I am beginning to feel like a Hugh Taylor stalker but he is a convenient vehicle for examining one or two debates and one such debate popped up on my Twitter feed the other day. If you mention Betfair Premium Charge on Twitter you can bet the vast majority of Betfair users will not know what it is at least in detail, for the simple reason that it does not effect them and its never likely to. The premium charge is an extra charge on top of commission but you have to qualify for it under a very specific set of circumstances.
You need to have played in over 250 markets over the lifetime of your punting, not too difficult to do. You also need to have generated commission that is less than 20% of your gross profit over your lifetime. These are the main two criteria.
Why PC was introduced depends on your perspective. If you are a punter who backs and lays then you may take the view that it was introduced to penalise traders who make heavy use of the system, generate profits from reduced losing periods compared to punters and as a result remove liquidity from the market and because of the low commission they pay in relation to their profits you may feel that extra payment is called for. If on the other hand you are a trader paying PC you may feel that it is just a cynical Betfair grabbing extra income from where ever it can. Also do not forget that Betdaq do not charge PC and have equal if not lower commission rates.
When this topic comes up on Twitter there are always people popping up who like to point out that people should not bet on the exchanges but stick with bookmakers because of the PC. This is of course nonsense and is akin to saying that if your boss offers you a pay rise to 20k per year turn it down because the rich get taxed at 45%. These objectors are invariably traders or in running players and not Joe BackorLay.
So how does Hugh Taylor come into all this, well I decided to run a simulation on Hugh selections from 2014 (year chosen randomly), to see at what thresholds of performance he would start paying PC. I will assume that at the start of 2014 he has played in 250 markets and that he is in profit. I will also assume that he backing his selections on Betfair at the prices he advises (not literally so don’t get upset Hugh if you are reading this). During this year Hugh made thirty odd percent ROI to his prices. To look at various thresholds I will randomly remove winners in steps to gradually bring the ROI down and each step will be run through 100 times to randomly distribute the winning bets eliminated and the average profit will be taken from the 100 run simulation. Here are the results
Remove 10% of winners
Bets 537 PL +130.09 ROI% +24.22% Comm’ paid 12.66 Comm% 9.73
With 10% of winners removed Hugh is paying 9.73% of his Gross profit as commission and is eligible for PC
Bets 534 PL +106.5 ROI% +19.94% Comm’ paid 12.19 Comm% 11.43
Bets 532 PL +93.2 ROI% +17.52% Comm’ paid 11.92 Comm% 12.78
Bets 530 PL +78.86 ROI% +14.87% Comm’ paid 11.63 Comm% 14.75
Bets 529 PL +70.1 ROI% +13.25% Comm’ paid 11.46 Comm% 16.34
Bets 527 PL +48.9 ROI% +9.28% Comm’ paid 11.03 Comm% 22.5
From the above Hugh would hit PC at above ROI 10% profit. It would appear therefore that if you are a punter having around 600 bets per year ie two per day and you are making more than 10% profits you may run into PC. The number of people capable of doing this on Betfair will be very small and furthermore if you fit into this category you will no doubt have the nouse to generate a number of bets/lays that have a net break even effect on your PL but crank up your commission paid. If you cannot be bothered to do this then simply bet on Betdaq.
I will finish by taking a look at the former. If Hugh found around 1,100 even money bets during 2014 that net of commission broke even he would avoid PC when he makes a ROI of 21.3% or less. Of course he is not restricted to even money shots but for ease of calculation. Now if you are making 21% on Betfair then you should either stop worrying or apply for Hugh’s job.
All that counts is Profit, ROI is for the ego.