Finding Overlays at Tradesports
Definition of an Overlay: An overlay is a wager where the odds against you winning are not as high as the odds that you will be paid if you win. In other words, you have the best of it. You won’t always win of course, but over time your account balance will grow because the money you win will total more than the money that you lose. (This will only happen if you are betting on overlays!)
Overlays come in all shapes and sizes. The most obvious is a proposition that you have properly identified as being a 50/50 chance and you are getting odd on, such as +112 (buying at 47 or selling at 53). But you can also be betting on or against a longshot and be taking advantage of an overlay as well.
For example, any contract that has exactly a 1 in 3 chance of expiring at 100 is worth 33. If you can buy it at 25 or sell it at 40 you have an overlay. A contract that has a 1 in 10 chance of expiring at 0 should be trading at 90. If you can buy it at 86 or sell it at 94 you should do so - either way, no matter what the contract is or what you personally think about the situation, as long as you are able to accurately determine the true value of the contract being 90.
These examples assume that you are willing to let the contract expire when entering the trade. This is the best way to approach your trading when scouring the site for overlays. It’s not the only way, but it’s the best way.
It is possible to enter trades that are an overlay when planning on trading out of the position before it expires, but that is a much trickier calculation. If you come from a financial broker trading background, you are probably familiar with this style of trading. It involves setting a stop loss and a profit target, and having identified an equal chance (or better) of the profit target being reached before the stop loss is. It is critical that the amount of money you stand to lose (should the stop loss be hit) is less than the amount that you can win (if your profit target is hit). So normally your stop loss is set at a closer distance to your entry price than your profit target. But the chances of either being hit must be no worse than 50/50. This is the hard part. You must absolutely correctly identify this condition when placing the trade.
Additionally, you need robot-like discipline to exit the trade when the predetermined conditions present themselves on both the profit and loss side. Most people fail at this type of trading, even the most well intentioned.
So my advice, especially when you are somewhat new to this game, is to approach every new position with the intent of letting it expire. It is much easier to find overlays this way. Now, I’m not saying that you should let every single position expire in all situations - just that you should be willing to live or die with the result when you enter it.
