Friday, January 18, 2008

Futures Odds Shift

It's not a huge deal, but some money moved in the NFL Futures market since my last post. The Patriots and Chargers are each seeing their Super Bowl payoffs drop, indicating that bettors are backing them to win it all.

At the same time, paradoxically, the early point spread for the Super Bowl itself has moved from AFC (-13.5) to as low as AFC (-12).

What's changed in the past few days? I think it has something to do with major online sportsbook CRIS releasing odds for each potential Super Bowl matchup:

SD (-3) vs. GB
SD (-6) vs. NYG
NE (-13.5) vs. GB
NE (-16) vs. NYG

For a variety of reasons, it's difficult for casual bettors to compare the Chargers with either of the remaining NFC teams. The previous futures lines indicated that San Diego would be about even money to win the Super Bowl if they advanced; they were trading at about 6.5% to win the big game and 13.0% to beat the Patriots and get there. Now that they've been established as the favorite against either NFC team, intelligent bettors can find some way to profit from this inconsistency in the odds. Evidently, they did; the Chargers' Super Bowl futures are now trading at higher than 7%.

By the way, if any of you are into arbitrage and don't mind waiting two weeks to collect your winnings, you can currently bet the "No" on New England winning the Super Bowl at +289 on Pinnacle. A variety of online books offer a price on the "Yes" that will result in some free money.

Wednesday, January 16, 2008

Market Odds

Now that sportsbooks have had a few days to smooth out their lines, how do they handicap the NFL Futures market?

Culling from the four major online futures books (Pinnacle, Matchbook, WSEX, Tradesports), we get the following estimates for winning the Super Bowl:

Patriots: 73%
Packers: 14.5%
Chargers: 6.5%
Giants: 6%

What I find most interesting about these percentages is that the Giants, who are 3-1 underdogs in this week's NFC Championship game, seem to have a better chance of winning the Super Bowl (provided they get there) than the Packers do:

Giants: 25% to win NFC, 6% to win Super Bowl (24% chance of SB victory)
Packers: 75% to win NFC, 14.5% to win Super Bowl (19.3% chance of SB victory)

I don't think the bookies really believe that the Giants are more talented than the Packers, even with the assumption that the G-Men win at Lambeau Field on Sunday. So are these odds a reflection of:

a) the Giants' spirited performance against the Pats in Week 17, or
b) an influx of money from the same unsophisticated New York fans that make it profitable to fade the Yankees in the MLB playoffs?

It's hard to tell at this point, but I do think this is a market inefficiency that can be exploited for a small profit, perhaps by betting on the Giants NOT to win the Super Bowl.

Sunday, January 13, 2008

NFL Update

Team Conf SB
NE 87.0 73.2
SD 13.0 8.7

GB 71.8 14.0
NYG 28.2 4.1

NFL Odds

Sorry about the formatting, Blogger isn't being nice.

Team Conf SB
NE 77.9 65.9
Ind 19.9 14.2
SD 2.2 1.4

Dal 49.9 9.6
GB 42.9 7.7
NYG 7.2 1.1

Notes: I think the market is undervaluing New England's Super Bowl chances. They were trading at 56-59 on WSEX before playing Jacksonville. After the game, they opened at 59-62. They were less than 7-1 favorites to win the game; something doesn't add up here. It's not like they barely squeaked out a win, either.

I'm erring a little on the side of caution with New England. Personally, I expect them to be -400 or more against Indy, but they're trading at 77 to win the AFC, so maybe the oddsmakers know better than me after all. Or maybe they're asleep at the switch.

Either way, this is shaping up to be one of the most boring playoff years of all time, unless you think the run at 19-0 is worth watching on its own merit.

Wednesday, January 9, 2008

Arbitrage

Earlier I blogged about King Yao's plan to buy Patriots futures and hedge them by betting their opponents to win each individual game.

I was slightly skeptical of the idea at the time, but it looks like Yao is right on. The prevailing odds make New England about a 2-1 favorite to win the AFC, the equivalent of a 66.7% chance.

Based on this week's money lines, the Patriots are about 86.5% to beat Jacksonville. Of those 86.5%, they'll face Indianapolis 68.3% and San Diego 18.2%.

I estimate the oddsmakers will make the Pats 80% favorites over the Colts and 87% favorites over the Chargers. Their net chances of winning the AFC: 70.5%. Indeed, betting the Pats to win the AFC and hedging individual games should show a decent profit.

Maybe my estimate of the Colts-Pats line is off. In that case, you can make a separate bet on Indianapolis to win the AFC, along with New England. The Colts are +375 at 5Dimes, the equivalent of a 21.1% chance to win. Thus, the Colts or Pats need to win the AFC greater than 87.8% of the time for this bet combination to show a profit.

Unlike the Pats future, this bet combination is unaffected by the odds of a potential Colts-Pats game, since you win one bet either way. And even if you assume some totally unrealistic odds for potential AFC Championship matchups (such as NE 80% over SD and Ind 65% over Jax), one of the top two seeds will still win the AFC 90% of the time. With reasonable odds, this number should be over 91%. Either way, proper hedging strategy will guarantee you a small profit.

(By the way, if you'd like to learn to do this kind of analysis on your own, I recommend King Yao's book, Weighing the Odds in Sports Betting. It teaches you most of the necessary skills to make a small profit without any knowledge of sports, and increase your profits if you're a good handicapper.)

The big finish: some updated probability estimates to reflect the latest sportsbook odds:

Team Conf SB



NE 70.5 59.8
Ind 21.1 15.2
SD 3.8 2.5
Jax 4.6 3.2



Dal 54.2 11.1
GB 31.8 6.1
Sea 7.0 1.0
NYG 7.0 1.1

Tuesday, January 8, 2008

My Take on an NCAA Playoff System

After a two-loss champion was crowned Monday, everyone is pushing hard for a playoff system in college football. The hot proposal now is an eight-team playoff for the BCS title. Is that better than the current setup?

The answer depends on our goals. Basically, the postseason is designed to accomplish three things:

- Make money
- Entertain fans
- Determine which team is the "best"

Will a playoff system make the NCAA richer? Almost certainly yes. The eight-team playoff proposal includes three more postseason games, which are big moneymakers.

Will the fans be better entertained? Maybe. Fans of six additional schools per year will enter the postseason thinking their team has a shot at the title. At the same time, a playoff system would greatly reduce the drama and excitement of the NCAA regular season--college football used to be the only sport where a regular season loss would knock you out of the title hunt.

Will a eight-team playoff do a better job of awarding the championship to the best team? Absolutely not. This is most easily illustrated by looking at some eight-team playoffs in other major sports.

In this century alone, MLB seen 11 teams win 100 regular season games, and exactly none of them have won a World Series. In eight years, the best regular season team has won the World Series just once (2007), while the worst playoff team (by record) won twice, in 2000 and 2006. Those teams won 87 and 83 games, respectively.

Now, you could argue that teams like the 2006 Cardinals and 2000 Yankees were actually the best in the majors, and that's exactly why we need a playoff system. But that's simply not true. The regular season, by virtue of its length, is more effective than the playoffs at determining which team is best. Because it's so hard to win three consecutive playoff series, the best team is usually eliminated at some point along the way.

On to the NFL. Eight teams currently remain in the NFL playoffs. I think we can all agree that the Patriots are by far the best team in the NFL this season, and maybe the best team ever. We can probably also agree that if the Pats are upset in the playoffs, it doesn't mean they are inferior to the team that beats them; they would still be the class of the NFL.

Yet according to the oddsmakers, they have only about a 56% chance to win the title. If the NFL operated like the NCAA, New England would only need to win one game as an 80% (or greater) favorite to claim the title.

While the NFL playoffs are great entertainment, they also greatly reduce the probability that the best team will win the Super Bowl. Here, the Patriots have seen their chances cut by a full 24%. In a sport where the average team has a 3% chance to win the Super Bowl in any given year, that's a massive difference.

If the NCAA wants to move to an eight-game playoff to raise money and fan interest, fine. But no one can argue that it will be a better way to determine which team is really best. If that's a problem with the current BCS, improve the selection process for the title game. How about turning it over to oddsmakers?

Monday, January 7, 2008

The Worst Playoff Odds Ever

...courtesy of John Hollinger.

Fire Joe Morgan beat me to it, but I still feel the need to elaborate on just how stupid these odds are.

Everyone knows that the NBA's Western Conference is superior to the East. Even your grandmother--who lives in a rest home in the middle of Siberia and thinks Michael Jackson is the king of basketball--knows this. Yet Hollinger has the West as, collectively, greater than 7-1 underdogs to win the NBA title.

Last year, the Spurs were 5-1 favorites in the Finals. This year, according to Hollinger, they'd be 14-1 dogs if they made it that far.

All in all, a classic example of why you should always check to see if playoff odds pass the laugh test. This one was funny enough to be optioned into a Farrelly Brothers movie.

Sunday, January 6, 2008

Updated NFL Probabilities

Team Conf SB



NE 67.5 57.3
Ind 22.0 15.8
SD 4.1 2.6
Jax
6.3
4.2



Dal
50.3
10.7
GB
35.7
7.1
Sea 7.1
1.1
NYG
6.9
1.1




Lesson learned: Predicting NFL lines is a lot harder than doing so for baseball.

As I said before, the percentages are strictly a reflection of my predicted lines for the playoff games. This week, Green Bay opened as a much bigger favorite than I expected, so their chances have gone substantially up.

In fact, with the Packers opening as a bigger favorite than the Cowboys next week, I wonder who Vegas thinks is really the best team in the NFC.

San Diego also sees their chances dip, despite winning. The opening lines for the Pats-Jags and Chargers-Colts hurt the Chargers triply:

- They're less likely to beat the Colts
- They're more likely to face the Pats, since the Jags are bigger dogs than I anticipated
- They're less likely to beat the Pats, should they get there

Futhermore, the numbers expected the Colts to beat the Titans anyway.