Question for the Wiz.

Last year I read the Bob Dancer story about the Super Bowl bets that him and the Wiz went in together on. I was wondering Wiz if you could tell us some info on what you do and what you plan on doing this year. I thought parts of the story were amazing, like the number of different places you guys place bets at and the amounts. I understand if you don't want to elaborate too much but any story you can tell would be very interesting I think.

I'm going to have to invoke my right to not say much. It is one of those things where there is only so much to go around.

Very briefly, I crunch a lot of numbers to determine the probability of certain props winning. From there if I find a bet that provides value, I bet it.

Here is a piece of free advice. The good bets 99% of the time favor an uneventful boring game. The squares bet on things TO happen, creating value the other way.

Quote: Wizard

The good bets 99% of the time favor an uneventful boring game. The squares bet on things TO happen, creating value the other way.

Yes. I've heard that much of sports betting is emotional and involves favorite teams or favorite players which probably means bettors are more emotionally involved than strictly analytical. Its also the same with stock options: Puts and Calls on highly volatile stocks are great but the real opportunities are usually in options on underlying stocks that pretty much never go anywhere.

I just read Lay The Favorite, a memoir by Beth Rayner about growing up with a gambling father and winding up working for a Sports Bettor. I couldn't believe some of the intense interest in sports some players had and how they would follow weather reports and alcohol consumption of the players. One early incident involved a Bookie who didn't check the morning news about an injured quarterback and accepted heavy action at the previous night's odds. The bookie had to go to a Money Man in order to pay off all the sharpies who took him to the cleaners.

In Europe it seems they just fix the games. I guess thats the safer way to win.

Quote: FleaStiff

Yes. I've heard that much of sports betting is emotional and involves favorite teams or favorite players which probably means bettors are more emotionally involved than strictly analytical. Its also the same with stock options: Puts and Calls on highly volatile stocks are great but the real opportunities are usually in options on underlying stocks that pretty much never go anywhere.

The most persistent structural inefficiency with stock options is what's known as the volatility skew. The majority of retail options traders want downside protection (so they buy puts) and are willing to sacrifice some upside in exchange for making money in a flat market (so they sell calls). The result is that puts are overpriced, and calls are underpriced over the long term.

There are some inefficiencies regarding volatile vs. stable stocks, but for the most part options prices reflect this. The vol skew still reflects the principle that demand from "the herd" causes prices to deviate from their fair values so that taking the other side of the trade has a +EV.

Quote: 7outlineaway

The most persistent structural inefficiency with stock options is what's known as the volatility skew. The majority of retail options traders want downside protection (so they buy puts) and are willing to sacrifice some upside in exchange for making money in a flat market (so they sell calls). The result is that puts are overpriced, and calls are underpriced over the long term.

There are some inefficiencies regarding volatile vs. stable stocks, but for the most part options prices reflect this. The vol skew still reflects the principle that demand from "the herd" causes prices to deviate from their fair values so that taking the other side of the trade has a +EV.

This reflects the fact that in general, you want to be the one selling insurance instead of buying it. If traders are overvaluing puts, then there's money on the table for someone who realizes that.

The question in my mind is has anyone attempted to quantify this, and is the +EV enough to cover the costs of trading?

Quote: Wizard

I'm going to have to invoke my right to not say much. It is one of those things where there is only so much to go around.

Very briefly, I crunch a lot of numbers to determine the probability of certain props winning. From there if I find a bet that provides value, I bet it.

Here is a piece of free advice. The good bets 99% of the time favor an uneventful boring game. The squares bet on things TO happen, creating value the other way.

The only problem with prop bets is that they're usually a 20-cent line, or worse. I would think that a prop would have to be pretty heavily skewed toward one outcome or the other (line in error) to produce enough value to overcome the vig. I presume you've managed to find such opportunities in the past.

I agree that the game is likely to be conservatively played (which is why the Saints' onside kick last year was such a shocker). I have noted that in the past, the AFC and NFC championship games have tended to be played pretty close to the vest as well. I've gotten value just mindlessly betting the under in every game of the playoffs after the wild card.