5 Differences Between NFL and NBA Markets
As traders look to make the change from trading the NFL to the NBA there are a number of things that should be considered when looking at the way the games themselves will impact how the market trades. We are going to break down the 5 biggest differences between trading the NFL and NBA on BallStreet.
SPEED OF GAME
Clearly the NFL is a much slower moving game so the market will naturally trade slower by comparison. Possessions are clearly defined and will usually last for several minutes in the NFL which means traders can take their time in deciding when and how to enter a position for a particular team. In the NBA, the opposite is true. Possession are constantly going back and forth and traders can’t simply buy the team with the ball. So this will lead to traders having to make decision for short stretches at a time.
How does this effect the overall market? Well, we would expect when markets are trending up and down those moves will be must faster than in the NFL, meaning a team can go on a quick run in the NBA and you could see a price quickly move from $55 to $65 much faster than you would see in the NFL. The underlying trend of the game will dictate the price action but all traders will need to focus on being flexible and this flexibly will lead to more traders getting into trades at the same time and much more violent price swings.
FIRST HALF TRADING
In the NFL there is a rule amongst top traders, don’t pick the winning team unless you really have to. Does the same rule apply in the NBA? The short answer is yes but the longer answer is in the NFL there is much more parity and any team can win on any day. In the NBA it's much more likely that the home favorite who jumps out to a 10 point lead will likely hold.
Defined trading ranges will always emerge when the game has a back and forth aspect. This is well defined in the NFL where trading around the IPO will hold in a competitive game and market. In the NBA the ranges will be wider because of the sheer nature of the game and the speed in which a team can go on a run to take a big lead or cut one down. In the NFL a team is “limited” to 7 points as a max move in the score. In the NBA you can have a team put up a 15-0 run in 5 minutes. You have to be able to both identify the ranges and understand when its appropriate to buy at a high or more importantly buy on the low.
RALLIES AND RUNS
This is the NBA, everybody makes a run. And every run will create a rally. Unlike the NFL the scoring in the NBA is quick. A team down by 20 can be down by 8 in a couple of minutes and the market will be reacting every step of the way. It’s important to always try and ride the current trend of the game. This might meaning owning shares of both teams enough to profit when those big runs occur.
LAST SECOND OUTCOMES
In the NFL you have the obvious 2 minute drills and last minute field goals that define games and create $50 to $100 and $0 markets. In the NBA the end of the game is critical to the overall P&L you are likely to take to the final leaderboard. This is why it's important to have traded with the trends throughout the game to help you not depend on a couple of final plays. The decision to go “all-in” on a team should be one that you are able to make using all of the information you have gained throughout the game.
The NBA is going to test even the most experienced traders and sports fans….go ahead and ask yourself, how much is a free-throw worth in a 2 point game with 15 seconds left? It’s these types of questions that everyone will be required to answer to sit on top of the leaderboards.
The NFL is a much different test. Big plays happen and games are decided on a single snap. Are you able to identify these moments and capitalize ahead of the market? And if you are wrong are you willing to accept it and get back on the right side of the market and wait for the next big moment to drive the next big rally?