2021 Financial Summary
● Trading volume of $19.0 million, a 7.7x year-over-year increase.
● Net returns from trading totaling $912,676 or 4.8% return on trading volume (“Trading ROI”). In 2020, net trading returns and Trading ROI totaled $28,434 and 1.2%, respectively.
● Cash back bonuses and promotional offers generated from our trades totaled $51,857.
● Realized and unrealized gains of $22,828 related to transactions buying and selling Bitcoin (“BTC”) to fund sportsbook accounts.
Volume and Performance
2021 marked a year of tremendous growth for us. With a starting portfolio of $500,000, we managed to complete nearly $19.0 million in trading volume. Along with the growth came significant growing pains. In the first half of 2021, we launched our first significant foray into basketball, deploying significant volumes into the NBA and NCAA Men’s Basketball markets for the first time. While we still believe that our underlying strategies have merit, our modeling and execution proved to be ineffective. Our models weren’t equipped to handle the evolving factors that played into game variance and, as a result, we often did not adequately employ proper risk management techniques. In addition, we lacked the infrastructure to identify actionable course corrections in a timely manner.
In early Q3, we made a significant investment in pricing and grading infrastructure that allowed us to 1) identify more favorable market pricing and 2) automate performance tracking in real-time. The improved performance tracking allowed us to assess performance in more granular and predictive ways than we were previously capturing. These improvements led to a dramatic turnaround in performance beginning in Q3 and continuing through Q4.
Our NFL activity exceeded expectations for 2021, generating an 11.7% Trading ROI on over $9.0 million in volume. While some of this performance can be attributed to our infrastructure improvements in Q3, we benefitted from favorable game outcomes and growing liquidity within higher yield opportunities such as player props. We expect that our Trading ROI in the NFL will settle into the 6.0-7.0% range for 2022.
Outside of the NFL, our performance severely underperformed expectations. While we expect our infrastructure improvements to add 2.0-3.0% to Trading ROI for all segments, we will require further investment in predictive analytics in these sports. Investing in analytical talent will be a focal point for the first half of 2022.
Promos and currency gains represented 7.6% of total returns in 2022. We expect these amounts to be less impactful on a percentage basis going forward.
Risk Adjusted Performance
Our portfolio generated returns of $987,361 on a starting balance of $500,000, representing a portfolio return on investment (“Portfolio ROI”) of 197.5%.
As we continue to grow, our portfolio is becoming less volatile. Based on our daily closing portfolio balances in 2021, the annualized standard deviation of the portfolio was 58.1%, compared to 88.9% in 2020. Assuming an annualized risk-free rate of 1.0%, we estimate the Sharpe Ratio of our 2021 performance to be 3.38.
After relatively modest volume growth in 2020, we took major leaps in 2021, increasing volume by nearly 8x. Returns followed with a 10x increase in 2021. The progression of Cleat Street is demonstrated visually below.
Looking Ahead to 2022
Our expectation for 2022 is to increase our volume to $100 million, an 5x year-over-year increase from 2021. We expect our Trading ROI, inclusive of cashback bonuses and promotions, to be 5.1%. Much of this growth will come from a significantly higher starting portfolio balance, improved pricing and tracking infrastructure and an investment in non-NFL predictive analytics. Our goal for 2022 is to deliver significant profitability in non-NFL markets.