Preliminary Investigation Into Potential Edge In Sports Betting

"I am going to have something no gambler has had before, a system" - Bernard Black

Hello my dear reader,

Long time friend and confidant of the blog, Adverse Selectee (affectionately known as Koala) and I hold a live Twitter spaces with a bunch of traders every second or third Thursday.

No I am not shilling our podcast (yet), bear with me. Part of the show is people request to get up and ask questions/discuss trading strategies/trading stories etc.

Two weeks ago we held a spaces and a trader at a sports betting shop in Australia got up. He discussed what markets were soft and how at times they can be mispriced.

Unfortunately for my mental health (and wife) this ticked off all the boxes of a great trade and has sent me down the rabbit hole of sports betting.

I bought a stack of books to learn as much as I could and have ordered more since.

In my mind this is a relatively good use of my time. Either I find out a new profit center or I learn something. Classic win/win scenario.

This touches on explore vs exploit, which was discussed at lengths in my Work Life Balance & Trading blog post.

I can still remember learning about trading and how exciting it was. I had so much to learn but I was still so eager to read & take everything in.

I listened to every Druckenmiller interview twice and (nearly) every Chat With Traders podcast.

The books I read in 2016 would make you cringe, for example I unironically read Tim Sykes's book.

Even though I probably took in a lot of garbage, I still remember the thrill of learning about the markets and just how exciting it was.

Needless to say sports betting has captured my imagination in a similar way.

Lets go into what I have found so far.

Author’s Note: Keep in mind I am an absolute noob with sports betting. If I use the wrong term or make an incorrect assumption I am sorry, please leave a comment.

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Sanity Check

Before diving head first into any business/trade it is worth doing a sanity check.

Before I go into a new strategy I always try to make sure it ticks all the boxes of potentially being mispriced before I go any further.

Everyone has a friend who has been banned from an online bookmaker.

Why do they get banned? It’s beyond the scope of this article but from what I can understand it is essentially from doing too well and not having the habits of a recreational sports better. They might have chased steam or taken advantage of mispriced odds but either way they did too well and got booted.

If you are successful or a ‘sharp’ better you will (probably) be banned.

There are (presumably) people who can forecast winners and they will obviously want to bet on their forecasts, so where do these sharp betters go? They go to bookmakers that won’t ban you for winning, for example Betfair or Pinnacle.

I know Betfair and Pinnacle are different but bear with me.

This kind of goes without saying but, the odds from bookmakers that allows sharp betters is going to have significantly more information than the bookmakers that ban them.

If the odds on a sharp exchange are derived directly from sharp betters, where do the recreational book makers get their odds?

From what I understand they just copy the prices from the sharp bookmakers (Pinnacle, Betfair etc) and (usually) offer slightly worse odds (referred to as the ‘hold’ or for traders you would know it as the bid/ask spread).

Okay, this is where it gets interesting.

What if the sport you want to bet on isn’t on any sharp exchanges? How do the rec bookmakers get their odds?

For example you are looking at female rugby union in NZ, Pinnacle doesn’t offer it and even if Betfair does I doubt there will be any volume.

Bookmakers want customers to be able to bet on anything but if there is no sharp exchange that tracks these esoteric sports usually the rec bookmakers either use their own model or just copies the odds from another rec bookmakers.

BUT there isn’t one or two esoteric sports that don’t have sharp markets, there are hundreds.

I ask you, my dear reader, as a trader what do you think the odds are that one of these markets is mispriced?

To make things even spicier a lot of these rec bookmakers offer additional markets on the game, so there could be a match between two teams with 60 related markets you can bet on. For example: first to score, over/under points etc.

Again, I ask you, what are the odds one of these related markets is mispriced?

If you are like me, your trader spidey senses are probably tingling right now.

To tie this up, at a high level my trade will be this:

• Find esoteric sports, these esoteric sports cannot trade at sharp markets

• Model the teams and find a sport where I have edge

• Bet on edge until the wheels fall off

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Rubber Meets The Road

If you think about this intellectually, it is hard to imagine some of these markets aren’t mispriced. The problem is if you are successful at betting, you will be banned.

So what is the point? You might fleece each bookmaker out of 5-10k but then they will banned you.

Yes it is true you can open accounts in friends/family names and it is tax free, but (for me) it would be easier just to stick to trading.

HOWEVER, one of Australia’s largest bookmakers has betting terminals in nearly every pub in Australia. You don’t have to provide ID for bets <$1,000 and (here is the best part), the bartender puts them through.

Yes the bets can still be intercepted by traders but bartender works for the pub, she doesn’t care if you win or lose and probably will do whatever is easiest, not what is in the best interest of bookmaker.

I think it would be hard to get banned and even if you somehow were banned you could have mates drop by a pub and put on a the bets for you.

I think betting in person over multiple pubs you could reasonably get 5-10k on a game. I find this very, very interesting.

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Conclusion

I think I can pick off low hanging fruit at bookmakers, once I am banned from every place I plan to bet in person.

If I could not bet in person I wouldn’t be pursuing this so aggressively.

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Closing Remarks

Thank you for reading this post. I really appreciate all the support. I see everyone liking and commenting and it makes me really happy that you are enjoying the Substack.

If you are an expert in this field or have any experience and I have said something wrong, I am sorry. I am new to this. Please leave a comment so others will know.

If you have made some money sports betting and want to share some advice please DM me on Twitter or on telegram.

If you have a request for something you’d like me to write about please comment and I will add it to the list.

Thanks heaps.

Your friend always - Worst Contrarian