In Order To Win At Sports Betting, Assume You're Wrong
The easiest path to profitability is not maximizing returns when you're right, it's minimizing losses when you're wrong.
In the last article, we talked about the concept of synthetic hold, and how broadening your view of a market to all prices at all sportsbooks can supercharge your ability to act on correlated beliefs. Today, we’ll get into why identifying these opportunities not only opens up lots more opportunities to bet on your beliefs, but why these opportunities should be the first ones you look for when you’re looking to place a bet.
Let’s take a recent NBA game as an example: the Sixers/Blazers game on 11/20, which has the Blazers favored by 6.5 and a projected total of 217.
Let’s say through whatever my research process is- looking at key stats, a model-based prediction, tailing another winning bettor- I like the over. From my correlated beliefs, all else being equal, I like the over on every single one of the player props for the points and assists as well. Using the concept of synthetic hold I talked about last time, I’ve identified Tyrese Maxey’s assists as a market with low synthetic hold. I can bet over 4.5 assists at -130 at BetMGM and under 4.5 assists at +126 at Fanduel, which works out to a synthetic hold of 0.7%, much less than the 6.5% you would get individually at either of these books.
Let’s say I like the true over to be closer to 221. Using some basic math (or a handy lines comparison like the calculator at Unabated, my expected return on betting the over is around 16%. Tapping the power of correlated beliefs, I know that all else being equal, I like Maxey’s assists to also be higher by some amount. Let’s make an extremely conservative assumption that Maxey’s true assists should also be higher by some small amount, and my expected return would be somewhere on the order of a 1.5% return on investment. If I’m right on my line assessment, I should bet the line that offers me the highest return on investment and go with the over on the total, correct?
Wrong- I would take the over on Tyrese Maxey’s assists instead of the over on the game total every single time. And it’s because of a part of that last sentence that’s doing a lot of heavy lifting- if I’m right. Even the best betting processes- whether it’s inside information, advanced modes, or having a specific angle you want to bet-l are going to be wrong plenty of times. And every single bettor will be far more profitable in the long run if they approach betting with their first assumption being “what if I’m wrong” instead of “what if I’m right”.
It’s not surprising most people don’t approach betting this way. Most of the sports betting industry- the sportsbook marketing campaigns, the media companies that produce betting content, even most of the available betting analytics tools- are designed to convince users that they’re unlocking their inner genius, whether it’s feeling smart by listening to the right people, or giving users a feeling that they’ve combed through data and unearthed insights that no one else could find. I definitely fell into this trap when I first got into sports betting. I spent hours developing predictive analytics models from scratch and firing them into full-hold markets, convinced that my modeling techniques were coming up with insights that no one else could possibly come up with. (Narrator: they were not.) Sure, making money off of these models would have been a nice outcome, but more than anything, I was looking for validation that I was solving the puzzle of sports betting, a testament to my own cleverness and skill as a data scientist. It took getting beaten over the head with a long-term barely breakeven record to figure out the fundamental truth of sports betting: being more correct than the entire market over the long run is hard. And most people that get into sports betting will not approach this level of being more correct than the market in the long run. Does this mean there’s not much hope to turn a profit in sports betting? On the contrary, there’s plenty of opportunity- but it requires being extremely price sensitive at all times for how and where you bet.
Let’s go back to the example at the start, where I gave the totals bet an estimated ROI of 16%, and Maxey’s assists over an estimated ROI of 1.5% in a world where my assessment of the lines is correct. Now, let’s introduce a wrinkle- what is my ROI in a world where I’m wrong? This deserves some clarification: by wrong, I don’t mean that betting the under instead of the over is actually a good bet, but rather that the market lines are efficient and I’m betting into a fairly priced, full-hold market. In a world where my assessment is wrong, I’ll win that bet 50% of the time and can expect a long-term ROI of -4.5%, which represents the house edge on a standard -110 line. But for my correlated player prop bet into a market with low synthetic hold, my long-term ROI is -0.7%, since I’ll be betting with minimal house edge, which translates into much less money lost over the long run. Let’s assume I have some skill as a sports bettor, but not enough for my assessments to be right all the time- call it a generous 20%. What is my long-term expected payout if I bet into the full-hold market? 20% of the time, my under bet is worth 16%, but 80% of the time, it’s worth -4.5%:
Long-term ROI in a full hold market:
(20% right) * (+16% ROI) + (80% wrong) * (-4.5% ROI) = -0.3% ROI
Not great- I’m just not right often enough when betting into a full-hold market to turn a profit. But let’s run the same numbers on if I bet my correlated beliefs into a player prop market with low synthetic hold:
Long-term ROI in a low hold market:
(20% right) * (+1.5% ROI) + (80% wrong) * (-0.7% ROI) = 0.3% ROI
The same beliefs bet into a low hold market turn a profit over the long run even if I’m wrong 80% of the time. This is an illustration of the key to being profitable over the long run in sports betting: the goal is not to maximize profit when you’re right, but to minimize your loss when you’re wrong. And the easiest way to do this, bar none, is to use low hold markets as the vehicle to bet your beliefs.
Why doesn’t everyone do this? Partly because of the desire to feel smart I talked about earlier. People want to be proven correct on their sports betting analyses more than they actually want to be profitable over the long run, so they will stick with their initial bets even if a correlated market offers them a better price. But the other reason is more logistical: it’s a huge pain to understand what all the available markets are for a game, which ones have low synthetic hold, and what your full range of correlated beliefs are. As I will mention in every one of these articles: we are developing tools to help bettors do all three of those things in a way that existing tools do not. In the next article, we’ll outline exactly what a betting approach looks like when your betting process looks like when price is the primary driver of how and where you place your bets.