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Wednesday, August 31, 2011

IPOs and Week Zero Football (Week 1 CFB)


An IPO (Initial Public Offering) is a very exciting and anxious time for a business. While you have a general idea of what the company is worth and how it is expected to perform in the future,   with no trading history it is impossible to pinpoint exactly what will happen when the market gets a hold of it.

Here at The Sports Market we feel this is similar to Week 1 wagering.  Most of our wagering is based on models incorporating how a team has performed over the past three or four weeks and projects a score and total.  We then back test over a 3-5 years period how our model has done and then take a position.  In Week 1, like an IPO, we don’t have a history to look at.  We clearly have a lot of information on each team, such as who is returning and coming in, who is coaching, how they performed last year, etc.  It’s like we can see what a company did privately before its IPO, but don’t know how its valuation will react in the open market.

If you visit us throughout the year, you will start seeing our model based picks in Week 4.  Most of these they will be 2 unit or 2 plays and rarely if ever vary.  Some people prefer to vary their bet, and some people prefer to bet              flat, and we prefer the ladder option in regards to our models. This is because based on our back testing, we are playing a discrepancy our model has found that equates to a profitable percentage throughout the year that doesn’t vary from game to game.

We also incorporate a bit of our own handicapping.  We are more likely to vary the units on this as we feel different positions have different strengths.  Most of the positions will be 1 unit or 1 and from time to time upgrade them based on market discrepancies or other information we feel warrants an upgrade.

With all that being said you’ll find our Week 1 thoughts below.  We have approached almost all of these as 1 plays.  Week 1, like an IPO, can have high variance.  An IPO can take off and then quickly crash.  Therefore, we’ve treaded lightly on the following positions. (note: some lines have moved since we’ve placed our bets.  If you can’t find the same number, then tough shit)

Also, follow us on Twitter @TheSportsMarket we'll likely post any 2nd half plays, hedges or middles here as its easier than the blog.

1 Plays:

Wisconsin -32.5 vs. UNLV (We would still play this at the widely available -35):  UNLV has one of the worst teams in the FBS.  The players Wisconsin has are head and shoulders above UNLV, whose defense returns no starting LBs and only 2 on the Defensive Line from a defense that was one of the worst in the NCAA last year.  Wisconsin should run all over this team. Wisconsin may also look to show off Russell Wilson in this game for the home crowd who hasn’t seen him.  Combine that with the big play ability of Wisconsin’s running backs and Wisconsin will likely score 50+, and I don’t see UNLV getting to double digits.

Akron +34 @ Ohio St.  Although Akron is nowhere close to the talent level of Ohio St. (even with the suspensions), we believe there has been too much turmoil in Columbus to start the season.  Listing both Senior Joe Bauserman and True Freshman Braxton Miller as 1st on the depth chart shows that new coach Luke Fickell is nervous about both options.  Bauserman has never been impressive in his little play for the Buckeyes.  Miller at one point said, "I've got most of the running plays down pat, the passing plays I get confused sometimes on the routes because there's a lot of them. ... It'll probably take years to get everything down pat."  The QB situation certainly makes us nervous.

 In the past, when Ohio St. was breaking in a young or new QB, they always had a great defense and running game to rely on. For this game, they will be missing their starting RBs from last year due to suspension (Herron) and graduation (Saine).  They’ll also be missing a starting Offensive Lineman and their best WR (which will only matter if there is even a QB capable of throwing to him). Their great defense from last year lost a lot to graduation.  Ohio St’s talent gap will easily allow them to win this game, but with all things considered, 34 points seems about a TD too high.

James Madison +18 @ North Carolina. James Madison returns 18 starters from last year.  Yes, they only went 6-5, however they clearly showed they can get up for a game against the big boys after beating Virginia Tech last year and taking Maryland to OT in ‘09.  Also, combine that with North Carolina’s the dismissal of Butch Davis and overall turmoil the last two years, and this seems like a good spot to take the points.

South Florida +10 @ Notre Dame.  We’re not the type of handicapper who likes to play trends.  However, from time to time something will present itself that we like to take advantage of.  If you read our first blog, The Notre Dame Discrepency (despite being way off in the expected spread for this game – it’s not like you could have bet it), you know we think the evidence supports that Notre Dame is often overrated and would look at spots to fade them.  This we feel is one of them.  There’s a few interesting trends that we’ve noticed. 
1)      Notre Dame is typically a slow starter: In the last five years ND is 4-11 against the spread.  They've never had a profitable first three weeks in the time period.
2)      Notre Dame’s lines are inflated especially when they’re expected to be much better than their opponent.  Going back to 2006, ND is 4-10-1 against the spread as a double digit favorite.  In 2006 they went 3-3 under this situation, since then they’ve fallen off even more as a double digit favorite going 1-7-1.
3)      The public perception inflates Notre Dame’s home games since they are nationally televised on NBC.  People who like or are alumni of ND want to bet them when they can watch them on TV, driving the line up.  The Irish are 16-34 against the spread at home since 2003. 

Wednesday, August 17, 2011

Market Correction


We are currently grinding through the next month whilst awaiting football season’s arrival.  Pre-season football is something we tend to tread lightly with here, as most of our regular season analysis, such as financial type projection models of games and backtesting, does not apply to pre-season games.  However, we did happen to notice something very interesting in this coming week’s games.

Two of the most consistent trends I’ve seen while betting pre-season NFL are betting against both the Indianapolis Colts and the Kansas City Chiefs.  Here we look to examine the Chiefs.  The following table summarizes the Chiefs performance during the pre-season under Coach Todd Haley.
Year
Week
Vs
Score
Margin
KC Line
2011
1
25
L 2.5
2010
4
-4
P -4
2010
3
3
L 1.5
2010
2
5
L 2
2010
1
10
L 2.5
2009
4
8
L -1
2009
3
4
L -3
2009
2
4
L 3
2009
1
6
L -3


-Courtesy of www.covers.com

As we can see the Todd Haley led squad is yet to cover a pre-season game.  An 0-8-1 trend is quite a trend of underperformance.  It may lead one to think that playing against Kansas City is a good approach moving forward.  Sadly, the bookmakers have adjusted greatly sending out the Chiefs as a 6 point underdog to the Baltimore Ravens. 

Some square bettors may argue that it doesn’t matter; Coach Haley has never covered a spread.  This has to be a play against game, how could you back the Chiefs?  Well if we look closer we see Kansas City may not have been as non-competitive as it may seem.  They’ve never been more than a 3 point underdog and if you look at the spread of +6 (which has moved up to +7.5 at some places), they would have gone 5-3-1.

Clearly, a market correction here is warranted.  The question then becomes, is this an over-correction or an under-correction?  You could argue it either way (I would lean toward an over-correction, especially if you can get it at +7.5).  The point is to understand the market correction, see how far it has corrected, and look to play against an over- or under-correction rather than just blindly thinking “The Todd Haley led Chiefs have never covered a pre-season spread.  I want to lay the touchdown with Baltimore.”

Tuesday, August 9, 2011

Insider Trading

Our goal here at The Sports Market is to provide information and parallels between financial markets and the betting markets. It’s our main theory that sports markets (when approached properly) are less efficient than financial markets based on the Efficient Market Hypothesis ("EMH"). Basically, EMH holds that it’s nearly impossible to beat the general financial market because the price already reflects all current information. This theory holds credence based on how governments have set up financial markets to work. Through financial reporting laws, insider trading laws, etc. almost all financial information about public companies is made just that, public. Combine that with the magnitude of the number of smart or “sharp” people in the financial markets and EMH has some credibility.


Luckily, betting markets don’t have those reporting and information laws. Books aren’t required to put out quarterly or financial reports, teams aren’t required to disclose any and all information, and in many cases those in the betting markets are far from Harvard Business School and MIT graduates. The biggest difference is in the discrepancy of information and who’s willing to get it and organize. Where can we turn for up to date and accurate information? Social media, and most notably, Twitter.

The genesis of this blog post was approaching some pre-season NFL games that kickoff in a few days. A key to handicapping those games is who’s going to play and for how long. Where best to get that information? The coaches. Who best to extract that information? The beat writers. It used to be each day or so you could read an article in the morning paper about your teams practice and training camp. Not anymore, we now have Twitter.

Not only does Twitter function as an RSS Feed with beat writers linking to their latest articles, but often they tweet general information they’re hearing and seeing at practice. By following beat writers on Twitter you can get information better and faster to react in the betting market. Is someone hurt? Is someone practicing? Who looks good at practice? Who did the coaches single out in practice? Who were they using in the red-zone? These are questions that are often answered by just following a beat writer as he/she’s observing practice.

For a practical example, let’s look closer at pre-season NFL handicapping. I am of the opinion that a lot of early pre-season NFL games will go under due to the layoff and lack of continuity. This is more likely to happen in places with new coaches, who have bad QBs from top to bottom and with teams more likely to play their starting defense longer. Therefore I narrowed Thursday’s games down to Seattle (bad QBs) at San Diego (new coach) and Arizona (new QB) vs. Oakland (New coach/lack of QB depth).

After identifying these games, I looked to the beat writers to see what more information can be learned, and found this nugget from azcardinal.com‘s Darren Clarke:

Clearly, not very inspiring news from your new QB on his understanding of the new offense.

With the idea of gaining more information from Twitter to do legal “insider trading” in the betting market and inspired by @beyondthebets college football lists, I’ve compiled a Twitter list of beat writers for all 32 NFL teams. Visit us @TheSportsMarket in our lists section and give it a follow. It is quite likely that in the pre-season and regular season, there will be quite a bit of “insider trading” type information that will help you beat the betting market.

Friday, August 5, 2011

Outs - And We're Not Talking Baseball


The whole premise of this blog is that the sports betting market is inefficient compared with financial or other markets.  None of this became more apparent then today when many online sites released their NFL season wins totals.  NFL season win totals have been available in Las Vegas starting last week.  Sadly, for those of us stuck in Middle America, we are relegated to offshore online sports wagering sites.  These books, gaining less for their brands by releasing totals early, have the luxury of waiting around to see how the market views the opening Vegas lines before adjusting.  The most dramatic example of this has been the Cincinnati Bengals, who opened at o/u 7.5 wins, but moved down to anywhere from 6.5 to 5.5. 

The following table compiles the current over/under win totals for all 32 NFL Teams from three separate books.  To really put this in perspective I’ve incorporated the changing vigorish (vig) into each price.  Common theory holds for season win totals that every -050 increase in vig is equal to 0.5 wins.  I’ve incorporated the vig into the “Price with Vig” column to give an accurate comparison.

Sportsbetting

Bookmaker

BetOnline
Vig
Price

Vig
Price

Vig
Price
Wins
to Over
w/ Vig

Wins
to Over
w/ Vig

Wins
to Over
w/ Vig


Arizona
6.5
-125
6.60

7
-105
6.90

7
-110
6.95
Atlanta
10.5
115
10.20

10
-150
10.35

10.5
-105
10.40
Baltimore
10.5
-115
10.50

10.5
-105
10.40

11
-115
11.00
Buffalo
5.5
-115
5.50

5.5
-105
5.40

5
-130
5.15
Carolina
4.5
-115
4.50

4.5
-125
4.60

4.5
-115
4.50
Chicago
8.5
-135
8.70

8.5
-115
8.50

9.5
100
9.35
Cincinnati
5.5
-130
5.65

5.5
-145
5.80

6.5
-110
6.45
Cleveland
6.5
100
6.35

6.5
-129
6.64

6.5
-115
6.50
Dallas
9
100
8.85

9
-115
9.00

9
-110
8.95
Denver
5.5
-135
5.70

5.5
-125
5.60

6
-110
5.95
Detroit
7.5
-120
7.55

8
-105
7.90

7.5
-120
7.55
Green Bay
11.5
100
11.35

11.5
-105
11.40

11.5
-120
11.55
Houston
8.5
100
8.35

8.5
-125
8.60

8
-120
8.05
Indianapolis
9.5
-135
9.70

10
-105
9.90

10
-110
9.95
Jacksonville
6
-130
6.15

6.5
-105
6.40

6
-115
6.00
Kansas City
7.5
-115
7.50

8
110
7.75

8
-105
7.90
Miami
7.5
-105
7.40

8
120
7.65

8
-110
7.95
Minnesota
7
-115
7.00

7.5
130
7.05

6.5
-125
6.60
New England
11.5
-135
11.70

11.5
-125
11.60

11.5
-110
11.45
New Orleans
10
-105
9.90

10
-129
10.14

10
-115
10.00
New York G
9.5
110
9.25

9.5
115
9.20

9.5
-110
9.45
New York J
10
-105
9.90

10
-125
10.10

10
-120
10.05
Oakland
7
110
6.75

7
-110
6.95

7
-115
7.00
Philadelphia
10.5
-130
10.65

10.5
-135
10.70

10.5
-130
10.65
Pittsburgh
10.5
-125
10.60

10.5
-125
10.60

11
-110
10.95
San Diego
10
105
9.80

10
-115
10.00

10
-115
10.00
San Francisco
7.5
-140
7.75

8
110
7.75

8
-120
8.05
Seattle
5.5
-135
5.70

6
-130
6.15

7
100
6.85
St. Louis
7.5
100
7.35

7.5
115
7.20

7
-120
7.05
Tampa Bay
8
-130
8.15

8
-105
7.90

8.5
-115
8.50
Tennessee
6.5
-135
6.70

7
120
6.65

6.5
-120
6.55
Washington
6
-130
6.15

6
-105
5.90

6.5
105
6.30


Next I took the converted prices to find where the biggest discrepancies are between these books.  That table is below with the Top 10 discrepancies highlighted.

SB vs Bmaker
SB vs BOL
Bmaker vs. BOL
Arizona
0.30
0.35
0.05
Atlanta
0.15
0.20
0.05
Baltimore
0.10
0.50
0.60
Buffalo
0.10
0.35
0.25
Carolina
0.10
0.00
0.10
Chicago
0.20
0.65
0.85
Cincinnati
0.15
0.80
0.65
Cleveland
0.29
0.15
0.14
Dallas
0.15
0.10
0.05
Denver
0.10
0.25
0.35
Detroit
0.35
0.00
0.35
Green Bay
0.05
0.20
0.15
Houston
0.25
0.30
0.55
Indianapolis
0.20
0.25
0.05
Jacksonville
0.25
0.15
0.40
Kansas City
0.25
0.40
0.15
Miami
0.25
0.55
0.30
Minnesota
0.05
0.40
0.45
New England
0.10
0.25
0.15
New Orleans
0.24
0.10
0.14
New York G
0.05
0.20
0.25
New York J
0.20
0.15
0.05
Oakland
0.20
0.25
0.05
Philadelphia
0.05
0.00
0.05
Pittsburgh
0.00
0.35
0.35
San Diego
0.20
0.20
0.00
San Francisco
0.00
0.30
0.30
Seattle
0.45
1.15
0.70
St. Louis
0.15
0.30
0.15
Tampa Bay
0.25
0.35
0.60
Tennessee
0.05
0.15
0.10
Washington
0.25
0.15
0.40


What does this have to do with outs?  Outs are where you can get down a bet.  Spreads, or in this case season win/loss totals, are no more than a price.  Do you shop around online for purchases for the best deal on regular items your buying?  In most cases you probably do.  That should be no different than how you place your bets.  Having more outs allows you to shop at more places for better prices.

There are two main advantages to line shopping, first by getting better prices.  Assuming you thought the Baltimore over was a good bet this year, wouldn’t you rather bet them over 10.5 wins at Bmaker and lay 5 cents (-105) of vig, than bet them over 11 wins and lay 15 cents (-115) of vig at BOL?

Secondly, when the prices are quite different across books it gives us the ability to arbitrage prices through a “middle bet”.  Some example of this are: Cincinnati, Seattle and Chicago.  We’ll start with Cincinnati.  If you were to bet Cincinnati at under 6.5 -120 at BOL and also bet Cincinnati over 5.5 wins -130 at SB you’re giving yourself a middle of 6 wins.  You’re essentially in a worst case scenario risking 30 cents (or -030) that both of your bets win to receive $2 (+200).  You get +666 that Cincinnati wins 6 games, or saying you think there is a better than 13.05% chance they land on 6 wins. In Chicago’s case you would do a similar exercise betting under 9.5 -120 at BOL, and over 8.5 -115 at SB.  Here you are risking 20 cents to win $2, getting +1000 odds that the Bears win 9 games, saying you think there’s a better than 10% chance they win exactly 9 games. 

The best opportunity in this is with Seattle, due to added value from an extra opportunity to push the bet.  .  By betting the under 7 -130 at BOL and the over 5.5 -135 at SB we’re risking 35 cents to win $2 or +571 odds for the Seahawks to win 6 games. Now we need to combine these two outcomes to see what odds we’re being given that Seattle wins 6 OR 7 games.  +571 odds convert to 14.9% and +286 odds convert to 25.91%.  By adding these two numbers we’re putting ourselves in a situation that says the chances of Seattle winning 6 OR 7 games is 40.81% or +145.  The overlay from the price offered and what the true price should be is massive!

Although I’ve shown these three scenarios provide arbitrage opportunity it is important to quantify what that opportunity is.  By knowing the exact odds on what it is we’re betting we can make better decisions.  For example we would have to think there’s a better than 13.05% chance Cincinnati wins EXACTLY 6 games, better than 10% chance Chicago wins EXACTLY 9 games, and a better than 40.81% chance Seattle wins 6 OR 7 games.  Comparing these percentages to some of last year’s there is some value.  7 of 32 teams were within one game of their win/loss total and 5 finished within a ½ game of their total.  This equates to 21.88% and 15.62%, respectively.  Obviously, you may want to incorporate your own personal handicapping of each team into your analysis as well.  (For instance, I happen to think that Cincinnati is a train-wreck, and would consider playing under 5.5 wins.  Therefore I’ll likely take the under 6.5 price and be happy as I feel it provides more value at -120 than EXACTLY 6 at +666 does.)

I hope the previous illustrations show the importance of having multiple outs.  If you skip over the various arbitrage scenarios, and focus only on finding the best numbers you will at least give yourself an advantage and increase profitability by playing better numbers over a month, a season, a year.