As my bot now has a track record of 2 years in profitability I decided to do some research in the topic of Premium Charge on Betfair. As of today I am not paying any kind of additional charges, but I guess that if my bot keeps moving money to my account I will sooner or later reach the PC limit? Is there some strategy that I could use to optimize my model between profit and charges?
This will be a two part post. This first post will focus on the behavior of PC charges in the context of my model, the second post will focus on optimizing the model with charges as one of the factors.
Right now my total commission to gross profit ratio is 37.8%. All those years turning over money for a small loss are finally paying off! But the ratio is declining and if I have understood everything correct the first magic limit is 20%, when hitting that limit I will always need to pay the difference up to 20% in PC charge.
If I should be even more successful (that is my plan) I could eventually hit the Super Premium Charge (I need to have net profit of £250.000, which is far from my current profit…). In that case I could be eligible to pay the difference up to somewhere between 40-60% based on my actual ratio.
It is hard to get a grip of what that would mean to my kind of betting, so to clarify I created a small simulation where I simulate the behavior of my model (same kind of odds and tested it for different gross ROI%) and this is what I came up with:
The above chart shows which kind of commission/profit ratio (from now C/P Ratio) my model would generate for different edges.
A. This is the current expected yield of my model right now (1.3%). At this point I expect my C/P Ratio to be around 28 %.
B. This is the point to where I can adjust my model without reaching the Premium Charge (around 2% yield).
C. If I ever reach the level of Super Premium Charge (£250.000), I will need to hold my model up to max 0.9 % yield to avoid paying that charge.
The above chart show how my model would be effected by Premium Charge (PC) and Super Premium Charge (SPC). As an example I have plotted the line to show the effect of a model returning a gross yield of 3%. The PC would bring it down to 2.7 %, and finally when hitting SPC it would be brought down to 2.1 %.
How to conclude on this?
I now know that I can calibrate my model up to a gross yield of 2 % without paying the PC, and if I reach the SPC limit I must keep the model below 0.9% yield to avoid SPC.
In the next post I will apply these curves to my own models, calibrate them at different yield% and see how many bets are generated at different levels and finally calculate my expected monetary win (yes, I prefer to maximize money and not minimize charges!).