i'm embarrased to post this: setting up an arbitrage on American Idol

[Performify]

Back story:

Two years ago, my mom got diagnosed with cancer (lymphoma). She's been a huge American Idol fan since the show started. I've got a full on home theater. Starting two years ago, as a way to spend more time with her, we've started doing "American Idol viewing parties" at my house on my home theater (which has actually been +EV in getting a couple different girls and their friends to my house on a weekly basis, but that's another story). She just started her third bout of chemo this week, and American Idol just last night dropped in to high gear of this year's competition (naming the top twelve). This crossroads means I'm going to be watching every episode of American Idol this year - and have watched every episode so far [img]/images/graemlins/blush.gif[/img]

I consider myself an informed opinion in the musical field. In addition to being a longime music fan, I once derrived 100% of my official (non-gambling) income from writing a music column for a newspaper (which was also published in a couple different formats). I also have at my disposal the opinion of my brother who is a music producer / label owner (who watches American Idol with us, mostly at the behest of his live in girlfriend) and of course the fanatical opinions of my moms and a couple other female american idol fans who attend my "party".


Last year I was able to identify Carrie Underwood as the eventual winner of American Idol in week one of the competition. Which let me to examine the betting lines this year, and conclude that there are a couple +EV opportunities.

Yes, I'm somewhat embarrased to post this, but the degenerate factor of betting on American Idol each week outweighs the loss of my street cred. [img]/images/graemlins/grin.gif[/img]

This year, i do not believe the actual winner is as clear cut as last year. However, thanks to Pinnacle's structure, i do believe there are a couple +EV opportunities including an opportunity to setup a long-term arbitrage.

So: because I'm a degenerate [img]/images/graemlins/grin.gif[/img] i'm going to post opinions each week on who i think is going to get kicked off the show. This line is not necessarily significantly +EV in itself (but I will identify when I think it is) but will be posted because I'm going to put some action out each week to make the show even more interesting.

But I'm starting this first thread to also call out an opportunity to set up what I believe are significantly +EV long term arbitrage opportunities.

Odds to win the whole thing:

3 Ace Young +597
7 Bucky Covington +5000
8 Chris Daughtry +301
9 Katharine McPhee +492
10 Kellie Pickler +1104
12 Elliott Yamin +953
14 Lisa Tucker +1092
17 Mandisa +589
18 Melissa McGhee +6000
19 Kevin Covias +4000
21 Paris Bennett +1057
23 Taylor Hicks +818

I believe that Ace and Mandisa are significantly overvalued. Neither has a 1:6 chance of winning this competition. As such, I believe the following two lines are significantly undervalued compared to their chances to win. But moreso, I believe putting money on them now can setup a significantly +EV arbitrage opportunity down the line.

8 Chris Daughtry +301
9 Katharine McPhee +492

Chris is the odds on favorite to win, and is currently my pick to win it all as well. He has the best "life story" working for him (he's a blue collar auto-industry worker, who gave up his dreams of pursing a music career to marry a single mother with two kids and support her and her kids). He's arguably (according to the couple females aged 24-28 i've discussed this with) the best looking guy. And he's demonstrated an ability to command the stage and to pick excellent songs: he's been picking contemporary rock songs such as Seether and Fuel.

Katherine McPhee is currently leading the female contingent. Her mother is a music teacher / vocal instructor. Katherine has the look, she has the poise, and she has an excellent voice and a propensity to pick excellent songs as well.

I will be placing the maximum $2k wager on both Chris and Katherine today.

I am doing so not just because I believe these will be the final two (and thus the lines themself are +EV), but because I believe doing so will present significant arbitrage opportunities in the future. These lines will shift to the point that once the competition is "heads up" there will be an odds-on favorite to win who will be something like a -150 favorite. I believe the odds are close to 98% that the odds on favorite at the end will be either Chris or Katherine (and its strongly possible that they'll be the final two) which would also present an amazing arbitrage opportunity to lock in a guaranteed profit by placing a small bet on whoever makes it through as the underdog (if its not Chris + Katherine in the final two).

I believe Elliot Yamin is significantly undervalued. He has demonstrated consistently that he is the single best male vocalist. And while he has image problems, I believe his stock will significantly rise this next week (the contestents will be doing Stevie Wonder songs, Elliot has already demonstrated an ability to sing Stevie Wonder extremely well). I believe he is a strong favorite to make the final four and will be placing this bet.

I also will be placing a smaller bet on Elliot to win outright at +953. I believe he is significantly undervalued at that line, as he has a better than 10% chance to win this competition due to his ability.

So, to recap:

I am placing the following "to win" bets:

$2000 on Chris to win $6002
$2000 on Katherine to win $9840
$500 on Elliot to win $4765

This can obviously be scaled in units if you just want to follow this pick and not the weekly picks:

Two units on Chris to win 6.02 units
Two units on Katherine to win 9.84 units
half unit on Elliot to win 4.765 units

Elliot is an outside hedge against Chris or Katherine blowing up, designed to protect the $2k there.


This puts forth the following endgame scenarios:

I believe all of the below scenarios will be +EV compared to the line that will be available once "heads up"

Chris makes it, against someone in the field: 2 units to win +3.52 units (1.76:1). This scenenario will likely present a no-risk aribitrage opportunity if it develops by betting on whoever is "heads up" against Chris as an underdog.

Katherine makes it against the field: 2 units at risk to win +7.34 units (3.67:1). This scenenario will likely present a no-risk aribitrage opportunity if it develops by betting on whoever is "heads up" against Katherine as an underdog.

Elliot makes it against the field in a tremendous upset: .5 units at risk to win .765 units (1.53:1). I expect this scenario would only create a minor arbitrage opportunity because Elliot would likely be the underdog "heads up".

Chris makes it against Katherine: $0 at risk to win +3.52 units (Chris wins) or +7.34 units (Katherine wins). (jackpot scenario)

Chris makes it against Elliot: $0 at risk to win +3.52 units (Chris wins) or +.765 units (Elliot wins). Significantly +EV scenario with a zero risk sum on who will likely be the large favorite.

Katherine makes it against Elliot: $0 at risk to win +7.34 units (Katherine wins) or +.765 units (Elliot upsets). Significantly +EV scenario with a zero risk sum on who will likely be the large favorite.

Last scenario is of course, none of the three make the top two. However, I obviously believe this scenario is exceedingly unlikely. And in the highly unlikely event that one or two of our runners do not make the top four, there will likely be arbitrage opportunities at those later stages based upon our action.

Finally, my prediction for getting kicked off next week:
802 Mellissa McGhee +164 (one unit)

Mellissa is cute and has a good voice, but I don't expect her throaty voice will match up well with Stevie Wonder this week. I also don't believe Buckie Covengton will match up well with the song choice this week either, but he's got the WT / southern vote which is going to likely keep him around one more week. if you wanted to hedge you could bet both to get kicked off:
One unit on Bucky at +220 and one unit on Melissa at +164 which would create a low-risk hedge.

I do not believe Kevin Covias will be eliminated next week, his vocal style and tone will match up better with the selected artist.

For tracking purposes (yes I'll be tracking my results), i'll be using $100 units here. So I'm placing 20 units on Chris / Katherine to win, 5 units on Elliot to win in an upset, and one unit on Mellissa to get bounced this week.

I imagine that Pinny locks down the lines between the show and the judging the next day which is why i'm posting now. If that's not the case, i'll need to re-evaluate my weekly "gets kicked off" pick with the line assuming it moves after the performances.