Super Bowl LVI weekend is here, with the Cincinnati Bengals set to take on the Los Angeles Rams. Data analytics firm PredictHQ suggests that over 100 million Americans will watch the big game on Sunday. And while that may mean more eyeballs for advertisers, it also means that many people will be watching the game for a different reason: sports betting.
Recent changes in state laws across the United States have made sports gambling more accessible. According to the American Gaming Association, a record 31 million Americans are expected to place bets on Super Bowl LVI, a staggering +35% increase from 2021. Total bets wagered are expected to approach $8 billion, an even more impressive +78% increase from last year’s Super Bowl.
Of course, when Super Bowl LVI concludes, so too does the NFL season. Americans betting on the big game may still have that speculative itch to scratch, and not many viable alternatives in the near-term. The NBA playoffs are still several months away, and college basketball’s March Madness doesn’t begin for a few weeks. And the MLB season could very well be delayed as owners and the player’s union are engaged in a lockout.
There is thus a chance that sports bettors take a page out of their pandemic playbook and turn back to financial markets, at least for the next few weeks.
Parallels exists between sports bettors and traders in financial markets. For example, both groups are engaged in estimating probabilistic outcomes: will Team A cover the spread or beat the moneyline?; what does implied volatility tell us about how Company B’s stock price will move if it beats or misses earnings?
Both sports betting and trading in financial markets have become more accessible in recent years as well. Many sports books accept bets starting as low as $1, while fractional share trading allows for smaller traders to buy as little as 0.01 share of a stock. The contract size of the S&P 500 E-mini futures is $50, meaning the dollar value of a 1 tick move is $12.50, while the contract size of the S&P 500 Micro E-mini futures is $5, meaning the dollar value of a 1 tick move is $1.25.
There are some advantages that traders in financial markets have over sports bettors, though. Not all sports books allow you to exit a bet once its been placed, whereas stop losses allow traders to exit positions with ease. Once a sports bet is placed, you’re usually stuck with it, while liquid financial markets can allow traders to put on and take off positions with relative ease.
Financial markets trade around the clock as well: stock markets are open for six and half hours per day, Monday through Friday; futures markets are open from Sunday at 6pm ET to Friday at 5pm ET, with 30-minute or 60-minute breaks each day around 4:30pm ET or 5pm ET (depending upon the market); currencies are open Sunday at 5pm to Friday at 5pm, without interruption; and cryptocurrency markets are available 24 hours a day, 7 days per week.
Sports bettors and traders in financial markets are cut from the same cloth: they’re risk takers. And while it’s unlikely that sports bettors flock to financial markets en masse as they did in 2020, it may be the case that a new wave of retail traders emerges in February and March once the whistle blows on Super Bowl LVI.
— Written by Christopher Vecchio, CFA, Senior Strategist