The Well: Performify

[ShakeZula06]

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If anyone has any sort of "noob" questions about sports betting...this is the perfect time to do it.

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Well since you say so [img]/images/graemlins/smile.gif[/img]

I very rarely play poker anymore because I simply don't enjoy it. However, without playing poker I've missed gambling so I was thinking about getting into sports betting. A few questions...

1) What is an arbitrage?

2) I heard you and others using the word syndicate. Is this similar to being 'staked' in poker? Can you go into details on how this works?

3) While other then being a sports fan in general I don't follow hockey or basketball, while waiting for MLB and the NFL to come back i was thinking about getting my feet wet in the former two. I have a few friends that follow one or the other religiously, but don't bet (they're poor college students like me). If I was to enlist them to help me make picks for those two sports (keep in mind I'd be the one betting the money, assuming the risk) what would be a fair distribution of profits (if I did profit of course).

4) I have a plan for NFL betting, which is to make a spreadsheet of all the games and their closing lines for the last three or four years, and study where the sports books made errors overall, like say which team was consistantly under rated, things like that. Do you think the time and effort I would have to put in to this would be worth it?

5) For any particular sport, what is the typical distribution among your bets between spreads, money lines, and anything else?

6) Do you ever bet futures at the start of the year? It seems to me like to long to have your money locked up on a bet that you could use elsewhere.

Thanks a ton for this thread, and thanks in advance for my questions, sorry for having a lot of them. [img]/images/graemlins/smile.gif[/img]

[Performify]

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From your posts I read that you develop some of your arb opportunities by taking an early position that you think will see subsequent line movement. Initially I do not want to work such arbs as I have no handicapping abilities. My interest is in the "pure arb" area. I read the www.ArbCentral.com site and found it helpful. Two comments there caught my attention.

First, the ArbCentral author wrote that one can scan lines live to locate opportunities. I presume this means having feed from several sports books open and doing a simple comparison. In the same context the author cautioned that some of the best arbs are open for 20-30 seconds. I believe I am well situated to search for these arbs as I will have access to Pinnacle. Any suggestions from you on this approach?

Second, the author also cautioned that betting on games in the closing minutes before starting time can be dangerous. The immediate pre-game moments apparently see significant line changes and arb opportunities result. But the author noted that this presented the distinct danger that one may not be able to enter a balancing bet as the intended sportsbook closes action just prior to a game's start (while one is still betting the first side). This, however, seems to present an opportunity. Given that the immediate pre-game minutes are "arb rich," then the dangers of sequential betting arbitrage must be solved to profit reliably. My solution is simple: my girlfriend and another computer. When such immediate pre-game arb opportunities arise, one of us readies the Pinnacle account (or that of a similar site) while the other readies that of the balancing book. We cross-confirm that the numbers remain profitable and execute the transactions simultaneously if such remains so.

I would welcome your and other posters' comments and suggestions as to these two or any other "arbitrage business plans" suitable for a noob with time and access to "Pinny."

My advance thanks to all responders and to 2+2 for maintaining this forum.

65DropTop

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ArbCentral is a great resource.

Just having access to Pinnacle will likely mean you're able to make some very decent money arbitraging their lines. All you'll have to do, as mentioned in the part you quoted, is to keep the lines up from five or six different books and look for opportunities. 90% of those opportunities will be between Pinnacle and another book. you can spot them oftentimes by seeing pinnacle move a line and knowing that the other sites will be slower to move.

however, it remains to be seen just how much the removal of a lot of the US money from the sports betting market will have on the volatility of the market.



You raise enough points in here that I'd just suggest starting another thread to talk about it. There are also a couple good arb-related threads in the FAQ, if you haven't read them already.

[136913691369]

I see taht your following my system. Kind of a selfish question, but what do u honestly think of my 1st period totals system? Do you think with such little capping I do, that I can win long-term based on math alone?

over 353 games I am 178-175 +32.23 units. Can I be 90% confident that I am a long-term winner?

Thanks.

[Performify]

I'm live blogging UFC 67 on UFCjunkie.com, so I will be away from this thread for the next few hours.

I'll be back later tonight or tomorrow to continue answering questions.

[fun160]

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I don't think dual citizenship is 100% necessary, establishing an address and ISP in Canada or Mexico would be sufficient I think.

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Do you really need a foreign ISP? Wouldn't it be enough to have a VPN? If you decide to go that route, I suggest HotSpotVPN.

[fun160]

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1) What is an arbitrage?

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Arbitrage is the simultaneous (or near-simultaneous) purchase and sale of two similar/identical assets that are incorrectly priced relative to each other. For instance, if you could find the Bears at +235 and the Colts at -225 for tomorrow's Super Bowl, there's value in betting both sides. With the proper sizing you can lock in a guaranteed profit.

Arbitrage is very popular on Wall Street. It is the mechanism that keeps prices "in line" relative to each other. For instance, on a particular stock there might be options, futures, warrants, convertible bonds, etc. It might also be a major component of indexes that are traded as futures, options, ETFs, etc. All these instruments form a giant matrix. When a piece of the puzzle is out of line, the arbs act quickly to restore order.

One of the beauties of arbitrage is that you don't have to identify which leg of the spread is fairly priced and which is over/under-priced. All that matters is identifying the fact that such a pricing disparity exists.

Arbitrage is not risk-free. Execution error and being "hung on a leg" are expensive hazards. Few Wall Street arbitrage plays are as pure as the Super Bowl bets mentioned above. Usually there is some "dirt" in them that makes them an imperfect arb. Imperfect is actually a good thing for a sharp arb. It allows for things to get out of line more easily.

As a for-instance, I used to trade on the floor of the Chicago Board of Trade. I traded calendar arbitrage (the difference between various delivery months) in the Dow Jones futures and also an arb between Dow futures and S&P 500 futures. While the Dow and S&P are highly correlated it's not a perfect arb, allowing for a natural ebb and flow which created opportunities.

Also, many arbitrage plays are based on reversion to the mean. However, there is nothing that guarantees that prices must return to "normal." Sometimes a fundamental shift in the underlying market can crush an arb. (A couple months ago the Wheat futures pit at the Chicago Board of Trade was decimated by a shift in historical relationships between delivery months. At least four locals--independent market makers--blew out and estimates of losses by locals in the Wheat pit were around $100 million.) In the words of the immortal John Maynard Keynes (who was himself a great trader), "The market can stay irrational longer than you can stay solvent."

Another challenge with arbitrage is that it's very capital intensive. The edges are small and fleeting. You need to put on a lot of size (often with a lot of leverage) to make it worthwhile. Also, overhead can be high, at least for the Wall Street version.

Low execution costs are vital to a successful arb operation (because the edges are small) as is real-time access to prices and execution (because the edges are fleeting). On Wall Street only pros can get the kind of clearing and execution rates that make arbitrage viable. And they are typically the only ones who have instant access to prices and execution capabilities.

The loss of Pinny was a crippling blow to the U.S. sports arbitrage market. In fact, it caused me to scrap plans to put together a pool of money to form a sports arb syndicate.

Finally, arbitrage isn't for everyone because it's...well, quite frankly, it's a boring way to trade/bet. Don't get me wrong, I enjoy it and many mansions in the Hamptons were built on arbitrage, but it's not a game for an action player. They get bored with the lack of action and invariably do something stupid to make it more interesting.

My apologies for stepping in Performify's Well, but I figured since he was busy blogging...

[Performify]

I appreciate it, Fun160.

[Performify]

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1) What is an arbitrage?

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Fun160 did an excellent job of covering this in depth above. In addition to what he said, i'd really recommend taking the time to read through the Sports Betting forum FAQ:

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its an excellent resource which has an answer to this question, and will probably spark several more good questions from you.

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2) I heard you and others using the word syndicate. Is this similar to being 'staked' in poker? Can you go into details on how this works?

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Syndicate in sports betting means primarily getting a bunch of people together to pool money. Sports betting is about small edges, and if you can bring $100k or $500k or $1mm to bear on a small edge you can make some really serious money. Syndicates will often employ or utilize multiple people with legitimate accounts to be able to spread their action across multiple accounts and multiple books. For example, a syndicate might have a million dollar bankroll spread across ten different accounts of $100k each, and when the syndicate decides to make a play, ten people log in to their accounts and make a wager around the same time. This way the syndicate tries to get as much action in on a line before it moves.

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3) While other then being a sports fan in general I don't follow hockey or basketball, while waiting for MLB and the NFL to come back i was thinking about getting my feet wet in the former two. I have a few friends that follow one or the other religiously, but don't bet (they're poor college students like me). If I was to enlist them to help me make picks for those two sports (keep in mind I'd be the one betting the money, assuming the risk) what would be a fair distribution of profits (if I did profit of course).

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Depends on how much you're depending on them for the picks. If they're just giving you input on the plays but you're really making all the decisions and bringing in all the bankroll, i'd offer them 5% each at most. More likely I'd just say something like "you guys help me make my picks, and I'll buy the pizza and beer every time we get together to watch a game". Win-win for everyone.

If they're really doing the handicapping, and you're just supplying the bankroll, I'd offer 25% 25% of the profits with 75% for you. Keep in mind though, there's a lot more to gambling than just being a fan, and in fact oftentimes the more rabid fans of a sport are actually worse at handicapping than someone who can remain detached.

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4) I have a plan for NFL betting, which is to make a spreadsheet of all the games and their closing lines for the last three or four years, and study where the sports books made errors overall, like say which team was consistantly under rated, things like that. Do you think the time and effort I would have to put in to this would be worth it?

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If you were to do this, you'd want to do it in a database and not in a spreadsheet. But I do not think its worth it, as team makeup changes too much for you to try to make any longterm decisions based on a team being over/under-rated in past years. A team being under-rated four years ago isn't really that relevant to what happens next year.

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5) For any particular sport, what is the typical distribution among your bets between spreads, money lines, and anything else?

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NFL: 70% spread bets, 20% teasers, 10% moneyline bets
MMA: 99% moneyline bets, 1% parlays

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6) Do you ever bet futures at the start of the year? It seems to me like to long to have your money locked up on a bet that you could use elsewhere.

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Yes. I will buy NFL futures if I think I can find a significantly mispriced future. Even more often, however, I will take a future position halfway through the season as things develop and as I start to feel that I can identify a potential playoffs dark horse, etc. I mostly like buying futures on an exchange, where I can sell them after they appreciate.

I also bet American Idol futures, although thats a much shorter time period.

I'd love to have access to a MMA futures market, i.e. who will hold X title on 12/31/07, etc.

You're very right though, you need to consider your overall ROI and consider your opportunity cost for locking up your money for a long time in futures, unless you're buying those futures on an exchange.

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Thanks a ton for this thread, and thanks in advance for my questions, sorry for having a lot of them. [img]/images/graemlins/smile.gif[/img]

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Anytime, happy to answer any sort of questions, that's the point of the well. I'm putting myself out to answer literally any question that anyone wants to shout down the well.

[Performify]

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I don't think dual citizenship is 100% necessary, establishing an address and ISP in Canada or Mexico would be sufficient I think.

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Do you really need a foreign ISP? Wouldn't it be enough to have a VPN?

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Correct. You could do it with a VPN. I'd personally probably just do it with SSH and port forwarding HTTP through the SSH tunnel via a proxy.

I would not advocate committing fraud as a part of this, so I would expect to establish a foreign bank account and address and some way to get my traffic to a foreign ISP.

[Performify]

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I see taht your following my system. Kind of a selfish question, but what do u honestly think of my 1st period totals system? Do you think with such little capping I do, that I can win long-term based on math alone?

over 353 games I am 178-175 +32.23 units. Can I be 90% confident that I am a long-term winner?

Thanks.

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I like it, for sure. I'm up somewhere between 15 and 20 units on the system as i didn't start following right away. But if you keep delivering the kind of results you are over the entire season, expect a nice fat thank you check from yours truly.

I'm curious if the books will adapt over time. The problem with these somewhat obscure mathematical systems is that its really easy for the books to adjust if the system becomes popular enough.

You've certainly got a reasonable degree of confidence that the system is a winner given the current constraints. However, there's no guarantee it will be profitable in the future if the books adjust or the general betting public becomes actively aware of this winning subset.