Sunday, December 16, 2007

Hedging

Last Sunday I made that football prop bet concerning whether or not the Miami Dolphins would win a game this season. (The bet also covers whether the New England Patriots lose a game in the regular season, but I can't say I'm counting on that part happening.)

The Dolphins are the great teal hope. Sure they haven't won a game all year. But they still have two home games remaining against two awful road opponents.

The Ravens who visit this Sunday have lost 5 out of 6 road games this season.

The week 17 visitor Bengals are even worse with 6 losses in 7 road games, including an embarrassing performance earlier today in San Francisco.

So the Dolphins winning a game in 2007 is absolutely possible.

What this bet does for me is create a scenario where through hedging, I can make a profit regardless of what ensues. Personally I want this bet to remain unresolved for as long as possible. Hopefully through the Dolphins final game in week 17.

Sure I could lose the prop bet. But it would also give me 4 opportunities to hedge along the way. (Baltimore over Miami tomorrow. New England over Miami in week 16. New England over NY Giants on the Saturday of week 17. And Bengals in Miami on the Sunday of week 17.)

The longer this bet goes, the more fun I can have. So there I was at Bellagio tonight, staring up at their lines in the sportsbook. Looking for a good price on Baltimore.

I had company. Not hedging the Baltimore game. But in the sportsbook.

David Sklansky is standing to my left betting on horses. Layne Flack sits to my right putting together what looks like some sort of massive football parlay.

I wonder what Sklansky knows about horses. He's the ultimate math guy. Always taking the best of it. If you read his books he's got EV coming out of his ass.

In fact the only time Sklansky doesn't seem to be about positive expected value is when he posts stuff on internet message boards. In those cases he always seems to take the worst of it. But for all I know, that helps to keep his name alive and sell his books. Maybe the guy knows exactly what he's doing.

I am somewhat intrigued by the idea that Sklansky thinks his time is better served betting horses than playing poker. Unless like myself he's just waiting. Or maybe he's taking a break from the tables and horses are his thing for pleasure. Who knows?

Back to football, it turns out I cost myself money by not hedging yesterday when I saw the Ravens at -165. I waited because the line had been dropping all week and I thought -160 was still possible.

But when I looked up at the big board Saturday night at the Bellagio, Baltimore was suddenly -175 to win in Miami. Damn. Where was I all day?

Oh sure it's better than the -180 line I saw Monday morning on the internet. But it ain't -165. I guess it would have been savvy for me to buy a chunk of it at -165. Say 50% of what I wanted overall and if it dropped further I could buy more. And of course if it went up like it did, at least I wouldn't be losing as much. I basically felt like I gave away money by waiting a night. And that's because I did.

Disturbed by the new price, I didn't buy any at -175. Instead I got in the car and drove over to the Hilton where I found it for -170.

Ravens at -170. It's better than -175. Although not quite -165.

2 comments:

eric said...

Rob what happened --

I don't understand the betting lines?

Ravens -170 -- what does that mean -- and we know now that the Dolphos won.

Robert said...

Was that you calling me at 531AM to ask this question?

Here's how money lines work....

Since Ravens were expected to defeat Dolphins, one would have to risk 170 to win 100. (You get 270 back if they win.)

Likewise the casino offers odds on the Dolphins winning. Since they're not expected to win it might be something like risk 100 to win 150. (Getting 250 back if you won).

In my example here the casino is selling Baltimore at -170, offering Miami at +150, thus their profit is that 20 dollar spread in the middle.

Now lets say hypothetically that my prop wager was for 1 million dollars. In other words I'm responsible for paying out 1 million bucks if Miami doesn't win a game (and New England goes undefeated).

I have to decide how much of that (if any) to hedge and protect myself.

Using the -170 line, lets say I put 850,000 on the Baltimore Ravens moneyline. If the Ravens win I'd make 500,000 (Getting 1.35 million back).

So if Ravens won I'd be plus 500k going into week 16 still hoping that the Dolphins win a game in weeks 16 or 17. But at least now my further risk is only 500k. If I did no further hedging I would either win 1.5 million or lose half a million.

But of course the Ravens lost. This meant that I lost my 850,000 Ravens bet, but I collected the 1 million on my prop bets.

Sure it was still a profit but greed wanted this bet to go on for 3 weeks. I was really looking forward to seeing how the math played out in weeks 16 and 17.

Like this weekend New England is -1700 at home vs Miami. Risk 1700 to win 100! Awful odds. But with my prop bet in place I could have put 850,000 on Pats to win 50,000. It's absurd to lay 850 to win 50. But this would have been the one time in my life that I had proper insurance to make that bet.

So I'd either win another 50k and be up 550 heading into week 17 where I could hedge the Bengals with what will be real sweet odds in Miami.

Or if Miami pulls the upset of the decade, century and forever then I'd lose my 850k bet on Pats but am still up 500k from last week and the 1 million prop bet.

So as you can see I was genuinely rooting against Miami last week. Even though their winning a game won me the prop bet.