Value Betting: How to Improve Your Value Betting

A value bet is when you lay a wager that a stock or other financial instrument will trade at a certain price, usually below the market price, at some point in the future.

The theory behind value betting is that you can gain significant benefits by being correct, but you also have the opportunity to lose a lot of money if you are incorrect. Because values are based on expectations of future prices, rather than today’s prices, they are often considered “safe” wagers, or wagers that you can make money no matter what happens. The key is to pick a price that you feel is achievable, given the circumstances, and that you are confident will be met if the stock drops to the price you select.

How Do You Play The Value Betting Game?

The first step is to establish which instrument you will be using for the bet. You can use just about any financial instrument for a value bet, but the most popular ones are stocks and futures. For a long time, the majority of value bets were placed on stocks, and still today, nearly 80% of them are. Stocks are a popular choice because they are easy to buy and sell, and therefore, relatively easy to manage, given the circumstances.

A futures bet, on the other hand, is where you make a wager the value of a specified commodity, such as gold or crude oil, will rise or fall against the U.S. Dollar in the future.

Futures are also considered “safe” bets because they are settled in U.S. Dollars, which means you will always have enough to cover your eventual losses. Still, like with most forms of gambling, the spread between the bid and ask prices for futures is often wide enough that it is relatively easy for someone to lose a significant amount of money without even trying. For instance, if a $100 bet on a $10 spread bets on a futures contract that ends up closing at $15, you have lost 10% (100/15 – 100) of your initial investment, which, in the case of our example, would be $1500.

The Advantage Of Being A Value Holder

Being a value holder is often considered a significant advantage because it makes it much easier to enter into and exit out of a trade, without suffering too much in the process. Consider the example of a stock you own that you decide to sell, at a profit. If you are not a value holder, you will have to take the loss if the stock drops in value before you can unload it. In that case, you might find it difficult to unload at a profit, without exposing yourself to significant risk.

The advantage of being a value holder is that, generally speaking, you are protected from large losses. So, if you are going into a trade with the goal of making a profit, it is usually advisable to start with an instrument you know is “safe” and will not decline in value.

Value Betting: Benefits And Risks

A value bet in the commodities market is usually associated with a handful of significant benefits, such as the ability to profit in the long run, the increased liquidity the market provides, and the overall security the market itself brings. Still, there are several drawbacks to this type of bet.

On the plus side, you get to profit in the long run if the value of your selected commodity rises. This scenario usually plays out a couple of ways. First, if you purchase the commodity at a low price, you will make a profit when the price rises. Second, if you short the commodity, you will make a profit when the price drops.

The overall benefit to this type of bet is that you can profit in the long run, usually 20 or 30 years, provided you are correct about the direction of the price. The disadvantage is that if you are incorrect about the direction of the price, you will end up losing a lot of money, as discussed previously.

Another significant disadvantage to value betting is the market’s illiquidity. This is a serious concern if you are taking a long time to exit the trade, and you want to be sure you have enough capital to cover your eventual losses. The problem with illiquid markets is that it makes it very difficult to determine an accurate price for the commodity you are trading, especially considering there is usually no way to find out the exact amount of your loss in advance. This makes it very difficult to place precise wagers, and difficult to know how much you will ultimately win or lose, especially early on and late in the game, when there is a lot of movement in the price.

Another significant disadvantage is the security the value bet provides is usually only temporary. Once the money you need to cover your losses has been withdrawn from the market, or you decide to walk away from the trade, it is not uncommon for the value to decline, sometimes significantly. If you need the security provided by the value of the commodity, you will have to continue to bet on it, even if you no longer have money in the market.

Despite all the risks and disadvantages, many professional investors still see value betting in the commodities market as a way to make money, especially in the long term. It is probably because of the limited downside compared to more traditional wagers, such as stocks, that make up the bulk of the market.

Where Can I Place My Value Bet?

The majority of value bets are now placed in the metals market, particularly in gold and silver. Still, it is by no means limited to those two metals, as there are dozens of others, like palladium, platinum, and diamond, that also see a lot of use in the market. Just about any metal or non-metal that can be bought and sold, on a global basis, will see some usage in the commodities market.

The advantage of using physical metals as opposed to financial derivatives is that you can’t lose physical metal. Still, even in the case of metals, the temporary nature of the security remains a significant drawback. The value of a metal, such as gold, can drop significantly, especially in the short term, if the price declines. The bottom line is that, for the average person, the sheer volume of metals available for trading makes them much more difficult to accurately value, and place safe wagers on. In the case of gold, which is one of the most popular choices for commodity bets, the downside is significant. Prices have declined by more than 50% from the record high set just a few years ago, and it shows no signs of stopping.

When Is The Best Time To Place A Value Bet?

The best time to place a value bet, as it pertains to the commodities markets, is when there are a significant number of opportunities to “hit the market” and make a profit. The problem is that there are often many opportunities, and a lot of them are quite aggressive, especially in the early stages of a bear market. This makes it difficult to find the right combination of leverage and risk management, both of which are essential to any successful long-term investment.

In a nutshell, it is always best to do your homework and pick a time when there are a sufficient number of reliable sources that have all the necessary information you need, about an issue you are interested in. This will make it much easier to select the right combination of leverage and risk management for the situation. In the case of value betting, there are generally speaking, three good times to do it: