Weighing the Odds in Sports Bet - King Yao.pdf

WEIGHING THE ODDS IN SPORTS BETTING by King Yao Pi Yee Press copyright © 2007, 2008, 2011 by King Yao All rights reserved. Inquiries should be addressed to Pi Yee Press, 4855 W. Nevso Dr, Las Vegas, NV 89103-3787. ISBN 978-0-935926-38-5 ABOUT THE AUTHOR King Yao is the author of Weighing the Odds in Hold‘em Poker and Weighing the Odds in Sports Betting. He uses his experience from making millions in financial derivative markets and translates it into gambling. Since he left his trading position in 2000, he has been playing poker and betting on sports. He travels to Las Vegas frequently, especially during football season. He keeps a blog at http://weighingtheodds.blogspot.com and is a regular poster on Internet forums dedicated to sports bettors. Table of Contents List of Tables Chapter 1 Introduction The Purpose of This Book Organization Other Books Why I Wrote This Book Why Sports Betting? Interpreting Data Legality Chapter 2 Basics Expected Value (EV) Calculating EV Sports betting EV example Money Line Converting a money line into percentage Converting percentage into a money line Point Spread Money Lines on Dogs Removing Pushes Talking Cents Half Point and Push Percentage Parlay Teaser ROI Expected ROI Money Management Smart money management Stupid money management Betting in Las Vegas Reading the board Making a bet Collecting winnings Chapter 3 Ways to Win Handicappers Fundamental Angles and trends Situational and emotional Feel Futures Relative-Value Players Database keepers Buying points Teasers Handicapper/Relative-Value Overlap Proposition bets Parlays Bettors Line hunters Followers Bonus hunting Promotions Betting For a Living is Work Talent Managing finances Motivation after winning Motivation after losing Willingness to study Persistence and physical endurance 55% Wins is Great Bet Those 53% Games! Chapter 4 Sports-Betting Market Not an Exchange Goals of a Sportsbook How Lines Open Why Lines Move Game-to-Game Line Adjustment Different Markets Efficiency of Sports-Betting Markets Relative-Value Bets Zero-Sum Game Market Value in Finance Market Value in Sports Bets Example with a Super Bowl futures bet Example of a bad team Example of analyzing your risk Why Mark to Market? Chapter 5 Scalping & Middling Scalping Perfect scalp Imperfect scalp Negative scalp Middling Example of a middle Half middle Reverse middle Similarities Differences Other Issues Example of betting the tough side first. Positions after a scalp or middle Conclusion Chapter 6 Hedging Valid Reasons to Hedge The risk of the original wager is too great The hedge has positive or zero EV The hedge was pre-planned The hedge releases capital Thoughts While Hedging Estimate the EV of the hedge Understand the risk of the bets Evaluate the risk after the hedge Compare the EV to the risk profile Sportsbooks Hedge Too Conclusion Chapter 7 Hedge Mistakes Hedging After Line Movement Avoiding a Reverse Middle Increasing Risk with a Hedge Hedging a Lost Cause Example 1 Example 2 Hedging the Last Leg of a Parlay Hedging the Second Half Missing a Bet Chapter 8 NFL Season Wins Sum of Wins is at Most 256 Rate Each Game Strength of Schedule Compare to Posted Lines 2006 The Wavy-Ruler Effect Other Considerations Time value of money Opportunity cost Sportsbook risk Value of a Half Win Spreadsheet Value of the Vig My RSW Picks for 2006 Conclusion Chapter 9 NFL Parlay Cards Break-Even Rates Advantage Profitability Betting Push Percentages Local Parlay Cards Chapter 10 NFL First Halves Historical Data The Value of Particular Numbers Tied at the half 3-point lead at the half Other valuable numbers Changing Times Other Uses for Table 7 Caution Using Table 7 Conclusion Chapter 11 Office Pools Good, Bad and Average Numbers Valuation of Each Square Valuation Caveats Buying, Selling and Trading Chapter 12 Super Bowl Props Understanding the Prop Researching Statistics Applying Math Adjusting for the Market Making Refinements Blocked Punts Prop Copycat Gets Punished Chapter 13 March Madness Pools The First Round The Second Round The Third Round and Beyond 2006 March Madness Texas A&M vs. Syracuse: #12 vs. #5 Wisconsin-Milwaukee vs. Oklahoma: #11 vs. #6 San Diego State vs. Indiana: #11 vs. #6 Wisconsin vs. Arizona: #9 vs. #8 UAB vs. Kentucky: #9 vs. #8 Wichita -2.5 vs. Seton Hall: #7 vs. #10 Marquette -2 Alabama: #7 vs. #10 California -1.5 NC State #7 vs. #10 Notes on two regionals Conclusion Chapter 14 NBA Playoffs A Sports Riddle Zigzag Theory Must-Win Games Game 3, home team down 0-2 Game 4, home team down 0-3 Game 6, home team down 2-3 Game 7 Exact Series Lines Game 6 Game 7 Calculations Exact Series Line Spreadsheet Chapter 15 Baseball: First Halves First Half Versus Full Game Endurance of starting pitchers Bullpen strengths of teams Bench strength for pinch-hitting Five Innings 4.5 Innings Half Runs in Five Innings Conclusion Chapter 16 Baseball: Totals STL vs LAD MLB Total Push Rates More Odds than Evens Higher Totals Have Fewer Pushes Value Depends on the Total An example with totals of 7 / 7.5 STL vs LAD An example with totals of 10 / 10.5 CLE vs KC Conclusion Chapter 17 Racing’s Triple Crown Before the Kentucky Derby Bet the “No” after the Derby If a Favorite Wins the Derby If a Long Shot Wins the Derby Fewer Horses in Later Races Lower Odds in the Belmont Belmont Souvenirs Putting the Odds Together An Example From 2002 An Example From 2006 BLOG Entry on 8 May 2006 Conclusion Chapter 18 Futures Time Value of Money NFL Futures 2006 NFC Odds: Seattle Wild-card round Divisional round Conference finals Putting it together Tiebreakers College football NFL MLB: Wild-Card Race Head to Head Down the Stretch Chapter 19 Tips for Handicappers Be Ready for Opening Lines Lines Getting Sharper Angles College football: returning starters Baseball angle: sign-stealing Use Statistics in Context Weed out the Luck One Sport at a Time News Relative-value plays Market moves and tendencies Choose a Sport You Like Chapter 20 Tips for Bettors Shop Finding a Sportsbook NFL teaser example NFL futures example College football correlated parlay The Best Time to Bet How big do you bet? How do you think the line will move? How sharp do you think the market is? Win Big or Slowly? Bet the max, and hope they don’t notice Bet smaller, and hope they don’t adjust Traps Forgetting the value of money Disdain for small bets Resting on your laurels Not admitting mistakes Chapter 21 Handicappers Following a Handicapper A Handicapper’s Record Sample size Lines the handicapper used Handicappers selling multiple services Handicappers who release picks early Websites for Handicappers Other Relevant Information Write-ups Size of other clients Change in pick volume Strategically releasing picks Line movement More Tips for Followers Picks using rogue lines Records may be biased Using break-even handicappers for cover Why does the handicapper sell picks? Conclusion Chapter 22 Sports Bets in Unusual Places Embedded Sports Bets Free Big Mac Embedded futures bet Options on Super Bowl Tickets Pricing of options Example Drawbacks Season Tickets Fantasy Sports Chapter 23 Internet and Media Internet Forums Good things about Internet forums Bad things about Internet forums Internet forums on sports betting Other Websites Media Coverage The media guarantee a win! Personal relationships with players The media overrate NFL quarterbacks The media try to explain everything Gossip Chapter 24 Interview with a pro Glossary Acknowledgments Contact Information List of Tables Table 1 Profit on 1000 Bets at Various Win Rates Table 2 Analysis of Hedges Table 3 2006 Carolina Panthers RSW Projection Table 4 2006 NFL Season-Wins Picks Table 5 2006 NFL Season-Wins Picks: Recap Table 6 NFL Full-Game Push Percentages Table 7 NFL First-Half Data Table 8 NFL Lines: Game vs First Half Table 9 NFL First-Half Push Percentages Table 10 NFL Home & Away Scores, 1Q Table 11 Frequency of NFL Scores, 1Q Table 12 Frequency of NFL Scores, 2Q Table 13 Frequency of NFL Scores, 3Q Table 14 Frequency of NFL Scores, Game Table 15 Frequency of NFL Scores, All Qtrs Table 16 Frequency of NFL Scores, 1x2x1x4x Table 17 Shortest NFL TD will be O/U 1.5 yards? Table 18 NFL Blocked Punts Table 19 Win Rates MLB Full Game and 5 Innings Table 20 Win Rates MLB 5 and 4.5 Innings Table 21 MLB Half-Run Lines for 5 Innings Table 22 MLB Totals: Betting to Actual Table 23 MLB Half-Run Values Table 24 Kentucky Derby Winners Below 10-1 Table 25 Kentucky Derby Winners Above 10-1 Table 26 Number of Entrants in Major Races Table 27 Belmont Stakes Odds for TC Candidates CHAPTER 1 INTRODUCTION The Purpose of This Book Sports betting can be attacked intelligently. Smart sports bettors do not gamble the same way as tourists play roulette or retirees play the slot machines. Instead, smart sports bettors are making bets that they have thought through carefully with supporting logic and/or research. The purpose of this book is to give you tools to succeed at sports betting, to show you how to evaluate, compare and view sports betting from an analytical perspective, not from a gambling perspective. This book should be used as a guideline to sports betting rather than a blueprint. The sports betting market changes and adapts quickly. The underlying principles shown in this book should help you adapt and continue to make good bets even when the market changes. This book is for you if you want to think analytically about sports betting. It is for you if you do not want to be spoon-fed supposed winners, but want to get some ideas to improve your game. You battle bookmakers and line makers constantly; betting sports is a game of maneuvers and adjustments. You can use as many weapons as possible in this continuous fight. This book should help in that regard. Organization Chapters 1 through 7 are on general theory and ideas in sports betting. These chapters should be read first as the rest of the book builds on their ideas. The remaining chapters can be read in any order. Chapters 8 through 17 examine more in-depth issues in particular sports. These chapters give you a sense of how to attack different aspects of sports betting using analytical tools, market perspectives and logical reasoning. Chapters 18 through 24 have information and general advice while covering multiple sports. At the end of the book is a glossary. Other Books There are few quality books on sports betting. The first sports- betting book that I recommend is Sharp Sports Betting by Stanford Wong. A few other sports-betting titles contain good information, including books by Don Peszynski, Kevin O’Neill, Trace Fields, Scott Kellen and Mike Murray. You also can get information from sports books that are not geared towards betting, and use that information to suit your purposes when it comes to handicapping and betting. Compared to other forms of gambling, there are relatively few good books on sports betting. There are many knowledgeable sports bettors who have the ability to write quality books on their craft. Why have so few of them written books on the subject? Unfortunately, the financial reward they expect to get from writing a book is probably not worth the effort. Instead, writing a book may hurt a sports bettor’s future winnings if disseminating his secrets decreases his future betting opportunities. You implementing the author’s ideas means more competition to make the same bets as the author. Most bettors who have the knowledge to write quality sports-betting books decide it is negative EV (EV is explained in chapter 2) to give out information when the expected royalties from a book are relatively small compared to the size of their wagers. In addition, it takes time and energy to write a book. Instead of writing a book, skillful sports bettors may sell information in the form of picks, which will probably net them more income than royalties from a book. Selling picks does not require any explanations, so they do not have to reveal their methods. Why I Wrote This Book When I wrote my first book, Weighing the Odds in Hold’em Poker, I did not have to think about the possibility that I would cost myself money by giving out information. If you use some of the ideas I wrote about in my hold’em book, it is unlikely to affect me directly since there are so many poker players, so many hold’em tables and so many poker rooms. Sports betting is different from poker in that it is a worldwide market similar to a financial market. If someone in New Zealand makes a large wager, it is possible that his wager can affect me directly by moving the line on the game around the world, thus denying me the opportunity to make the same wager at the same line. The sports-betting marketplace has similarities to the financial world. I was able to transfer my training and experience in trading options and other derivative products to sports betting. The information in this book is some of the things I have learned during that time. I have analyzed and bet on sports for a long time, but it was after finishing writing Weighing the Odds in Hold‘em Poker that I turned my main focus on sports betting. There are many different ways to approach sports betting, and the more I delved into it, the more interesting and challenging I found it. You can approach it from a handicapper’s point of view and try to make a better line than the line makers and the market. Or you can approach it from a relative-value player’s point of view and make distributional, correlated and derivative bets. Or you can approach it from the point of view of a scalper or middler. There are numerous ways to attack the sports betting market and find positive EV. I did enjoy the process of writing Weighing the Odds in Hold’em Poker and decided to write about some of the things I learned about sports betting. In February, 2006, I submitted my first article to the Two Plus Two Internet Magazine, which can be found at TwoPlusTwo.com. That article, on the analysis of a Super Bowl prop, is the foundation for chapter 12 of this book. I enjoyed writing the article as it forced me to focus on a specific topic and explore it in- depth and from different angles. After a few months of writing articles, I started thinking about writing a book, the book that you now are reading. I knew I had to make sound logical arguments if my writing were to be published. But I was also prepared for the possibility that someone might catch an error, which actually did happen with that first article. I did not mind being corrected since learning from my mistakes allowed me to improve both my writing and my own betting. The same logic applies to this book: If you find an error, please tell me about it. I am both a sports bettor and a writer, and willing to improve in both endeavors. I wrote this book is to satisfy my own ego. There are few good books on sports betting, so my contribution to the literature will be more significant than a similar effort in another field. My enjoyment of the writing process and my ego outweigh the possible negative EV in writing the book, thus making it positive EU (expected utility) for me. Why Sports Betting? I enjoy following, betting, and thinking about sports more than I enjoy following stocks, thinking about interest rates and trading in the financial markets. I would rather analyze how Alex Rodriguez will perform in his next playoffs given his poor past performance than how PAC IOs will perform given an increase in mortgage refinancings. I would rather evaluate how often a baseball team is expected to win by more than 1 run given certain variables than evaluate the skewness of an out-of-the-money put in the Pharmaceutical Index. I would rather compare the relative strengths of the Colts and Patriots when playing on a cold November night in New England than compare the relative differences in volatility, skew and kurtosis between the SPX and NDX indices. Making money in sports betting is just as challenging as making money in the financial markets. My enjoyment of sports made it easy for me to choose sports betting over trading in the financial markets. Being my own boss, waking up when I feel like it, watching tons of baseball, basketball and football games and traveling frequently to Las Vegas all helped tip the scale towards sports betting. You probably have similar interests in sports if you are reading this book. Interpreting Data I view and explain the sports-betting market as if it were a financial market by applying skill sets from my background in derivatives trading. I wrote this book from the perspective of a trader and a bettor, not from the perspective of an academic researcher. The trader/bettor looks for data that can be used to make money (or avoid losing money), and does not necessarily demand a high level of statistical significance. Conclusions reached by research of historical sports data are results from limited sample sizes. The smaller the sample size, the less reliable the data are in predicting the future. On the other hand, results from large sample sizes are well known and usually embedded in betting lines. Bettors who do a good job interpreting data from small sample sizes have an advantage. While reading this book, be aware of the sizes of the samples. The smaller the sample size, the greater margin of error you should associate with the results. The larger the sample size, the more you should expect the results are already reflected in betting lines. Legality Taking bets on sporting events is illegal in most states in the United States. Making bets seem to be in a gray legal area. With that in mind, this book is geared towards betting in Nevada, especially Las Vegas. If you live in a country where sports betting is legal and socially accepted, consider yourself lucky. You are more likely to get paid on a winning bet made in Nevada than anywhere else. The industry is regulated in Nevada, and there is an avenue for you to voice grievances if you feel the sportsbook has treated you unfairly. Justice may not be served all the time, but it is better than wondering how to get your money back from a tiny outfit in the Caribbean Islands. Any wager that is made in Nevada cannot be retracted by the casino once the bet is made. This is not the case in other places, where sportsbooks sometimes cancel wagers after they are made if they feel they put up a bad line. Some notorious Internet sportsbooks have canceled wagers after a game was played, presumably due to having a big imbalance of action and their side losing! Nevada is the safest place for sports bettors. Some of the tables in this book might be images, which cannot be read as text. If you want to access those tables in a format that can be read as text, go to: http://BJ21.com/books/WeighSports/tables.shtml CHAPTER 2 BASICS This chapter goes over some basics of sports betting. All sports bettors should know the information in this chapter. Expected Value (EV) You are in the supermarket shopping for bread. You see two brands that you like equally, but one is cheaper. You decide to buy the cheaper one. You have just made a decision by comparing the expected value of the two brands of bread. You are driving on a highway during rush hour. Your lane seems to be going slower than the lane to your left. The first chance you get, you switch over to the left lane so you can get home faster. You have just made a decision based on the comparison of the expected value of the two lanes. You are at the sportsbook watching a game and the first half just ended. One team is playing without emotion and you think that will be the cause of their downfall in the second half. You decide to make a second half bet against the emotionless team based on your gut feeling. Right or wrong, you have just made a decision based on the perceived expected value of the teams. Expected value is a concept that all people use in their daily lives, sometimes without being conscious of it. Whenever there is a choice, expected value can be useful in making a decision. Sometimes the values are not purely monetary. The value could be based on happiness, a term that academics like to call utility. Although often there is no need to use a formula to calculate the expected value of a decision, there are cases where a calculation gives a result that is counterintuitive, or shows why an idea is correct or incorrect. It can also help to pinpoint factors to consider in sports betting. Expected value (EV) describes the value of an event averaged over all possible outcomes. It is a way to describe situations that can have different results. Consider a basketball player at the free throw line. If Dwayne Wade has made 750 free throws out of 1,000 attempts, a fair estimation of his chance of making his next free throw is 75%. The EV of the number of points scored with one free throw attempt is 0.75. Wade either makes the free throw and scores one point or misses the free throw and scores no points; but on average, with one free throw, he is expected to score 0.75 points. The concept of EV is used throughout this book to demonstrate the value of certain bets and ideas. This chapter introduces EV, and shows how it is calculated and how it can be used. Calculating EV To calculate the EV of an event, take all possible outcomes and assign each of them a monetary result and a probability. The sum of the probabilities equals 100%. The sum of the individual results, each multiplied by its probability, equals the EV of that event. If the EV of the event is a positive number, the event has a positive expectation or positive EV. If the EV of the event is a negative number, the event has a negative expectation or negative EV. Here is an example with a roll of a single die. You roll a fair die, and each of the six faces has an equal chance of coming up. If the die comes up 1 through 4, you win $3. If the die comes up 5 or 6, you lose $3. Below are the probabilities of each roll and the results. The last column shows the multiplication of the Probability and the Result columns. Add all the numbers in that column to get the result, the EV of a roll: +$1. You expect to make $1 per roll of the die. But you will not win $1 on any given roll; you will either win $3 or lose $3. This information can be written as a mathematical equation: EV of rolling one die = 1/6 x (+$3) + 1/6 x (+$3) + 1/6 x (+$3) + 1/6 x (+$3) + 1/6 x (-$3) +1/6 x (-$3) = $1.00 In mathematics the order of operations is to do everything within parentheses first (in this case there are no operations within parentheses), then multiply and divide, and then add and subtract. In the EV equation for rolling one die, multiply 1/6 x (+$3) to get +$0.50, and do the same for each term before adding all the terms together. Look at another example. If the roll is a 1, you win $100; but you lose $1 with any other number. This is a great game for you, provided your opponent is not cheating. This shorter equation is simpler than writing out each term. EV of rolling one die = (1/6 x $100) + (5/6 x -$1) = $15.83 There is no need to write out each of the rolls from 2 through 6 because they all have the same result: a loss of $1. The solution for the equation is $15.83. You expect to make $15.83 on average per roll of the die. Losses outnumber wins; on average you lose five out of every six rolls. But the win amount overwhelms the loss amount by so much that you have a positive EV of $15.83 on average per roll. Sports betting EV example Most lines that sportsbooks offer are efficient. On most point spread wagers, the sportsbook collects the juice in that you have to risk more than you can win on a straight bet. If the bet has a 50% chance of winning, then the sportsbook has positive EV against you. Here is a sports betting EV example. The Celtics are a 3.5 point favorite against the Knicks. The sportsbook has set a good line and there is a 50% chance of either team covering the point spread. You go to the window and bet $110 to win $100 on the Celtics -3.5. Here is your EV on the bet if you have a 50% chance of winning it: EV of Celtics -3.5 -110 = (50% x $100) + (50% x -$110) = -$5 If most lines on the board are efficient, then most bets made by bettors have negative EV from the point of view of the bettors. The sportsbook has the disadvantage of not choosing which team you will bet on. But if the book sets all lines reasonably correctly, then it holds a big advantage over most gamblers. You should try to put yourself into situations where you have positive EV. Winning requires being able to distinguish between situations with positive EV and situations with negative EV. When you find a positive-EV bet, jump on it. When you see a negative-EV bet, pass. Losing sports bettors are not able to distinguish between positive and negative EV, so they often make negative-EV bets. The goal of this book is to help you better identify positive-EV and negative-EV situations. Square bettors (squares) are people who often make negative EV bets. Sharp bettors (sharps) are people who often make positive EV bets. Semi-sharp bettors often make the same plays as sharp bettors, but who may not have the ability or the knowledge to adjust or adapt as quickly. Money Line The betting line on a participant (usually a team or a person) to win an event outright is expressed in terms of money lines. Examples are: the Yankees -150 to win the game; the Mets +650 to win the National League. If the money line is negative, you have to risk that amount in order to win 100. For example, -129 in the money line means you have to risk 129 to win 100. If the money line is positive, you have to risk 100 to win that amount. For example, +109 in the money line means you have to risk 100 to win 109. Converting a money line into percentage Convert a money line into its equivalent win percentage by dividing the amount you risk by the amount your ticket will be worth if your bet wins. The ticket amount is your win plus the amount you bet. If the money line is negative, then take the money line and divide it by itself minus 100. For example, a money line of -129 converts to 56.3%: = -129 / (-129 -100) = -129 / -229 = 56.3% If the money line is positive, then take 100 and divide it by the money line plus 100. For example, a money line of +109 is converted to 47.8%: = 100 / (109+100) = 100 / 209 = 47.8% Converting percentage into a money line If the percentage is greater than 50%, then divide it by 100% minus itself, and multiply by -100. For example, 55% is converted to -122 = PERC / (100%-PERC) x (-100) = 55% / (100%-55%) x (-100) = 55% / 45% x -100 = 1.22 x -100 = -122 If the percentage is less than 50%, then take 100% minus itself divided by itself, then multiply by +100, then put a plus sign in front of it. For example, 45% is converted to +122 = (100% - PERC) / PERC x 100 = (100% - 45%) / 45% x 100 = 55% / 45% x 100 = 1.22 x 100 = +122 Exactly 50% can be expressed as both +100 and -100. Point Spread A point spread is an artificial adjustment to the score of an event in order to determine a winner and loser for a wager. The favorite lays points and the underdog gets points. If the point spread is -5, there are three ways to compare the favorite to the underdog: Subtract 5 points from the favorite’s score and compare the result to the underdog’s score. Add 5 points to the underdog’s score and compare the result to the favorite’s score. See how many points the favorite won by, and subtract 5 points. If the result is a negative number or the dog won outright, then the dog beat the point spread. Sportsbooks typically put up point spreads that approximately divide the action among bettors and/or equally divide the chances of either team covering the point spread. Without any other information or opinion on the line, bettors should assume point spreads are fairly efficient. However, they are not always efficient, and this is when the smart sports bettor can take advantage of the sportsbooks. Sportsbooks change point spreads with new information. New information can be: heavy money being bet on one side; seeing money bet by certain bettors whom the sportsbooks respect highly; news about the participants in the event (such as injuries, suspensions, etc.); and following other sportsbooks that have moved their line (called moving on air). Once you place a bet, the terms of the bet are fixed. The point spread may change as regards new bets, but the terms of an already-made bet will stay as written. Betting sports is not the same as pari-mutuel betting in horse racing. Point spreads have accompanying money lines as well, called the vigorish, the vig or the juice. Typically, the vig is -110; you have to risk 110 in order to win 100. Sometimes the sportsbook will have a vig different from -110; instead of adjusting the point spread, the book may adjust the vig. For example, if the sportsbook gets considerable action on the Colts -3 -110, it might change the terms to the Colts -3 -120. Some sportsbooks offer reduced juice, some all the time and some during certain times of the week. Instead of -110 juice on point spreads, a book may offer -107 or -105. Some sportsbooks in Las Vegas offer reduced juice on the Super Bowl to attract business. Money Lines on Dogs A bet on the underdog money line usually is expected to lose more often than win. Rarely are you expecting that the money line is so inefficient that the market has the wrong team as the favorite. The most common exception is when the money line is close to even money. Underdog money-line bets can be positive EV even if they lose more often than they win. It is all about value. A way to evaluate money lines is to think of them from the same perspective as trading stocks, where you are looking to buy shares with value. To do this, convert the money line into percentage and compare to your estimate for the game. If there is a sizable difference, then you have a potential bet. For example, suppose you think the Cardinals should be a +150 (40%) underdog, but you are able to bet them at +160 (38.5%). From a stock-market perspective, you are buying shares of the Cardinals at 38.5 when you think they are worth 40; that’s good value and worth a bet. You do expect to lose more often than win even though you have positive EV on this bet. When the underdog does win, you expect to get paid more than your fair share, because you think the bet has positive EV. Removing Pushes When a wager pushes, sportsbooks refund the amount risked back to the bettor. If it is possible for a wager to push (a tie with no winner or loser), then an adjustment is needed when converting probabilities to money lines. The total probabilities that should be considered are the probabilities of the bet being a winner or a loser; ties should be taken out. Here is an example: Proposition wager: number of shots Shaquille O’Neal will block in tonight’s game? Over/under 2 blocked shots. You need data on the distribution of blocked shots by O’Neal. Let’s assume the following distribution: If O’Neal gets exactly two blocked shots, then the wager is a push. In order to correctly convert the probabilities into a money line, you should throw out the probability of a push and just compare the winners and the losers. In this case, comparing the combined probabilities of 0 or 1 blocked shot versus the combined probabilities of 3 or more blocked shots. Taking out the 30% chance of a push, leaves 70% chance the bet will be either a winner or a loser. Take the probability of each possibility in the distribution and divide by 70% to get the adjusted probability. The combined adjusted probabilities should equal 100%. Now add the adjusted probabilities for all the over possibilities as well as for all the under possibilities. In this case, it is 50% for each. Then convert those probabilities into money lines. In this case, both over 2 and under 2 blocked shots are 50%, so the equivalent money line is +100 for each. Talking Cents The total vig on both sides of a bet is called the spread, and is usually described in terms of cents. For a point spread of -110 on each team, the total vig is 20 cents, thus a 20-cent line. For money lines, the spread usually depends on how far away the line is from +100. Sportsbooks understand that a cent is worth less as the line gets farther from +100, so they offer wider spreads as a result. Some sportsbooks offer 10-cent lines in baseball money lines up to a certain point. For example, they may offer 10-cent lines up to a money line of -150. For a bigger favorite than that, the spread will be bigger. Examples of this would be lines of: favorite -120, underdog +110 (10-cent line) and favorite -180, underdog +160 (20-cent line). Spreads on prop bets usually range from 20 to 40 cents. Bettors compare money lines by referencing the differences between them, in cents. For example, money lines of +105 and +125 are 20 cents different. Laying -150 is laying 10 cents more than laying -140. +100 (which is the same as -100) is treated the same way 0 is treated on the number line. When comparing a line of -120 to a line of +110, first figure out the difference of -120 to +100 (20 cents) and then +100 to +110 (10 cents) to get the difference (30 cents). There is one problem with using cents as a unit. The farther away from even money, the lower the percentage differences are for each cent difference. The 10 cents from +100 to +110 (2.38%) is a greater percentage than the 10-cent difference from +200 to +210 (1.08%). 10 cents of edge in an even money bet is better than 10 cents of edge in a +200 bet. Half Point and Push Percentage The value of a half point can be calculated from the push percentage. First, subtract the push percentage from 100%. Then divide the result by two. Then calculate the equivalent money line from that percentage. Lastly, subtract 100 from the money line, and you will get the value of a half point in cents. Here is an example: In the NFL from 1989 to 2006, when the home team was a -2 to -4 favorite, it won 10.2% of the games by exactly 3 points. Converting 10.2% into the value of a half point in terms of cents: 100% - 10.2% = 89.8% 89.8% / 2 = 44.9% 44.9% converted to a money line is +122.7 taking 100 from 122.7 is 22.7, and rounding yields 23 cents So the value of a half point from 3 to 3.5 or 3 to 2.5 is 23 cents. These three lines have the same value: -2.5 -123 -3 +100 -3.5 +123 In order to check the work, convert the money line for -2.5 and -3.5 into percentages and find the difference. It should be exactly the same as the push percentage of 3, except for small rounding errors. Parlay A parlay is a bet involving two or more teams where all teams must win in order for the bet to win. To figure out the expected winning percentage of a parlay, you must know the expected winning percentage of each individual event as well as whether the events are correlated. Let’s first look at the case where there is no correlation between the events in the parlay. Here is an example of a two-team parlay with zero correlation. Both Event A and Event B have a 50% chance of covering the point spread. In order to win the parlay, both Event A and Event B must win. The probability of that is: Two-team parlay winning percentage = Event A Win% x Event B Win% = 50% x 50% = 25% or +300 in the money line Most two-team parlays pay 13 to 5 or +260. A parlay with two events that both have a 50% chance of covering the point spread and no correlation between the two events is not an attractive bet. If the two events are correlated, then the percentages will change depending on the degree of correlation. For example, let’s say that the chances of Event A winning is perfectly correlated to the chances of Event B winning. This means that whenever Event A wins, Event B also wins and vice versa. Essentially, Event A and Event B are the same event. Two-team parlay winning percentage with perfect correlation between the two teams = Event A Win% x [Event B Win% given Event A wins] = 50% x 100% = 50% or +100 in the money line With perfectly correlated events in the parlay, the typical payoff odds of +260 now look profitable. But this is an extreme example. Even when two events are correlated, rarely is the correlation this strong. Let’s throw in a third event (Event C) that also has a 50% chance of covering the point spread and make it a three-team parlay. Let’s also assume there is no correlation between any of the three teams. Three-team parlay winning percentage = Event A Win% x Event B Win% x Event C Win% = 50% x 50% x 50% = 12.5% or +700 in the money line For money line parlays, sportsbooks use odds off the board instead of a set payout schedule. The vig in the parlay comes from the vig in the individual money lines. Here is an example of a two-team parlay where the expected win percentages are not 50%. Let’s say there are two teams in the parlay, one is an underdog at +300 in the money line and the other is a favorite at -150 in the money line. You decide to parlay these two teams using the money lines. Two-team parlay using money lines = Team X Win% x Team Y Win% = 25% x 60% = 15% or +567 in the money line Teaser A teaser is a parlay bet in which each team is given a set number of additional points. The payout odds on teasers are significantly lower than the payout odds on parlays due to the additional points. To figure out the expected winning percentage of a teaser, you must know the expected winning percentage of each individual event as well as whether the events are correlated. The same exercise can be done for teasers as they were done previously for parlays. Here is an examples of a two-team six point teaser. Point-spread lines: Giants -2.5; Jets +10 Six point teaser lines: Giants +3.5; Jets +16 Six points are added to the point spreads of each teams; both teams must cover the enhanced point spreads. Rules differ on what happens if any teams tie. Usually in teasers with more than twoteams, if one team ties, then the teaser is changed to a teaser with one fewer team, so a three-team teaser with a tie becomes a twoteam teaser. With a two-team teaser vig of -110, the break-even rate that the average team has to win with the additional points is about 72.4% or -262 (square root of 11/21 is 72.4%). ROI ROI is the acronym for Return on Investment and is expressed in percentage. ROI uses two variables: return and investment. Return is the profit on the investment. Investment is the funds that you put up to make the wager(s). ROI does not take into account the time it takes for a wager to be completed. It is possible for two investments to have the same ROI, but one investment to be superior because it takes less time to complete. The formula is: ROI = Profit / Investment Example: You make 500 bets during the season. Each bet is on point spreads laying -110 juice. You risk $220 to win $200 on each bet. 500 bets at $220 per bet means the total investment is $110,000. At the end of the year, your net profit is $3,300. Your ROI is: ROI = $3,300 / $110,000 = 3.0% Some people use ROE (return on equity) or ROR (return on risk) to mean the same as ROI. See Chapter 5 for differences between ROI and ROR as applied to scalps and middles. A higher ROI does not necessarily mean superior performance. A bettor with a high ROI may be passing on positive-EV bets with relatively low ROI. This bettor keeps his ROI high at the expense of net profit. ROI should be viewed in conjunction with overall profits in order to see the big picture. Expected ROI Instead of using the known profits for the return, Expected ROI uses expected profits in the numerator. The formula is: Expected ROI = Expected Profit / Investment Here is an example of using expected ROI to calculate expected profits. You find a money line on the Yankees at -150 against the Angels. You bet $1,500 to win $1,000 on the Yankees. At game time, Vladimir Guerrero is scratched from the Angel lineup and the mid- market line moves to Yankees -180. Assuming -180 is now the fair line, the EV is: EV = (180/280) x $1,000 + (100/280) x -$1,500 = +$107.14 The expected profit is $107.14, and the total investment was $1,500. The expected ROI on this game at game time is: Expected ROI = $107.14 / $1,500 = 7.14% Money Management There are two kinds of money management: smart and stupid. The smart kind of money management deals with bet sizing to reduce the probability of going bankrupt and diversifying risk. The stupid kind of money management deals with trying to turn combinations of uncorrelated negative-EV bets into a positive-EV portfolio. Unfortunately, these two concepts get confused by gamblers because both are called “money management’. Smart money management How much should you bet? You have to make your own decisions on how much to bet. Your personal risk preference is just that: personal. No one can tell you perfectly how much to bet given a certain bankroll unless you tell them the exact level of your personal risk preferences. There are good tools, such as the Kelly Criterion, that will help answer the right amount to bet given a certain bankroll, but these tools need your input on the amount of risk you are willing to take, as well as the expected edge of each bet. Be true to yourself and your own risk preference and take responsibility for your bets, whether they win or lose. Here are some general conservative steps you can take to figure out how much to bet: Figure out your sports-betting bankroll. This is the money that can be dedicated to betting; if it is lost you will be sad, but it won’t eat away at you or at your family’s living expenses. For most wagers, bet only 1% of your sports-betting bankroll. This should allow the possibility of a bad losing streak to occur without crippling your bankroll. Make sure that you are comfortable with the amount that 1% represents. If losing that amount makes you sick to your stomach, then it is too much to bet. If winning that amount does nothing for you, then maybe your bankroll is set too low. Save the 2% bets for the best bets, the ones that have the most edge. It is often difficult to gauge the exact edge you have in sports betting. It is possible you are wrong or unlucky. Do not bet a huge percentage of your bankroll on any one bet in case you are wrong or make a mistake. Betting too much and losing can be a big detriment as it can cloud your thinking on future bets. You can risk more if the payoff schedule has little downside. For example, middling a game has little downside if equal amounts are bet on both sides. The two risks in the game are negatively correlated, so the true risk is much smaller than the total funds used for the bets. Betting these low percentages on individual games will mean a slow bankroll growth. But it will also minimize the risk of a disaster. Casual bettors can afford to bet a higher percentage than professional bettors because casual bettors have other income sources that professional bettors may not have. Stupid money management Trying to turn bad bets into a good portfolio does not work. There are no money management schemes that can turn a combination of negative-EV bets into a positive-EV portfolio. Beginning gamblers often think up their own version of the Martingale system. I thought up this system myself when I first got out of college; but lucky for me, I never put it into play. The classic Martingale system is doubling your bet size after losing. You bet a small unit on a bet that pays close to even money. If you win, you repeat the bet. If you lose, you double the bet. The doubling allows you to win one unit when the win finally does come. To illustrate the idea, let’s use hypothetical games at even money juice but with true win rates of 48% for each game. Rule if a bet is a winner: go back to the bet size in bet 1 Rule if a bet is a loser: bet twice as big as the previous bet Bet 1: $10 to win $10 Bet 2: $20 to win $20 Bet 3: $40 to win $40 Bet 4: $80 to win $80 Bet 5: $160 to win $160 Etc. The gambler thinks that with this progression of bets, he is surely going to win sooner or later and eventually win the $10 in his first bet. If he can repeat it forever, he will become rich! There are two requirements: The sportsbook allows infinitely large bets You have a bankroll of infinite size No one can satisfy these two requirements, including Bill Gates and the biggest casinos in the world. Instead, what will happen if the gambler continues to play this progression is that the gambler will eventually hit one of the two limits: either his bankroll will run out or the casino will no longer accept his wager due to its size. Since he has negative EV on each bet (remember we pegged each game as having a 48% chance of winning), the sum of the bets has negative EV. Let’s say you have $2,550 in your bankroll, and you start off making $10 bets with the odds described above. It would take 8 losing bets for you to go bankrupt ($10, $20, $40, $80, $160, $320, $640 and $1,280). The chance of you going bankrupt is small; it is 0.5346% (52% to the 8th power) or about 1 in 200. Even though it is likely you will escape and not lose eight straight bets, the big loss that occurs when that unlikely event happens will crush you. You are not being paid appropriately for the risk you are taking. If the individual bets are negative EV, then the Martingale is a negative-EV system. Here is the calculation using the variables listed in this section. EV of the Martingale system = (0.5346% x -$2,550) + (99.4654% x $10) = -$3.69 You must look for positive-EV bets. Money-management systems that turn negative-EV bets into positive-EV portfolios when the bets are not correlated do not exist. Betting in Las Vegas Betting sports in Las Vegas casinos may be intimidating if you do not understand the layout of sportsbooks or the semantics conventionally used at the betting window. The sportsbook can look like a stock market exchange with many numbers in lights on boards high up on the walls. Reading the board Sportsbooks post the betting lines on the board so you can see them easily. Some use electronic boards that are updated via computer. Others use handwritten boards that must be maintained physically. If there is a conflict between what the board shows and what the computer says, the actual betting lines are according to the computer and not as shown on the board. Each betting option has a rotation number associated with it. Sportsbooks may not have titles on their lines; but each set of lines is distinct from another, so experienced bettors have no problem distinguishing one from another. If you are in doubt, ask the clerk at the betting window. Lines on baseball games may look like this: The rotation numbers are 107 for the Rangers, 108 for the Mariners, etc. The money line on the first game is Rangers +155, Mariners -170. The run-line on the first game is Rangers +1.5 -135, Mariners -1.5 -115. The total on the game is 9.5, -110 for both over and under. Lines on football games may look like this: When there is no accompanying money line listed for a point spread or total, the vig is -110 on both sides. The line on Texas Tech is -8 -110. When the accompanying point spread is different from -110, the sportsbook explicitly lists it. The accompanying money line on Nebraska -7 is -105. Money lines are typically listed next to the point spread. The money line on Oklahoma State is +240. At bigger sportsbooks, money lines are offered on most games; but when the point spread is high, many casinos do not offer money lines. When a point spread is pick ‘em, there may be no money line listed since it is essentially the same as the point spread. Making a bet To make a sports bet in Nevada, tell the cashier the rotation number of the wager and the amount you want to risk. If instead you name the team you want to bet, the cashier will have to look for the corresponding rotation number, and that wastes time. State the amount you want to bet, and proffer that amount in cash or chips. If you want to bet the money line, you have to state that explicitly or the assumption will be that you want to bet the point spread. Examples using the baseball and football lines above: “202 for $550” means “I’ll take Baylor +8 -110 for $550 to win $500.” “204 on the money line for $560” means “I’ll take Nebraska to win the game at -280, risking $560 to win $200.” “203 Under for $200” and “204 Under for $200” both mean “I’ll take Under 49 in the Oklahoma State / Nebraska game risking $200 to win $200.” The total is associated with both teams in the game, and the cashier needs to punch in whether you want the Over or the Under. “110 on the run-line for $140” means “I’ll take the Giants +1.5 runs risking $140 to win $100.” “Parlay 107 and 109 for $200” means “I want to parlay the Rangers on the money line and the Dodgers on the money line, risking $200.” They will tell you the exact amount the parlay pays, in this case, it should be $718. “Parlay 109 run-line and Over for ten dimes” means “I want to parlay the Dodgers on the run-line laying 1.5 runs and Over 9 in the Dodgers / Giants game for $10,000.” They will likely tell you to get lost because the items you want to bet are correlated and your bet size is high. In Nevada once you make a bet and receive the ticket, the bet is good. Future line changes do not affect your bet. Even if the sportsbook made a ridiculous mistake, it has to honor the ticket. If a team should be favored by 33 points, but a sportsbook mistakenly allows you to bet it plus 33 points, the book has to honor your ticket when you win. Collecting winnings The event must end completely in order for you to collect your winnings. The date the event ends will be printed on your ticket. If you have a winner, go to the sportsbook and present the ticket. The clerk will give you the amount of your winnings plus the amount you wagered. A winning ticket risking $110 to win $100 will pay you $210. If you have another wager to make at that time, you may use the funds to make the wager without exchanging cash. Large winnings can be requested in the form of chips (chip denominations are usually $1,000, $5,000, and higher amounts) which can be used only for wagers at that sportsbook. Winning tickets can be mailed in, and the casino will send you a check. Instructions are listed on the back of the ticket. Tickets have expiration dates listed on the back. Generally it is 30 to 120 days after the event. CHAPTER 3 WAYS TO WIN There are many ways you can win at sports betting. Some people are good at handicapping games. Others are good at spotting value in a bet based on information from other lines. And still others are good at finding and betting into stale lines (lines that have not changed at one sportsbook but have at most others). Here is an overview of different ways that people win in sports betting, split into three categories: Handicappers Relative-value players Bettors These categories are not mutually exclusive. Although some people concentrate on strategies in one category, many people use strategies in more than one category. Some strategies can be approached successfully from the perspectives of both handicapper and relative-value player. Both need to become bettors in order to turn picks into positive EV bets. The three categories are intertwined. While these are methods people use in beating sportsbooks, not everyone who uses these methods will be a winner. The percentage of sports bettors who are winners is low, and losing players may often use one or more of these strategies. This overview is not an exhaustive list of all the ways people can win betting sports, but it captures many of the methods that winning players use. Handicappers Good handicappers can make money by betting their own picks and/or selling them. Break-even or bad handicappers can make money off their own picks only by selling them. Be wary when you listen to the radio or TV guy screaming about a five-star lock and how he is the greatest handicapper in the world; he likely only sells his picks and does not bet them. Here are some different ways that good handicappers create their picks. Fundamental Fundamental handicappers look at the individual teams and players and formulate an opinion on the quality of each team. Statistics and forecasting are used to form these opinions. Some handicappers look only at the few statistics they think are important and ignore most others. Other handicappers look at every number they can get their hands on. Power ratings are often used to compare one team to another. Angles and trends Some handicappers look at angles and trends. Others look at angles and trends in conjunction with fundamental analysis. An angle is an isolated idea that is relevant to the game at hand. It may be as simple as: “Old baseball players do not play as well in a day game following a night game, due to old bodies needing more time to recover.” Or it could be more involved like: “Favorites on the road against a divisional rival are less likely to cover the spread due to the fatigue of traveling.” A trend is a sample of recent games that fit a pattern. The fact that the sample sizes used by trend followers are small is a big negative. For example, how much weight should be put on a trend that shows Nebraska has gone 7-1 against the spread in its last 8 games on the road as double digit favorites when off a bye week? When a data miner examines many possible trends, he is going to find a few that deviate greatly from random but won’t be predictive of the future. In any set of random data, outliers exist. I do believe that some people occasionally spot trends with predictive power, but I also believe that most trends are actually random fluctuations. Situational and emotional Some handicappers look at special situations and figure out how the teams may be positively or negatively affected. These situations may be due to motivation and the emotions of the players involved in the game. Examples are teams that are especially motivated while their opponents are not expected to bring the same intensity to the game. The Eagles’ first game in the 2006 NFL season against the Cowboys and Terrell Owens is a good example. The Eagles as a team were especially motivated and focused on the game; they wanted revenge against their old teammate. Meanwhile the Cowboys, other than Owens, probably looked at the game as just another NFC East divisional game. Handicapping the emotions of teams is more valuable in “physical” sports such as football and basketball. Handicapping emotions is less important in baseball, where exerting greater strength may not necessarily favor the player. Hitters who are playing more intensely than normal do not necessarily perform better than normal. Pitchers who are throwing harder may have less than normal command of the strike zone. Feel To handicap by feel is to examine a team and get a feeling based on what the handicapper has seen in the past. For example, a bettor may say “Peyton Manning has never won a big game in the playoffs, and he never will. I’m going to bet against the Colts because Manning will choke yet again.” This is probably how most people handicap games. Of course, most people are not winning sports bettors. I am not convinced that you can beat the current sports betting market by feel alone. Futures Betting futures is different because the bets take a long time to be decided. It also requires a big bankroll and patience in finding favorable lines. A good futures bettor needs to handicap the teams and do a good job of projecting lines into the future. He also needs to have a solid understanding of the basic math needed for sports betting. Relative-Value Players Relative-value players do not need to handicap well in order to have an edge in sports betting. Instead, they use other information to help them make money. This includes the use of historical information, simulations, logic and comparable lines in different markets. Database keepers Database keepers have large databases of games with lines, results and other information they think is pertinent. Some database keepers use this information as part of their handicapping process. Others use this information for relative-value plays in side bets. Examples of side bets are the first half and the first quarter in football and the run line in baseball. With access to so much information, database keepers can look at historical results to figure out how the actual point spread, money line or total is related to the side bet. The bigger the sample size, the more comfortable database keepers are with their results. Database keepers invest time and/or money keeping their databases current. They have to be proficient at interpreting the data; having a good database but interpreting the data incorrectly produces negative-EV ideas and bets. Buying points Getting positive EV by buying points in a football or basketball game requires understanding the value of each point. Database keepers can get these values from their historical databases. You can also get these values from other sources that do not require a massive database. Long ago, point buyers off the 3 in the NFL did well because some sportsbooks allowed bettors to buy any half point for just ten cents. When the line on an NFL game is 3, buying the dog to +3.5 or the favorite to -2.5 for just ten cents is worthwhile due to the frequency at which the favorite wins by exactly 3. Bettors could blindly bet both sides off the 3 and have positive EV. Nowadays most sportsbooks have made it more expensive to buy off the 3. Teasers Relative-value players can beat teasers (parlays with additional points added to each team, but with worse odds) if they have a good idea of the distributional frequency of the possible results of the game at hand. This is similar to the knowledge required for buying points. No handicapping is necessary, but with the inclusion of good handicapping, the relative-value player can add some teasers that are not as obvious or eliminate the worse teasers from his portfolio. Handicapper/Relative-Value Overlap Handicappers and relative-value players can arrive at the same conclusions using their particular styles of analysis. Some people can combine the skills of handicapping and relative-valuation to come up with picks. Here are some strategies where the skills of handicappers and relative-value players can overlap. Proposition bets There are many types of proposition bets and they can be beaten in different ways. Some can be beaten with historical or distributional information. An example is whether there will be a score in the last two minutes of the first half. With historical information, the database keeper will have no trouble coming up with an estimated value. A fundamental handicapper will have a tougher time valuing this prop. Handicappers can beat some props just as they can beat point spreads. An example is whether Peyton Manning will throw for more than 300 yards in the Super Bowl against the Bears. This prop requires handicapping the teams and players. A database keeper will have a tougher time getting enough data to be comfortable making this analysis. There are also some props where a person can have different thoughts depending on how they attack the problem. If that is the case, it is best to avoid making any wagers. For example, a handicapper may think that the Super Bowl usually starts off conservatively called by both coaches. Thus a field goal is more likely to be the first score of the game than in a typical NFL regular season game. On the other hand, his database may show that a touchdown is the first score more often than a field goal in a typical NFL regular season game. These two conflicting thoughts may convince the bettor to pass on the prop because his two different methods show different values on the same prop. Parlays A relative-value player can beat parlays by making two or more bets that are related. The higher the correlation, the greater edge there is in the parlay. You do not need to know how to handicap or have an edge on a specific side. You need to know only that the two bets have correlated results, meaning that if one wins, the other is more likely to win than to lose. A handicapper who can expect to beat the point spread at a 53% or higher clip is a winning handicapper. As the expected winning percentage increases, the handicapper gets more and more edge in playing parlays, even if the bets are not correlated. A person who is both a good handicapper and a good relative-value player can draw from both to maximize EV. Bettors Line hunters Line hunters search sportsbooks for lines that may be different than the general marketplace. They do not need to handicap to win; rather, they win by jumping on weak lines. For example, if the line at a sharp sportsbook on the Jets at the Packers is Jets +3.5, line hunters would be looking for Packers -3 or Jets +4. Line hunters look for stale lines or sportsbooks fading lines. These sportsbooks that fade their lines may be getting more action on a particular team, motivating them to shade their line differently than the rest of the sports betting marketplace. They are more focused on balancing their action due to the bets they have already taken. This is when line hunters can step in and take advantage. Line hunting in Las Vegas is difficult for an individual because it takes time to travel from one sportsbook to another. The walking distance between the large casinos on the strip seems to get longer every year with the addition of new shops and tourist attractions. In the summertime, walking between books is more difficult due to the heat. The traffic has gotten worse every year, making driving from one casino to another more difficult. Included with the driving time is the time spent parking and walking from the parking garage to the sportsbook, which can be ten minutes at some casinos. Line hunters have the help of services that present the lines of games at various sportsbooks. However, there is no guarantee that the lines will remain unchanged. The sportsbook may have changed the line during the time it takes the bettor to get there. Followers Followers are bettors who bet other people’s picks. Followers follow the advice of a handicapper and bet on the games that the handicapper releases. This sounds simple, but followers need to be intelligent in order to profit from their activity. They need to handicap the handicapper. Following a bad handicapper is negative EV; following a good handicapper is positive EV. Handicapping the handicapper is not as simple as just looking at the handicapper’s record. Good luck or bad luck may have distorted the handicapper’s record, and it is up to the followers to try to separate luck and skill and follow a handicapper with positive-EV picks. Bonus hunting When Internet sportsbooks were popular, bonus hunting was a favorite activity of some bettors. Bettors did not need to beat the sportsbook to make money. All they had to do on the teams they selected to bet was break even or play with a small negative EV. The expectation was that the bonus from the Internet sportsbook would be enough to cover the expected small losses. Here is a typical arrangement: The sportsbook would give a certain percentage of your deposit as a bonus. If the bonus percentage was 20%, the sportsbook would credit an extra 20% to your account. If the bonus percentage was 20%, the sportsbook would credit $100 to your account for a $500 deposit. The caveat was that you had to play the initial deposit a certain amount of times, called a rollover rate. If the rollover rate was 10 times, then you had to play $5,000 worth of plays ($500 x 10) in order to keep your bonus if you made a withdrawal. Early withdrawal voided the bonus. $100 of bonus on $5,000 of plays is 2%, so you had the expectation of winning money provided your plays would do no worse than lose at 2%. Promotions Sportsbooks sometimes offer special promotions to entice you to play. Bonuses are one type of promotion, but there are other promotions as well. Promotions I have seen include free plays, better parlay odds, reduced vigorish lines, free food, and entry into a lottery for a new car or house. Some of these promotions are worth enough that one does not need to be a winning handicapper to get an edge. Promotions vary, so examine the wording of the details carefully. Betting For a Living is Work Making money gambling is tough. Wanting to win is not enough; you must be dedicated to winning. You must be a motivated self- starter willing to work on your own time without an outside force encouraging you. It is not easy getting motivated on a daily basis. My estimate is that less than 1% of people who try to make a living gambling are actually successful within two years. A good thing about sports betting is that you do not have to do it full time to succeed. You can hold a regular job and spend your extra time on analysis and betting. If you concentrate on one segment of sports betting (such as one conference in college basketball), then betting sports does not have to consume 40 hours a week. Here are some qualities you need to succeed: Talent Whether it is math skills, street smarts or intuitive logic, you need talent to succeed. Managing finances You must understand the right amount to bet per game given your bankroll. If starting off on a good streak causes you to overestimate your true skill, you might soon be playing too big for your bankroll. When the inevitable losing streaks hits, as it always does for everyone, your bankroll may not be able to handle the negative deviation if your bets are too big. If you know how to manage your bankroll and understand the risks you are taking, you can better handle the negative swings. You can’t be a successful sports bettor if you have a gambling problem. Problem gamblers bet more than they can afford to lose. Whether it is in one game or in a series of games, they extend their bankrolls to the limit and sometimes beyond. In order to succeed in sports betting, you must be able to control yourself and bet within the limits of your bankroll. Motivation after winning When on a winning streak, it is easy to get complacent and take unscheduled days off. Are you going to be motivated to find the edge in a small bet after raking in a huge win? Are you willing to continue to grind it out on a daily basis after hitting a jackpot? If not, you will have problems motivating yourself after wins. Motivation after losing When on a losing streak, it is easy to stay in bed all day feeling sorry for yourself for suffering the bad beats. Why bother spending hours working on a database or walking in the Las Vegas heat when it seems you keep losing on silly last-second plays? Are you going to be motivated to gain small edges in wagers even after losing a few of them in a row? Willingness to study Winning sports bettors have to analyze, study and think about the games as they evolve. Line makers and other sports bettors are quick to adapt to changes, so you must keep pace or better yet, stay one step ahead of them. Reading this book is a good step toward that goal. Persistence and physical endurance Gambling is not the easy life that many think it is. For the Las Vegas bettor, it can mean walking 10 miles a day from sportsbook to sportsbook in 100-degree heat. 55% Wins is Great From my experience in sports betting, I have observed few handicappers that can truly expect to win at a 55% rate or higher in the long run against widely available lines (lines that are easy to find and bet). Any handicapper who can pick at that rate over a large sample size is a truly talented handicapper and among the best in the world. The touts who claim to have winning percentages of 70% or higher are exaggerating. See Chapter 21 for more information on how to evaluate handicappers. Table 1 shows what different win percentages yield for 1,000 wagers of $1,100 each with -110 vig. For example, the 55% win rate makes $55,000. If it was easy to win at a 55% rate, then many people would be doing it and hurting the sportsbooks. Even with all the square bettors losing their money, sooner or later, the 55% winners would bankrupt the sportsbooks. The mere existence of -110 lines argues against there being many people who pick at a 55% rate. Based on knowledge of the sports betting market, experience betting sports, and logic, I have come to the conclusion that a 55% long-run win rate is not achievable for most bettors. Table 1 Profit on 1000 Bets at Various Win Rates Bet Those 53% Games! The sportsbooks are smart and adjust to bets from sharp bettors. You do not need to hit 55% in order to win big. A 53% winner can have a profitable activity in sports betting. More handicappers can win at 53% than at the vaunted 55%. Winning at 54% can be better than winning at 55%. How? It is possible if the 54% winner makes more bets. Here is an example: Assume there are two bettors who can each pick 300 bets per year that win at a 55% rate. Assume they can each pick another 300 bets that win at a 53% rate. One bettor decides to bet only the games that have a win rate of 55%. The other bettor decides to bet all plays that he expects to win at 53% or better. Here are the results of the handicapper who bets only the 55% plays. Betting $550 to win $500 per game over 300 games means he expects to make $8,250 overall. Here are the results of the handicapper who bets the 300 plays that he expects to win at a 55% rate, and also bets another 300 plays that he expects to win at a 53% rate. He bets $550 to win $500 per game over 600 total games. He expects to make $10,200, or $1,950 more than the first bettor. The bettor who passes on the 53% games is missing out on profitable situations. Although the winning percentage of a bettor is important, it is more important to consider the expected profits (assuming the additional risk is accounted for). The second bettor will have a lower win rate and a lower ROI, but will make more money. It is incorrect to look at just the winning percentage; the total number of plays in the record needs to be considered as well. CHAPTER 4 SPORTS-BETTING MARKET The sports-betting market is similar to financial markets. Sportsbooks act like market makers and professional traders. Sharp bettors act like hedge funds and smart investors. They can act like market makers in some instances. Square bettors act like square investors by buying high and selling low. This chapter explains how the sports-betting market works, how lines open and move, the efficiency of the market and ways to use market prices intelligently. Not an Exchange Unlike the stock market in the United States, there are no central exchanges or mechanisms to prevent “trade-throughs,” a term used for a trade that happens at a worse price than the best bid or best offer. But there are other markets where individual entities make trades directly with each other rather than through a central clearing system like an exchange. In some markets, banks act as market makers and make bids and offers on financial products. Different banks may have different prices on the same product, but they are not obligated to tell their customers when another bank has a more competitive price. This is similar to how sportsbooks act. All sportsbooks have betting lines on the same games, but sometimes their prices differ. If you want to bet Seattle -3 -110, the sportsbook has no obligation to tell you that you can bet Seattle -2.5 -105 across the street. You have to look at multiple sportsbooks to determine the best places to make your wagers. Comparing lines is difficult in Las Vegas since it takes time to physically travel from one sportsbook to another. Updated lines at selected sportsbooks are available on the Internet. Goals of a Sportsbook A sportsbook has two goals when it puts up a line: maximize profits and minimize risk. Those two goals can conflict at times, and different sportsbooks put different priorities on them. Some sportsbooks are more risk averse and strive for minimal risk. Their casinos think of them like $5.99 buffets: useful for attracting customers but not for making profits. Other sportsbooks are more aggressive; their primary goal is to maximize profits. These sportsbooks are willing to take unbalanced positions, and have a rooting interest on some games. How Lines Open Sportsbooks post new lines with a combination of the goals listed above in mind. They may have their own in-house line makers or they may subscribe to a service that sends recommendations on opening lines. Some sportsbooks have confidence in their handicapping ability, and are not averse to posting new lines as early as they can, with reduced limits. They have the advantage of being among the few sportsbooks with lines available for betting, and they get a large market share during this early stage. Often their early lines are efficient. But when they do make mistakes, smart bettors are quick to take advantage. Lines are then adjusted to reflect the betting action. The limits are raised when the sportsbooks have a better grasp of what the efficient line should be with information they received from early betting action. The winnings of smart bettors against early lines can be considered part of the sportsbooks’ costs of making the lines. Other sportsbooks wait until lines have been bet into and adjusted at the more aggressive sportsbooks to help them decide what numbers to post. Why Lines Move Once lines are open, there are many reasons for sportsbooks to move them. Sportsbooks can independently move their lines for any reason, including: Taking big action on one side Seeing a sharp bettor bet on one side and having the desire to be on that same side Breaking news concerning players and/or teams such as injuries or lineup changes A changing weather forecast Seeing the lines move at other sportsbooks (called moving on air) Increased interest and betting activity in any event leads to a higher chance of sportsbooks moving their lines. More line movements allow for the increased possibility of different lines at different sportsbooks. This gives line hunters more opportunity to take advantage of differing lines. Popular sports with high betting activity are often the sharp bettor’s favorite sports due to the high number of opportunities caused by the general interest from squares. In high-volume sports, middlers and scalpers act similar to arbitragers in the financial markets by taking advantage of pricing differentials between sportsbooks. Sportsbooks in Nevada can only take bets; they cannot act as customers and make bets. (Individuals such as owners of casinos and sportsbook managers may make bets at other casinos.) Thus Nevada sportsbooks cannot lay off any of their action with other sportsbooks. The only way they can try to adjust their positions is by moving their lines. In comparison, market makers in financial markets must make markets in their particular products, but they are free to trade in other markets. They can use other products to hedge their exposure, possibly allowing them to make bigger markets in their own products. For example, options market makers can hedge with underlying products (in equity options, the underlying product is the stock) to reduce their risk. Nevada sportsbooks cannot be proactive; they can be only reactive. This may mean lower limits in Nevada. Sportsbooks outside of Nevada may not be under the same restrictions and may be free to make bets with other sportsbooks. Perhaps this is one of the factors that makes the sportsbooks at the multi-billion-dollar casinos in Nevada smaller than some outfits elsewhere. Lines can be adjusted at any time, but generally in major sports, they seem to move the most early and late. Lines move early if they are weak and taken advantage of by sharp bettors. Lines move late when sportsbooks accept huge bets on one side and want to attract action on the other side. In the past, once the game started, the betting action was over. With the advent of in-game trading and halftime betting, markets may still be active even after a game starts. Only when the game or event ends does the market truly close. Game-to-Game Line Adjustment Line adjustments made from one game to another are often subtle and difficult to detect since many variables change from game to game. Here is an example of a line change where the variables stayed the same, so the main reason for the line change was adjustment to the marketplace. The sportsbook opened an overnight baseball line at home team -160. A couple of sharp bettors each bet large on the road team, so the sportsbook adjusted the line to -140; 20 cents is a big move in baseball. Then the game was canceled due to rain, and rescheduled for the following day. Sports bets are good only for the day stated on the ticket; so all bets made on the canceled game were void, even though the same teams and pitchers were rescheduled for the following day. The rescheduled game opened at home team -140. The -160 may have been a mistake, but the line maker learned from the market reaction and did not make the same mistake the following day. Different Markets There are sub-markets in sports betting. Each sport can be categorized in a sub-market. The different types of bets that are offered in each sport can be categorized further into minor submarkets. Some of these markets have a lot of interest from bettors, while others do not. The market in NFL games is the deepest and most active market in American sports betting, with NFL point spreads leading the way. Within the NFL betting market there are niche markets such as prop lines, lines on individual quarters, and Grand Salami lines (lines on the combined score of all road teams versus the combined score of all home teams). Typically the betting limits and the volatility of line movements are related to the size of the market. For example, limits on Arena football may be $500 at a major sportsbook, and the lines move on a $500 wager. But the limits at the same sportsbook on an NFL game might be $100,000, and a four-figure wager may not budge the line. Having an edge in a big market like NFL point spreads has more value than having an equivalent edge in a small market like Arena football point spreads. You can bet a lot more in one market than the other. Small bettors in small markets need to keep this in mind as well because their growth potential is limited. Efficiency of Sports-Betting Markets The efficient-market theory says it is difficult or impossible to beat the market with public information. There are different levels of efficiency, ranging from strong to weak. The strong form of the theory says investors can not consistently generate greater-than-average market returns based on public information, and that the current market price reflects all public information about the asset. The weak form of the theory says that most public information is reflected in the current market price, but it is possible for some people to generate excess profits because markets are not completely rational all the time. While a good estimate of the value of any asset is its current market price, it is possible for someone to correctly think it is overvalued or undervalued. The weak-form of the theory seems to work well in describing most financial markets and also works well in describing the sports-betting market. Most lines in sports betting are efficient. It is the few lines that are inefficient that allow bettors to make bets with positive EV. Without a central marketplace, sportsbooks may make the mistake of offering lines that the bettor can arbitrage. Sharp bettors have a slight edge on a number of profitable plays, but not enough to hurt the sportsbooks’ overall business since there are so many more square bettors than sharp bettors. The efficiency of any sports-betting market depends on two things: the ratio of square money to sharp money comparative knowledge between line makers and sharp bettors When the market is not efficient, it is often due to squares betting on the negative EV side. In situations when the ratio of the square bettor’s money to sharp bettors’ money is high, sportsbooks shade their lines to increase profit and/or reduce risk. Shading lines too much gives opportunity to the sharp bettors. In financial markets, higher volume and more trading interest usually mean more efficient markets; but this is not as often the case in sports betting. Lines on important NFL games can be more inefficient than regular season MLB games even though there is much more money bet on the NFL game. For example, Super Bowl lines can be inefficient because the ratio of square bettors’ money to sharp bettors’ money is high. Many square bettors come out of the woodwork to bet on the Super Bowl. Meanwhile, the number of sharp bettors stays the same whether it is the middle of the season or the Super Bowl. Super Bowl lines are likely to be less efficient than regular-season lines. Other inefficiencies arise when the knowledge of sharp bettors is greater than the knowledge of line makers. This can happen in sports where there is less interest like Arena Football, NFL Europe and the WNBA. Big line moves are an indication of inefficient opening lines; in general, minor sports see bigger line moves than major sports. If you have interest in a minor sport, you likely will find betting opportunities in your sport. You won’t be able to bet as much as you could on an NFL game. Relative-Value Bets Efficient game lines can help value wagers in other similar markets from a relative-value point of view. If there are two related markets one of which is efficient, then you can use the efficient market to value the line in the other market. Some examples are NFL first half lines compared to NFL game lines, Super Bowl proposition bets adjusted for the total in the game, and NBA exact series lines calculated on expected individual game lines. Another name for relative-value bets is derivative bets because their valuations are derived from efficient lines in another market. Zero-Sum Game Sports betting is a zero-sum game; the combined profits and losses by all participants equal zero (ignoring expenses like taxes and casino employee wages). When someone wins, someone else has to lose. Sharp bettors can beat sportsbooks by betting into inefficient lines. To the extent that there are not enough bets on the other side, sportsbooks are footing the EV of sharp bettors. Sportsbooks are not happy to take unbalanced big bets from bettors identified as sharp. But sportsbooks may be happy to take sharp action if it helps balance their risk. In that case, sharp bettors are beating square bettors indirectly, and both sharp bettors and sportsbooks are rooting for the same side. Square bettors make up the negative side of the zero-sum equation that allows sportsbooks and sharp bettors to both make money. Thus square bettors can be viewed as the driving force in the sports-betting market. Market Value in Finance In the financial markets, “marking to market” is the act of assigning a fair value to stocks and other financial assets. Usually the fair value price is the price of the closing trade of the day. This price is used to value investments to find the current market value of portfolios. The concept of market value is also useful in evaluating sports wagers. It allows the user to determine the actual risk in the wager for a particular game. It also allows the user to compare one bet to another for relative-value plays and is useful for hedging purposes. It is not used enough by sports bettors and many fall into a trap of not understanding the true risk of their wagers. In the financial markets, the market value of an investment (MVFinancial) is simply the price times the number of shares owned. MVFinancial = Current Price x Shares If you own 100 shares of IBM, and the current price is $50, then the market value of your shares is $5,000 ($50 x 100). The market value of your shares is the same whether their cost was $10 per share or $60 per share. Market Value in Sports Bets Calculating the market value of a sports wager (MVSports) is similar. The “Current Price” is replaced by the probability of the ticket winning. The “Shares” is replaced by the amount you get back if the wager is a winner. The amount you get back includes the initial wager as well as the winnings because the sportsbook keeps your initial wager and does not return it unless you win your bet. (To do otherwise is called “credit betting,” and there is no credit betting in Nevada). The market value of a sports wager is the probability of the ticket winning times the amount you get back. MVSports = Probability of Ticket Winning x Amount you get back Example with a Super Bowl futures bet Here is an example using a Super Bowl futures bet. Before the 2006 NFL season, you made a wager on Seattle to win Super Bowl XL at 20-1 for $100. Your wager, assuming you made it at a fair market price, had a market value (MV0) of $100 at the time you made it. MV0 = Probability of Seattle winning Super Bowl x Amount you collect if you win = 1/21 x $2,100 = $100 During the season, every game that had an impact on the probability of Seattle winning the Super Bowl had an impact on the market value of your ticket. If a win by Seattle gave it a greater shot at the #1 seed in the NFC, then that win increased the market value of your ticket. When Seattle clinched the NFC West division, the probability of winning the Super Bowl increased, and the market value of your ticket increased. When Seattle won its first playoff game, both the probability of Seattle winning the Super Bowl and the market value of your ticket increased. Now let’s fast forward to the day before the Super Bowl. The market shows the probability of Seattle winning the game is 37%. Here is the market value (MV1) of your futures bet on the day before the Super Bowl: MV1: 37% x $2,100 = $777 The market value of your ticket is now $777. If you were to sell that ticket to someone on the day before the Super Bowl, a fair price would be $777. Your initial investment was $100, so you have already theoretically won $677. The market value of your wager tells you how much money you have at risk. If Seattle loses in the Super Bowl, you will lose $777 in market value; your ticket value goes from $777 to $0. It is incorrect to think that if Seattle loses the game you lose only the $100 that you originally bet. As of the day before the Super Bowl, you had already won $677 with your ticket since its market value went from $100 to $777. On the other hand, if Seattle wins the Super Bowl, the market value of your ticket goes from $777 to $2,100. You did not win $2,000 on the Super Bowl itself, but instead you won only an additional $1,323 ($2,100 - $777). You get back $2,100 when you cash in your winning ticket ($2,000 you won plus the $100 that you gave the sportsbook to make the initial wager), but the market value of the ticket was already $777 before the game. The key to determining the market value of the ticket is marking to the current fair market price. Finding the fair market value can be done by looking at futures odds at sportsbooks and sports betting exchanges, as well as doing your own analysis. Seattle was an example of a team that increased its chances of winning the Super Bowl throughout the season, and the futures ticket increased in value. All of that value collapsed to zero when Seattle lost the Super Bowl. It was a roller coaster ride. The market value of the ticket went from $100 slowly up to $777 right before the Super Bowl. Then it collapsed from $777 to $0 when Seattle lost the game. Example of a bad team Let’s take a look at a bad team. Oakland lost its first three games of the 2006 NFL season. With each loss, Oakland’s chances of winning the Super Bowl worsened. Let’s assume before the regular season began, the probability of Oakland winning the Super Bowl was 2.94%, with fair odds of 33-1. You made a $100 wager on Oakland at those odds. Let’s also assume that after each of the first three losses, the probability of Oakland winning the Super Bowl decreased to 1.5%, 0.8% and 0.3% respectively. The market values before the regular season and after each of their first three games were as follows: MV0: 2.94% x $3,400 = $100 MV1: 1.5% x $3,400 = $51 MV2: 0.8% x $3,400 = $27 MV3: 0.3% x $3,400 = $10 In the first game, you lost $49 ($100-$51) in value on the ticket. You lost another $24 in the second game and another $17 on the third game. After the third game of the season, Oakland has such a small chance to win the Super Bowl that your original wager has already lost most of its original value. When Oakland was finally mathematically eliminated from the playoff race, it came as no surprise and the drop in market value in that last game was tiny. By that time it was inevitable that Oakland would not make the playoffs and the market value of your ticket was already close to $0. In the case of Oakland, it was not the 11th or 12th game of the season (or whichever game it was that mathematically eliminated the team from the playoffs) that made your ticket go from a value of $100 to $0; it was a series of games before that one. Losing the first game of the year dropped the market value by almost half. If the above probabilities of Oakland winning the Super Bowl after each game are correct, then the game where your ticket lost the most value was the first game. If Oakland had won its second and third games, then the value of the ticket would have bounced back to match the increased probability of Oakland winning the Super Bowl. Example of analyzing your risk Let’s say it is the eleventh week of the season, and the Broncos are playing the Chargers. This is a big game for both teams as the winner will have a big leg up on winning the division, including tiebreaker scenarios. Before the season began, you bet $100 on the Broncos to win the AFC West at 2 to 1. Here are your estimates for the Broncos to win the AFC West before and after the game versus the Chargers. Your estimates for the Broncos to win the AFC West Before the game: 40% If the Broncos beat the Chargers: 60% If the Chargers beat the Broncos: 20% The line on the game is pick ’em. You know a sportsbook that is offering the Chargers at even money, and another sportsbook that is offering the Broncos at even money. This means you may increase your position, or hedge out of your position (for this game only) without having to pay any juice. In order to analyze your true risk on the game, figure out the market value of your ticket before the game, what the market value will be if the Broncos win, and what the market value will be if the Broncos lose. Given the information above, the market values are: MV before game: (40% x 300) + (60% x 0) = $120 MV if Broncos win: (60% x 300) + (40% x 0) = $180 MV if Broncos lose: (20% x 300) + (80% x 0) = $60 If the Broncos win, the market value on your futures bet increases from $120 to $180 for a net gain of $60. If the Broncos lose, the market value on your futures bet decreases from $120 to $60 for a net loss of $60. Your true risk is +$60 if the Broncos win and -$60 if the Broncos lose. It should be clear that the perfect hedge is to bet $60 on the Chargers at even money. That would reduce your risk to zero with a zero EV bet. Not all examples are as simple as this. See chapter 6 for more on this issue. Notice that the EV of the game is zero. It should be zero because you have marked your position on the Broncos future at fair value. EV = (Prob. Broncos win x increase in MV) + (Prob. Broncos lose x decrease in MV) = (50% x +60) + (50% x -60) = $0 Why Mark to Market? Marking to market is crucial when considering hedging. Knowing the current market value allows you to figure out the true risk of your bets and thus it allows you to figure out the perfect hedge. This topic is discussed in detail in chapter 6. Marking to market is an important factor for relative-value plays. Relative-value players compare different bets to see if there are inconsistencies. Marking to market allows you to make comparisons in bets like futures, props and other type of bets that are closely related to the point spread or total. CHAPTER 5 SCALPING & MIDDLING Scalping A scalp is a combination of two bets that are mirror images of each other. The combination of the two bets in a perfect scalp has zero risk and you win the same amount no matter the outcome of the event. Scalps might consist of bets that are other than perfect mirror images of each other; they may slightly favor one side over the other. Perfect scalp Here is an example of a perfect scalp with no risk remaining. The Lakers are playing at the Spurs. Bet 1: Lakers +3.5 +100, risking $100 to win $100 Bet 2: Spurs -3.5 +110, risking $95.24 to win $104.76 If the Lakers cover the +3.5 point spread, your result will be: Lakers +3.5 +100 Win +$100 Spurs -3.5 +110 Lose -$95.24 Total Result: +$4.76 If the Spurs cover the -3.5 point spread, your result will be: Lakers +3.5 +100 Lose -$100 Spurs -3.5 +110 Win +$104.76 Total Result: +$4.76 No matter who covers the spread, the Lakers or the Spurs, your total result is the same, a profit of $4.76 on the two bets combined. This is a perfect scalp; there is no risk remaining, and you are indifferent on who covers the spread. Imperfect scalp Here is an example of an imperfect scalp with minimal risk remaining. The Suns are playing at the Heat. Bet 1: Suns -4.5 +100, risking $100 to win $100 Bet 2: Heat +4.5 +110, risking $100 to win $110 This is a more practical scalp because betting $100 at the sportsbook is more natural and less cumbersome than betting $95.24. If the Suns cover the -4.5 point spread, your result will be: Suns -4.5 +100 Win +$100 Heat +4.5 +110 Lose -$100 Total Result: $0 If the Heat covers the +4.5 point spread, your result will be: Suns -4.5 +100 Lose -$100 Heat +4.5 +100 Win +$110 Total Result: +$10 There is a little bit of risk remaining in the scalp; you are slightly better off if the Heat cover the spread. But even if the Suns cover the spread, you do not lose anything. This is a scalp, just not a perfect one. Negative scalp A negative scalp is a scalp that is guaranteed to lose. Generally sports bettors are not interested in negative scalps, but they can happen sometimes. Here is an example of an intentional negative scalp: Baylor is playing Texas Tech in basketball. You handicap the game with Baylor -3 as the correct line. The game opens at Baylor pick ’em -110 and you decide to make a wager. Later in the day, before the game starts, you hear news that two star players for Baylor were just suspended for the game by the coach for curfew infractions. You know this is a big impact and without these two star players, you think the line really should be Texas Tech -1.5. You quickly run to the closest sportsbook and see that the line has not moved. They still have the game at pick ’em, but you have to lay -110 to bet either Baylor or Texas Tech. You decide to bet Texas Tech -110, which has a slight positive EV if the true line is Texas Tech -1.5. Normally you would not make that bet because the line is too close to your handicapping expectations and there is not enough room for error. In this case though, given you have new information and you already have a bet on the “wrong” team, a bet on Texas Tech makes sense because it has positive EV and reduces your risk. The two bets combined is a negative scalp. No matter who wins, you will lose

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