It’s the second day of Royal Ascot today. The heavy overnight rain will be playing havoc with the form book but that won’t worry the average punter, just out for a bit of fun. It probably won’t worry the people out there day after day, year after year, either, the bookmakers. As you’ll see from the betting displayed on their boards, nobody really wants to be the outlier offering better odds than anyone else, even if it does get the money rolling in. Successful bookies play it safe.
So if anyone comes up to a bookie with a wodge of cash to put on an unfancied horse, even while rubbing their hands in glee the bookmaker will immediately place most of that money on the same horse on the online betting exchanges. He doesn’t know what’s up with that horse and isn’t going to take the chance. It’s all about being certain that he drives home that evening with more money than he came with (or at least, only a little less if all the favourites win).
It’s also known as “hedging your bets” – based on the idea of setting a barrier or hedge against potential losses.
We recommend hedging your bets when you have a major transaction abroad too. The currency markets are even more unstable than horse-racing, where at least you only have your horse’s form and fitness, other horses and the weather to calculate. In currencies every economic and political factor will be influential. In currency terms safety-first means taking out a Forward Contract, where you fix the rate as soon as you commit to a transaction in the future.
Speaking of betting odds, someone in the paper this morning has pointed out that on the bookmaking site Betfair Boris Johnson is now judged 86% likely to be the next prime minister. Yet the chance of leaving the EU on or before 31 October – his headline policy – is only put at 30%.
If you don’t think those figures quite compute, you really should think about how your plans will be affected by future currency chaos, and fix that rate!
Call your trader today on 020 7898 0541.
