Teasing NFL With NCAAF

[Ganchrow]

[ QUOTE ]
OK, this is the only part which confuses me - the hedging.

To take a real world example, the Seahwaks/Steelers -6 (not an NCAA game but still appplicable) has a moneyline on Pinnacle of +240/-260. This implies a Steelers win pct of 71.06%.

The over round is only 101.634%.

So if we included this slightly +EV leg (due to limit constraints), it would be useful to hedge by betting Seahawks +240?

For me, this is counter intuitive.

[/ QUOTE ]Yes, in this instance it would be useful to hedge regardless of whether or not the price on 2-teamers were -110 or +100. This will be true even without betting limits.

Through a partial hedge a bettor is synthesizing a shorter odds bet out of two-longer odds bets and of course ceteris paribus, a Kelly bettor will prefer shorter odds bets.

This is somewhat akin to a scenario with two mutually exclusive singles outcomes, only one of which has +EV. If the market as whole is not arb-able, a bettor will only bet on the +EV outcome. If, however, the market is arb-able, then the bettor will always choose to hedge by betting a portion on the -EV.

Example:
2 outcomes
Outcome 1 prob = 50%, odds = +110
Outcome 2 prob = 50%, odds = -111
Kelly optimal stake ≈ 4.5455% on outcome 1

If we change the payout on outcome 2 so that:
Outcome 1 prob = 50%, odds = +110
Outcome 2 prob = 50%, odds = -109
Kelly optimal stake = 50% outcome 1, 50% outcome 2

The bettor will lay half of his bankroll on the -EV bet.