cable networks. “Teams play inspired ball at home. Avoid Exotic Bets – “For very skilled handicappers, with a proven track record, there can, at least in theory, be value in betting parlays,” says Gordon on the type of bet that combines two or more individual wagers. Bet at the Right Time – “The sharp bettors tend to bet underdogs, and they tend to bet them early,” Moseman says. Shop For Numbers – “Another important aspect of betting on football is shopping for the best number,” Moseman explains. Consider Underdogs – “In the long-run, it’s easier to win betting on the underdog,” Konik says. Also, being “in action” can make a dull late-afternoon game (Buffalo vs. Research Football Services – “Most sports services realize that most people who sign up with them are insecure,” Gordon warns. Not all games work according to this formula, but it is usually a good rule of thumb.”
But that doesn’t mean you have to bet like a “square” and throw away your hard-earned money.
“The standard bet requires gamblers to lay $11 for every $10 they want to win with the extra $1 or 10 percent known as the juice,” Konik says. Oakland comes to mind) seem like the Super Bowl. “In trying to bamboozle potential customers, many services make claims about having scouts all over the country that give them inside information and promise 70 or even 80 percent winners, as if the bookmakers were the biggest suckers in the world. To be a successful sports bettor you need to operate with a clear mind.”
9. If you want advice about sports betting, find someone who has a successful track record. “Over the course of several seasons, the percentage of bettors who turn a profit is minuscule.”
But even though the math says it’s virtually impossible to win on a consistent basis, Americans continue to bet on football.
5. And why not? We have unconditional love for the sport and betting $50 or $100 on a game adds an extra rush of adrenaline. If North Texas is his best bet on a Saturday then that is his bet. “He is not jaded by teams and does not bet with his heart.
“In an average season, fewer than one bettor in twelve turns a profit,” Gordon says.
Michael Konik, a sports writer and best-selling author of The Smart Money (Simon & Schuster 2006), explains why it is so hard for the recreational gambler to win at betting on football. Thanks to the juice, the only one who profits in this scenario is the bookmaker. “Thus, the bookies love and cherish the squares.”
“There is probably no better bet in sports than playing an underdog at home,” Moseman says. If you like an underdog, it is best to get your bet in as late as possible, where there is heavy action from squares on favorites. On college you will be able to find different lines at different sports books. “When you’re in a good rhythm and winning, you want to increase your bets. Drinking and Gambling Don’t Mix – “There is a reason the casinos in Las Vegas supply you with free drinks while you are gambling,” Moseman says.
“The bookies fear and despise a tiny coterie of professional bettors known as ‘the sharps,'” Konik says. “As for me, the best bet in football is betting the point spread or over/under totals on individual games. There is a wealth of information on the Internet; it is just up to you to find it and research it daily.”
But before you start thinking about having bigger yields out of these instruments, know a little more about them. Options are fantastic in their ability to cater to every possible need of the stock market trader. They are a boon for the hedgers but not always so for the arbitrageurs and speculators.
Interest Rate Swaps
These markets happen to be of two types. Lack of knowledge coupled with greed, turn them into your worst possible nightmare. If you wish to play the stock markets, they offer an unbelievable amount of ground to play in, especially when it comes to hedging and risk management. How else is it possible that just investing $10 should help you take positions worth $1000. For example, if a party has a fixed rate payment obligation and another one has a floating rate one, the two can swap their interest obligations with each other without settling the underlying debt.
Futures contracts are derivatives very similar to forward contracts, with the main difference being that while forwards are traded OTC, futures are traded on an exchange. Last but not the least, they lend monetary power to the traders, for they can take large positions in the stock market with the minimal amount of cash, i.e., by just paying the premium amounts.
Certain exotic types like Cacall, Caput, Barrier options, etc., lure investors with the greed of returns, but what happens many a time is that, traders fail to see the complexity involved in them. A call option gives the buyer the right but not the obligation to buy a certain asset from the call option writer, by a certain date and for a certain price, known as the strike price. Here’s and example of an underlying asset.
Mastering these instruments can make you a millionaire overnight, but it is good to understand them first. Two or more options can be combined together (synthetic options) to give the trader just the kind of payoff he was visualizing, given his forecasts of the future price movements on the stock exchange. They can be used to hedge open positions in stocks and this makes stock trading safer. Hull in his 1999 book titled ‘Options, Futures, and Other Derivatives’.
Shares of company XYZ have an intrinsic value of $20 each. Not understanding how they work and investing large sums of money in them blindly is a folly. They are very good risk management tools and are mainly used to hedge risks that a trader is routinely exposed to. Forwards and futures prices are good reflectors of the price directions as well as the expected change in the future prices of the underlying asset.
They offer the traders an option to change the nature of their liabilities and exchange the risks associated with some of their unwanted liabilities with some more bearable ones.
They can be used to make arbitrage profits. Arbitrage profit opportunities are those opportunities that allow for risk-free, zero net investment profits, by capitalizing on price differentials on the same commodity in different markets. By definition, they are financial instruments that derive their intrinsic values from the underlying asset that they are based on. Plain vanilla swaps, or the least complicated of swaps, allow two parties to swap their interest obligations. On the other hand, forwards, swaps, and CDS are usually traded on the over-the-counter (OTC) markets. Being traded on exchanges robs the futures of the customization that is available on forwards, but on the other hand, as exchanges play clearing houses in the transaction, futures have relatively lower credit risk.. Forwards contracts are over-the-counter contracts that usually trade on commodities. In a put option, the option will thus, only be exercised if the strike price is higher than the going market price at that specific point of time in the future. When investing in these instruments, be aware of the risk that you are taking on with that kind of leverage.
When they are used for hedging, they perform exceptionally well but when used for speculation, it is not prudent to rely too heavily on them. But when you have a derivative option on the shares of this company, you are basically holding a financial instrument that has no intrinsic value of its own. The intention is to buy low and sell high in two different markets and pocket the differential profits.
They allow for large portfolio position changes without incurring the buying and selling transaction costs.
Forwards Contracts and Futures Contracts
By definition, a forwards contract is ‘an agreement to buy or sell an asset for a predetermined, fixed price, at a certain time or date in the future’. He either takes on another risk in return or makes a cash payment in exchange for the risk transfer.
Instruments like forwards and futures play a key role in giving directions to the market prices of the future. Be careful and ask all the right questions before you bring out the cash.
Since most of them involve the play of big money with very little in the way of initial investment, most people fail to foresee the impact they can have on their total funds. Research them and you will find a very grim picture, more houses have been broken with these instruments than have been built. The only difference between a normal spot transaction and a forward transaction is the time span between the contract and its fulfillment. For many of these instruments, small changes in the underlying asset can swing your fortunes from millionaire to bankrupt within seconds. Many an investor have fallen to greed in this market, for everyone else, it is a risk management boon.
Whether futures and options, or swaps and forwards, all require careful and deliberate study. They offer the trader, the option of passing on some of the risk that he’s bearing over to another party. The only difference between them and the normal financial instruments (like shares), is just the little term called ‘underlying asset’. On the other hand, with a short position (agreement to sell), your payoff will be the differential between the spot price of the commodity then and the futures price that you have agreed on (S – F).
Below are some of the uses as listed by John C. The value of your option to either buy or sell the shares of this company, derives its value from the actual market prices of the underlying asset, in this case, the shares of company XYZ. While spot is an immediate, present tense contract, a forward is a later date or future tense contract that is just being finalized today. The term futures encompasses all things like foreign exchange futures and stock index futures as well. You’ll know then, why all traders haven’t mastered the art yet and become overnight millionaires. These non-standardized financial instruments bear some amount of credit risk, since no exchange interferes between the buyer and the seller. While most financial assets have intrinsic asset values or prices, the intrinsic value of a derivative is based on the financial asset that forms the basis of a derivatives contract. Futures and options trading is fantastic as a risk reducing measure (hedging), but may not be equally fantastic as a speculative bet, especially when you do not have the required expertise, neither in derivatives nor in forecasting.
Interest rate swaps are also derivatives for they too derive their values from the underlying debt instrument. For many, what they invest in these instruments are their savings so you can only imagine the impact.
Many investors fail to understand that investing in them means indulging in a kind of leveraging. Options are not limited to the exchange traded derivatives markets and some are also traded on the OTC markets.
Understanding Futures and Options
Learning about derivatives is one of the most important lessons to learn, for anyone making new forays into investment finance. These are normal financial instruments where you just buy or sell shares of company XYZ (for $20 each, if market value equals the intrinsic value). Think about it and you’ll know why so many have gone down while betting on these instruments. On the other hand, a put option gives the buyer the right but not the obligation to sell a certain asset at an agreed price (strike price) by a certain date in the future. When you hold a long position in a forward contract, i.e., you have agreed to buy the underlying commodity at the agreed price, your payoff will be the differential between the forward price and the spot rate at that point in the future (F – S). So for once, a financial instrument has been named correctly, an instrument that derives its value from some other asset is termed as a derivative.
Options are basically of two types, a call option and a put option. Inexperienced options expire once their time duration ends and it is only the premium paid for buying the option that exchanges hands between the two parties.
They are simple financial instruments. Futures are also agreements to buy or sell commodities at a certain predetermined price at some predetermined time in the future. First the futures and options are traded on the exchange traded derivatives market and are standardized instruments with negligible credit risk. Even though you have invested only $100, the position that you had taken in the market was on $10000 shares. Know their uses and advantages, their drawbacks as well as their various types, namely forwards, swaps, futures and options.
What is the Derivatives Market?
Uses in Investment Finance
A point to note here is that, while futures and forwards are obligatory buy and sell contracts for the holders, options are rights and not obligations that the holder can choose on whether to exercise or not. Marginal swings in the value of these shares can leave you with the outcome – ‘Investment – $100 and Total Loss $100, 000’. There is no monetary transaction to the contract when it is first negotiated, and money only changes hands on contract maturity. Since it is the ‘right but not the obligation’ to buy an asset, it is obvious that the call option will only be exercised if the strike price is lower than the going market price for the underlying asset at that certain time in the future. These are extremely powerful instruments and though, ‘no guts no glory’ does summarize the ‘higher risk, higher potential return’ mantra of investment finance; having open positions in them is never prudent