Sometimes hopping into your first cash market can be intimidating, so here at Jock Talk we’re going to be breaking down a few basic concepts to get all you new traders on your feet. Today we’re going to start with some IPO strategy.
Above is a sample of average ROI within the MLB this season. Players are grouped by IPO price, 1 represents all players who IPO’d between $1 and $2, 2 represents all players who IPO’d between $2 and $3 etc. 6 represents anyone who IPO’d at $6 or higher. Clearly, the players with the highest chance of turning a profit are players with lower IPO prices, like Ward. If you’re looking for low risk, high reward investments, lower priced IPO players are the place to go. To dive deeper, let’s look into a real world example.
Here are the top two finishers in a recent MLB market.
I’m sure most readers have heard of Mookie Betts. The sweet swinging right fielder filled up the stat sheet on Monday with two walks, two runs scored, a single and a stolen base. Those stats translated to a second place finish in the market as well as a very solid 230% ROI (return on investment, in other words the ratio between profit and investment) .
I’m less certain that you may have heard of unheralded Angels right fielder Taylor Ward. The fourth year pro is quietly enjoying a nice beginning to the season, slashing .353/.600/.647. He continued his good, if not great, hitting on Monday to the tune of two home runs and 3 RBI. This propelled him to his first ever market win and a spectacular 768% ROI.
While both players had great games and finished near the top of the leaderboard, there was a massive difference in the return on investment between them, and not just due to the fact that Ward finished one spot ahead of Mookie. Even if the roles had been reversed, and Mookie happened to beat out Ward for the top spot, Ward would still have been a superior investment (317% for Betts and 594% for Ward). So why is this? Well it has everything to do with their IPO price.
Pricing for Mookie Betts and Taylor Ward on 4/25
Mookie and Taylor are different players. Mookie is a former MVP who is one of the most well known and best players in baseball. Because of this, he’s likely to have a higher IPO price which caps his upside (less chance of winning large amounts) and also increases his risk (higher chance of losing more). Ward doesn’t have these same problems. With his low pre-rank, his IPO will mostly stay quite affordable. If he happens to have a huge game, it can lead to massive returns like on 4/25. If he doesn’t, because his price starts off lower and all stocks can only go as low as $1, your loss is capped. While Mookie is high risk/low reward, Ward and other similar players are low risk/high reward.