POD Trading: Positively Offsetting Discrepancies for consistent capital growth!
POD Trading: Positively Offsetting Discrepancies for consistent capital growth!
POD Trading is the use of Software Technology to achieve a mathematical certainty of profit when trading financial markets.
In economics, Sports and finance, POD Trading is the practice of taking advantage of a price discrepancy between two or more markets: getting a combination of matching deals that capitalize upon the differences, the profit being the offset between the market prices. When used by academics, POD Trading is a transaction that involves no negative cash flow at any point and ensures a risk-free profit.
POD is an acronym for "Positively Offsetting Discrepancies"
Contents
Tax
Understanding How POD Trading works
Compound Trading
Computer Software
Pitfalls
References
Tax
POD Trading is more commonly used within the Sports betting industry. In countries such as Australia, New Zealand, United Kingdom all winnings are considered tax exempt.
POD Trading became tax exempt in Australia by way of the the Family Actual Means Test (FAMT), where it was described that "windfall gains' would be fully exempt from taxable income.
Understanding how POD Trading works
POD Trading Thousands of sporting events take place around the world on a daily basis, and bookmakers offer odds on the results. It is not uncommon for many bookmakers to offer different odds on an event with only two or three possible outcomes, making a possible POD Trade exist. Any individual bookmaker will organize their odds so that no one person can cover all outcomes at a profit against their books. However, in order to remain competitive their margins are usually quite low. Different bookmakers may offer different odds on the same outcome of a given event; by taking the best dividends offered by each bookmaker, a customer can cover all possible possibilities of the event and secure a small but guaranteed profit.
This occurs because the bookies are competing for the revenue which means they must offer different prices than their competitors. Furthermore, the bookmakers all originate from different regions; therefore the betting which occurs on international events will be weighted differently with bookmakers from those regions. A POD Trader will then place two or more bets with two or more bookmakers and by using proportionate amounts of money to the different odds offered can guarantee a small but definite profit, usually between 1.5and 6.5%.
Example Trade
There is a basketball match between the LA Lakers and the Miami Heat:
Odds on the LA Lakers = 1.97 (in fractions)
Odds on the Miami Heat = 2.18 (in fractions)
If you have $1000 and split it up as shown below then there is a mathematical certainty of profit.
If you stake $ 525 on the LA Lakers it would equal $1034.25
If you stake $ 475 on the Miami Heat it would equal $ 1035.50
This guarantees a ROI of a minimum of 3.425%.
The Odds shown in the example above would never be offered from one bookmaker as it would put that bookmaker in a position where he would stand to make a guaranteed loss.
However it would be possible to have these odds offered by opposing bookmakers i.e. bet on the LA Lakers with one bookmaker and bet on the Miami Heat with another bookmaker.
These trades are available all day, every day, but are near impossible to find without the use of computers.
Trading Programs
There are several companies who design trading programs which are used to generate POD trades
Trading Programs for POD trading gathers live data feeds from a wide-range of online bookmakers and (in real time calculates) which bookmakers have discrepancies on certain events.
Then the POD trading software displays this data in a way that improves the speed and accuracy of determining the offset and required investment.
Effective POD trading software will indicate how much money needs to be placed down to produce a mathematical certainty of profit and bring you into the bookmakers website to place the bet (not all software will offer this feature).
Drawbacks
There are potential drawbacks to this industry.
Firstly some companies or traders may claim that it is totally guaranteed.
This statement is true to a certain extent, however, there are some things which can go wrong:
Bookmakers can limit the amount you can trade (this will only happen if you trade uneven amounts of money i.e. $287 instead of $290)
Bookmakers can go into administration and not pay out your dividends (this generally occurs when you use small bookmakers and not reputable ones
Errors with amounts can be made and therefore putting you in a situation where you can be at a loss (this will only happen when negligent).
References
1. Johnson, Bryan The POD Centre, http://www.thepodcenter.com
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