The Well: King Yao
 

A stranger is being shown around a village that he has just become part of. He is shown a well and his guide says "On any day except Wednesday, you can shout any question down that well, and you'll be told the answer" .

The stranger shouts down several questions, and all are answered. The stranger is impressed, and after thinking a minute he shouts down: "Why not on Wednesday?" and the voice from in the well shouts back "Because on Wednesday, it’s your day in the well".




I'm pleased to introduce King Yao who has volunteered to take a turn in the well.

For those who do not know him, King Yao is a former derivative trader who quit his job in 2000 and now dabbles in gambling. In 2005, he wrote "Weighing the Odds in Hold'em Poker", a strategic book with an analytical approach. (via amazon).

Yao maintains a blog at http://weighingtheodds.blogspot.com and is currently working on a book "Weighing the Odds in Sports Betting." Yao has also contributed articles to the Two Plus Two Internet Magazine.

Yao has long been a part of the sports betting forum, but not always the most vocal of participants - instead he's one of those posters who when he steps up, tends to step up with valuable information or insight. Its an honor to have him and please treat him - as with all Well participants except Thremp - with all due respect.



If you're interested in taking a turn in The Well, see this thread.

====

<ul type="square">
Previous turns in The Well: [*] Performify - 02/02/07[*] B00T - 02/07/07[*] Thremp - 02/14/07[*] NajdorfDefense - 02/21/07[*] King Yao - 05/23/07[/list]

Re: The Well: King Yao
 

I'm glad to be here. Because I use my real name, there may be some questions I'll feel uncomfortable answering. I'll try to note those as such.

Fire away!

Re: The Well: King Yao
 

I'm interested in your upcoming book, so I'll give things a start.

How long have you been betting sports?

How often do you bet sports?

What's the top misconception most sports bettors believe to be true?

What sort of mathematical techniques (if any) do you use to handicap or bet sports?

That should start... I'll think of more. Like the blog, though it isn't updated much.

Re: The Well: King Yao
 

"How long have you been betting sports?"
Since high school, but not seriously until 1999.

"How often do you bet sports?"
Almost every day.

"What's the top misconception most sports bettors believe to be true?"
That a good handicapper can win at a rate greater than 55%. I don't even think a great handicapper can hit greater than that rate. A good one should be happy with 53% against widely available lines.

"What sort of mathematical techniques (if any) do you use to handicap or bet sports?"
I don't know if I can list them all here...but, I'll try. Mostly, I use stuff that is available on Excel, I don't use other software. Mathematical techniques include: simulations via Excel macros, possion distribution for props, simple arithmetic functions but may be a pain in the butt to write all the formulas into Excel (such as every permutation of a 7-game NBA playoff series), multiple regression, and although this is not a true mathematical technique, it's probably the best thing I do - that's comparing relative-value between two related bets.

"Like the blog, though it isn't updated much."
That is true, especially in the last few months when all of my time was taken up in writing the book. I will probably post a bit more often now, but it will come in spurts. Maybe one week I'll post everyday, but then I won't post for a couple of weeks. <font color="blue"> </font>

Re: The Well: King Yao
 

King, I am thrilled that you're doing this. I loved Weighing the Odds in Hold'em Poker and can't wait for Weighing the Odds in Sports Betting.

What is your favorite sport to bet/handicap and why?

Have you ever had problems having your bets accepted at the limits you desire?

What longterm ROI do you reasonably hope to accomplish from various types of wagers and sports?

I assume you are publishing Weighing the Odds in Sports Betting through Pi Yee Press?

What is Stanford Wong up to these days? Is he still actively involved in sports betting?

Re: The Well: King Yao
 

Strictly from a financial standpoint, is there any reason for a winning poker player to handicap sports?

There are a couple guys that I follow because it requires very little time and effort on my part, but in my experience the time that goes into handicapping makes it a much less profitable use of time than playing poker. Agree? Disagree?

Thanks for doing this.

Re: The Well: King Yao
 

Thanks for the nice words Tom.

"What is your favorite sport to bet/handicap and why?"
NFL. Because there are the most opportunities in the NFL.

"Have you ever had problems having your bets accepted at the limits you desire?"
All the time.

"What longterm ROI do you reasonably hope to accomplish from various types of wagers and sports?"
Anywhere from 1% to 4%. It depends on what kind of wagers you can find. Last year, my ROI was only about 1.5%, whereas it was around 3.5% in previous years. But the reason for that was I was finally cut off from correlated parlays and teasers. I didn't get dumber and have a lower ROI this year...I just didn't have the same betting opportunities anymore. In the future, I'd be satisfied with 1.5%. The good times are gone.

"I assume you are publishing Weighing the Odds in Sports Betting through Pi Yee Press?"
Yes!

"What is Stanford Wong up to these days? Is he still actively involved in sports betting? "
I don't think he bets much anymore...I also don't think he ever bet that much. He was (is?) more interested in the intellectual process rather than the money making process. He's got a good life going.

Re: The Well: King Yao
 

"Strictly from a financial standpoint, is there any reason for a winning poker player to handicap sports? There are a couple guys that I follow because it requires very little time and effort on my part, but in my experience the time that goes into handicapping makes it a much less profitable use of time than playing poker. Agree? Disagree?"

It depends how you handicap. Are you a "scouting" handicapper where you have to watch the games to get a good feel? Are you a fundamental handicapper that needs a lot of time to input current statistics as they happen? Are you a relative-value handicapper that just looks at a database and compares value in different bets? This is pretty much what I do for baseball...it takes me about 5 minutes a day now. It did take me a long time to set up my database, but now it is almost automated.

Also, do you ever feel you need a break from playing poker? If so, then another positive EV activity can really be a nice addition. Some people don't mind just playing poker 24/7, but others get a bit bored and lose focus. So a different activity can help.
Sorry for the vague answer, but "it depends".

Re: The Well: King Yao
 

What kind of derivatives did you trade?

What drove you to quit the trading world and go to gambling?

You mentioned that you primarily use a database of information for your handicapping. Did you have someone mentor you with this, or did you design, create, test, and implement it all on your own?

Thanks for doing this, can't wait for the new book.

Re: The Well: King Yao
 

"What kind of derivatives did you trade?"
"What drove you to quit the trading world and go to gambling?"

1993-1996 Equity Index Options as a Specialist in the American Stock Exchange (that means I was the lead market maker for the products that I traded)

1996 for three months: Currency Options at Bank of New York - mostly $/Yen, a little Yen/Mark (this was before the EU)

1996-1997: Oil Options at the NYMEX (Crude and then Gasoline &amp; Heating Oil - it was a very quiet year in oil when I was there)

1997-2000: Mortgage derivatives (CMOs) - proprietary desk for firm's account. Ran head-first into the LTCM debacle.

I was at Susquehanna during that whole time. I moved from equity options to the Bank of New York desk for currency options (Susquehanna had a partnership where they supplied the traders while BNY supplied the capital and salesmen) which is a very unusual lateral move. I was trading $/Yen within a month. I needed a change for personal reasons. I was under a non-compete contact, but I was able to use playing poker as my leverage. The main partners at Susquehanna were ex-poker players and I think they knew about the poker games after work in the office...so they knew I was serious. Its unusual to go from one sector to another without having to start from the beginning. Luckily, I was able to do that 3 times, all because they knew I had no problems leaving .. and not for another job. I was never afraid to say "screw this, I don't like the people I'm working with, I don't need this" (that's why I was only at the currency desk for 3 months). In late 1997, they moved me with my wife to San Francisco. The main reason was they wanted my wife to head the options floor for them in SF. But they also wanted to get into the mortgage derivatives business, so I was a natural choice to start it up for them - someone they trusted and could shift to another sector quickly and easily, and someone who enjoyed new things. In 2000, the amount they needed to pay me to stay was finally too high. So it was a good time to leave and finally pursue poker. Even though the money is much less in poker/sports than it would be on Wall Street(after the fact, it turned out I missed out on a $3 million year in 2000 if I had stayed), I've been very happy ever since. And even though I loved trading and wouldn't do anything else if I had to work for someone else...it was one of the best decisions of my life.

"You mentioned that you primarily use a database of information for your handicapping. Did you have someone mentor you with this, or did you design, create, test, and implement it all on your own?"

Actually, I use my databases a lot, but I don't use them for handicapping, but for relative valuation. I think those are two different things. Stuff like: if the Patriots are a 3 point favorite on the road, what is the fair value pick'em line in the first quarter? If the line is different than my database shows (after the curve is smoothed out) then there's a bet for me. As for the database, I did all the work and discussed it with few people. I have hired some people to gather the raw data for me...and asked some math questions to the right guys....and I share it with a very good friend of mine that I trust would keep it to himself(we partner up once in a while for special events). But I take credit for all the good and bad that come out of those databases.

Re: The Well: King Yao
 

You said the best a capper could hope for was 53-55%. Do you think the NFL can be won at a higher pct. than that? Or are you factoring in all sports with that figure?

Is any style of capping better or worse than others? I read an article on Mickey Appleman and it seems he goes off scouting and feel. Does that type of capping have better or worse results than going the math route?

Who do you like for this weekends NBA playoff games? [img]/images/graemlins/smile.gif[/img]

Re: The Well: King Yao
 

"You said the best a capper could hope for was 53-55%. Do you think the NFL can be won at a higher pct. than that? Or are you factoring in all sports with that figure?"

Assumptions need to be made to answer this question.
1. A great handicapper betting into widely available lines.
2. The handicapper is also a bettor that doesn't particularly care about his record, but truly cares about the money he makes.
3. We're talking about the long run, not a 35-25 record in a 16 week season.
4. Also, I'm talking about major sports...not small sports like NFL Europe, Arena or WNBA where the action is small.

Given these assumptions, I think the best handicapper in the NFL can only hit 55%, no better. Here's part of the reason: let's say he can identify some bets that can hit at 60%, but they are only 15 bets a year. Is he only going to make those 15 bets? Probably not...if he can identify 60% plays, he can probably identify 55% plays. He'll play those too. If he can identify 55% plays, he can probably identify 53% plays. He should bet those too. There are a lot more 53% plays than 55% plays than 60% plays. The higher number of 53% plays is going to drive the average down to 55% or lower.

If a 54% capper says a certain play is a 60% play..I think that is possible. He may be making 20 53.5% plays for every 1 60% play, thus averaging 54% overall (I didn't do the math, but you get the drift).

So there are two types of people who can hit greater than 55%:
1. People that are lying or fooling themselves with small sample sizes or rogue lines when they say they can hit greater than 55%.
2. People that are too risk-averse to realize they can make more money (sure, there is more risk, but with so many more bets, the portfolio will get diversified) by betting games at 53%.


"Is any style of capping better or worse than others? I read an article on Mickey Appleman and it seems he goes off scouting and feel. Does that type of capping have better or worse results than going the math route?"

I don't know if one is better than the other. I do know what I am good at, and what I am less good at (or not willing to spend the time at). I do not believe anyone can beat widely available lines by feel alone. I don't know what Appleman does...you mentioned scouting and feel. Maybe his scouting is superior. Its difficult for me to believe his winnings (if he is actually a winner, do we really know that for sure?) are on feel alone.

"Who do you like for this weekends NBA playoff games?"
I don't like anyone in particular, but if forced to make a bet, I'd take UTA -2 in game 3 (that's the line this morning, maybe it is different). Against -110 lines, I think that is a fair bet (not postiive ev, but zero ev). I'd shop for UTA -1.5 and if the market line was still UTA -2, I'd make a small wager on -1.5 (this I'd consider a slightly rogue number and not a widely available number....a good percentage of positive EV bets should be made due to shopping, as opposed to betting into widely available lines).

Re: The Well: King Yao
 

Excellent answer, Yao. I've never been able to put that in to words quite so well...

Re: The Well: King Yao
 

as someone who has done this full time for seven years now, i am curious how you handle the emotional variance of gambling?

personally, i am a functional adult when i am running good or running breakeven, but when i am stuck i become very moody and unwilling to enjoy life until i become unstuck.

i can imagine this being more difficult with kids and a wife. or, being married would require that someone stop being moody and somehow block out the negative thoughts that come with losing. either option sounds difficult.

so, would you please talk about the emotional and psychological challenges involved with downswings, or for example, seeing one's ROI shrink to one-half size because one's industry became more difficult to beat?

Re: The Well: King Yao
 

"as someone who has done this full time for seven years now, i am curious how you handle the emotional variance of gambling?"

I am not sure I am the best person to answer this question as it relates to sports betting. I'm not under the pressure of making money because I've already got it. Don't get me wrong, I still get disappointed when I lose, and happy when I win big. The disappointments are far worse than the happiness when winning/losing the same amount. I do bet very small relative to my net worth, the most I've ever won/lost in one day is probably 2% of my net worth. I know for most, it is tough to play at those low percentages of ones net worth, because then it is too difficult to make any real money. That's why I consider myself not a good person to answer this question because I never had to go through those stresses in poker or sports betting. I had/have a huge safety net.

When I was trading, those stresses never seemed to hit because my wife worked (she was a trader as well) and we didn't have kids until just last year. So in trading, poker or sports betting, I've never been under the "gotta feed the family" stress. I do think people that have those stresses have it a lot tougher. That's why I would not recommend anyone go into gambling as a career if they have a family and need to make money to live on. It is very difficult. I wouldn't try to stop someone either...but I'm just saying I wouldn't encourage anyone to do it. Instead, when asked, I usually tell them the negatives and to be very careful.


"seeing one's ROI shrink to one-half size because one's industry became more difficult to beat?"

The way I see it, things change, people get smarter. Nothing good stays forever. In trading, when something is great, it doesn't last too long because other traders find out about the opportunities, and they come in and want a piece of the pie. But there is always something else. You have to have the ability to adjust, adapt and be open-minded. I don't think everyone can do that.

Re: The Well: King Yao
 

why are automated bloomberg market data feeds, that batches out to a sql server nightly, so prone to data corruption?

how familiar are you w/ ISDA and FPML? did you have any part in the initial FPML design? what do you think is the likelihood, of FPML becoming the universal accepted standard, for derivatives communication medium industry-wide, in the near future?

Re: The Well: King Yao
 

Since one can bet/lay the number of players in main event in WSOP at betfair, and I think the popular choice is WAY off, I would like to ask mr Yao his under/over line for #Players in WSOP?

Best regards
Ola

Re: The Well: King Yao
 

"why are automated bloomberg market data feeds, that batches out to a sql server nightly, so prone to data corruption?

how familiar are you w/ ISDA and FPML? did you have any part in the initial FPML design? what do you think is the likelihood, of FPML becoming the universal accepted standard, for derivatives communication medium industry-wide, in the near future? "

I have absolutely no idea!

Re: The Well: King Yao
 

Sometimes, the answer is I don't know, others know more than me. I wouldn't be comfortable in my own estimates because I don't follow tournaments, the current status of players that received their seats from offshore poker rooms or any other issue related to WSOP. I've only played in two WSOP events in my life, and those were in the previous century. I'm sure there are plenty of other people that have a better idea than I do about the number of entrants in the WSOP, and I would defer to the market versus any opinion I have given the limited information I have right now. If I gave you an answer, it can only hurt to anchor you against a fairly random number.

Re: The Well: King Yao
 

Do you know where I could find a solution to the optimal bet size for simultaneous wagers at varying odds and winning percentages using the kelly criterion?

Everything I can find relates specifically to all wagers having the same edge against -110, which we all know isn't practical (especially in baseball). I'm still searching, and I might try and work it out myself, but since you're in the well I figure it's a good question to ask. [img]/images/graemlins/wink.gif[/img]

Re: The Well: King Yao
 

Do you ever use in-running betting to hedge your positions? Do you have any advice on in-running betting strategy?

Re: The Well: King Yao
 

do you play poker for fun? what limits do you normally play at?

Re: The Well: King Yao
 

I don't use Kelly, even if I did, I probably wouldn't be able to answer your mathematical question.

The guy who wrote the post linked below this seems to use it and know it very well...I'd ask him questions:

http://forum.sbrforum.com/players-talk/2...ion-part-i.html

Re: The Well: King Yao
 

"do you play poker for fun? what limits do you normally play at? "

I rarely play poker now. But once in a while I'll go down to Foxwoods and play 75-150 stud. I don't think I currently have any edge in that game, but I enjoy starting to learn it and thinking about it. I'd play more often if the drive to Foxwoods was shorter for me.

Re: The Well: King Yao
 

I've read his stuff--it's good.

If you don't use Kelly, then what do you use?

Re: The Well: King Yao
 

"Do you ever use in-running betting to hedge your positions?"

I don't use in-game betting for the sole purpose of hedging. When I do use it, it is for the purpose of getting positive EV bets. I used it much more often 2-4 years ago, at WSEX and when Tradesports first started. I think there is less edge now as the marketmakers are smarter.

"Do you have any advice on in-running betting strategy? "
I'm not sure if this advice will help...but here's a few things that come to mind:

- be careful if you have TiVo or a DVR. I found out that there is about a 1-2 second delay on Tivo when I had two tvs in the same room, one with tivo the other without.
- don't leave standing orders out there during play. there's little upside.
- in football, understand the exact scenarios when a team that is ahead may be looking to score, or just looking to run out the clock. The period between the 8:00 to 4:00 left in the 4Q and one team ahead by more than 1 score seems to be the less uncertain section. I think it'll depend on coaching philosophy, dominance (or lack thereof) in the running game and urgency to win a game. Once it gets under 4:00, it becomes more obvious to everyone that the team ahead by more than 1 score is not that interested in scoring.

Re: The Well: King Yao
 

"If you don't use Kelly, then what do you use? "

Often it is the sportsbooks limit that limits my action, so I don't even need to quantify how much I actually want to bet. When they allow big action (say a NFL side), I just bet the amount that makes me feel good. That probably sounds like a strange answer since most of the issues I write about are predicated on numbers and not on feel. I've gotten to the point where I know how comfortable I am with how much I bet. If losing $X feels queesy to me, then I won't bet that much.

I will bet more when I feel more certain about the edge, not necessarily the amount of edge. For example, if I'm laying -110, but I'm very sure it should be worth -120, I don't mind betting big. On the other hand, if I think a bet is worth -130 (when the line is -110), but I'm not nearly as certain of fair value, then I discount my own opinion a bit, and give the market a bit more credit...and actually bet less. In the first case, I have more certainty I have edge. If I repeat those bets over hundreds of bets and throw them into a portfolio, the risk is diversified and the overall edge in those type of bets is fairly certain to me. In the second case, I am not as certain and there is a higher chance I am wrong. So even though there seems to be 20 cents of edge, it may be that I actually have no edge or negative edge.

The way I see Kelly, even if I used it, I'd probably bet a certain fraction of kelly. Many pro gamblers I know bet half-kelly. Why is this? Its because they are adjusting kelly to fit to their own risk preferences. Full-kelly is too risky for them. So I am doing the same thing, except I am comfortable knowing how I feel about risking the dollars on any given bet. I have nothing against people that do use Kelly, I just don't use it and I don't think its necessary for everyone.

Re: The Well: King Yao
 

I began using half kelly myself recently, and so far I'm very pleased with it. When you bet big and run into limits like yourself then you're right, it doesn't matter. [img]/images/graemlins/smile.gif[/img]

Re: The Well: King Yao
 

How much of a correlation did you find between derivatives trading and sports betting/poker? What are the major differences?

I interned at Susquehanna in 1998 on the Pacific Options Exchange floor(didn't stay with it because hated the hours and didn't want to move to East Coast). Without getting too personal, did you know Rob Ring(equity options trader) or Shirley something(boss)? Rob used to eat everybody else's lunches. The shouting matches that would follow were hilarious.

Re: The Well: King Yao
 

My Kelly calculator handles multiple independent simultaneous wagers.

This post I made on Kelly details the generalized solution.

Re: The Well: King Yao
 

"How much of a correlation did you find between derivatives trading and sports betting/poker? What are the major differences?"

I thought it was useful to transfer my general knowledge about markets that I learned in trading into sports betting. There is not too much that can be directly transfered over, but rather, its useful to use the same general philosophy.

"I interned at Susquehanna in 1998 on the Pacific Options Exchange floor(didn't stay with it because hated the hours and didn't want to move to East Coast). Without getting too personal, did you know Rob Ring(equity options trader) or Shirley something(boss)? Rob used to eat everybody else's lunches. The shouting matches that would follow were hilarious. "

Shirley Woo is my wife. Rob is a character, let's leave it at that. :-)

Re: The Well: King Yao
 

king,

from my observation, most trader analysts/assistants function as glorified order-fillers and coffee-makers (not that there's anything wrong w/ that).. but was simply curious as to how you would be able to distinguish those few diamonds-in-the-rough, that can be eventually promoted to full-time traders?

Re: The Well: King Yao
 

[ QUOTE ]
but was simply curious as to how you would be able to distinguish those few diamonds-in-the-rough, that can be eventually promoted to full-time traders?

[/ QUOTE ]

I'm not sure I'd know how. From my experience, it was tough to tell until those people were thrown into the mix and given a chance. Some bright guys could solve problems when given the time, but for some reason froze up when they were rushed, as they usually are in trading. Other guys that only knew algebra but no further were really good. I don't know if times have changed, but in the past it was easier to throw someone in the mix as an equity options market maker on an exchange floor to see how he did, because the money/risk could be kept small. It's been 10 years since I traded on the floor, if things have changed, I probably wouldn't be aware of it. As for trading on desks, banks need to be much more confident since they are usually dealing with bigger dollars per trade, and have to answer to customers. So I'd imagine it isn't as easy in that atmosphere to test someone out like that.

I was never a manager of other traders, nor would I want to be. That is definitely not the fun part of trading.

You sound like you are currently in the business. If you are, have things changed a lot in the last 5-10 years?

Re: The Well: King Yao
 

are you asking regarding the market or the atmosphere? market-wise: non-linear instruments such as options/caps/floors have experienced a good deal of growth.. of course the credit market went thru an exponential explosion, it now dwarfs the bond/security market... synthetic cdo's and tranches is where the buzz is at these days..

i can only comment on the observations i make regarding front office atmosphere though.. i'm mostly involved on the quant/valuation/pricing side of derivatives trading

Re: The Well: King Yao
 

trix - sending you a PM.

Re: The Well: King Yao
 

[ QUOTE ]
trix - sending you a PM.

[/ QUOTE ]

thanks for the kind words, i'll pm you back later to explain my position in more detail, the short answer is that i'm currently on the fezzik-ized fast-track management plan..

i'm also not fully convinced/confident enough yet that i would be able to live up to the responsibilities.. there's an old chinese proverb that you might be familiar with: "a frog that lives inside a deep well, has no idea how high the sky is.." i don't want to be that frog [img]/images/graemlins/smile.gif[/img]

Re: The Well: King Yao
 

What's your sports betting book going to include?

Do you know any good free tipsters online?

Re: The Well: King Yao
 

"What's your sports betting book going to include?"

Here are the Chapters:

1. Introduction
2. Basics
3. Ways to Win
4. Sports-Betting Market
5. Scalping &amp; Middling
6. Hedging
7. Hedging Mistakes
8. NFL Season Wins
9. NFL Parlay Cards
10. NFL First Halves
11. Football Office Pools
12. Super Bowl Props
13. March Madness Pools
14. NBA Playoffs
15. Baseball: First Halves
16. Baseball: Totals
17. Racing's Triple Crown
18. Futures
19. Tips for Handicappers
20. Tips for Bettors
21. Handicappers
22. Sports Bets in Unusual Places
23. Internet and Media
24. Interview with a Pro
Glossary

"Do you know any good free tipsters online?"
Tough to say. There are some guys who post picks for free that are good, but they don't stay around for long. If they are really good, it seems that often they are contacted by someone for a private arrangement. Or it could be that they are good in very small sports, so when they list a pick, the line moves very quickly and if you miss the first 5-10 minutes, the value is gone. Daringly with Arena Football was like that a few years ago. I haven't kept careful track, but it seems Scott W at Fezziksplace.com moves the Arena lines a lot.

Re: The Well: King Yao
 

Set a release date yet?

Re: The Well: King Yao
 

It depends what time the books come back from the printers. It was submitted to the printers yesterday. Should take 6-8 weeks. Hopefully with no delays, it will be easily found by August 1st.