I did a piece last year explaining the basics of how the bookies go about pricing sporting events, which covered traditional and decimal odds, implied win % and the “over-round”.  Check it out here if you haven’t read it.

As you should all have gathered by now given how much I bang on about it, the current MLB season is reaching a crescendo and a couple of the divisions are “goin’ down to the why-ar”, as Sid Waddell would say.

Whilst that is exiting for baseball nuts like myself, I am aware everyone else is a little “Roy Hodgson style” ambivalent.  You have to love Roy.  So very refreshing.

However, you’ll be glad to know it has given me a couple of great examples of how the bookies go about pricing these things.

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Check out today’s market for the NL West division winner, as previously discussed in my post explaining how to arbitrage a sports market:

NL West winner market as @ 10pm on 21 September

Selection	Win	Loss	Win %	Odds	Implied %
SF Giants	84	66	.560	6/5	45%
San Diego Padres	83	66	.557	9/5	36%
Colorado Rockies	82	67	.550	11/4	27%
					108%

As you can see the opportunity to arbitrage this market has now gone, with a standard 8% over-round currently included in the pricing.

If you want to make money out of the market, what do you have to identify?  I hope all long term followers are all over this by now BTW.

You need to determine if any of the three sides actually have a higher percentage chance of winning the division than the implied % chance which the odds reflect.

This percentage acts as a “value break” point.

Anything lower and, although you may “get lucky”, you are swimming against the tide.

Anything higher and, although there is still inherent risk in each and every selection, you will eventually end up in the black.

Check the footnote for a bit more on the dreaded over-round.

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So how do we go about assessing this market?  Well, in this case we don’t even have to, as the clever guys at baseball prospectus do it for us.  Every single day!

Check out the table below, which compares their three different forecast model predictions:

NL West winner market as @ 10pm on 21 September

Selection	Implied %	BP – standard	BP – PECOTA	BP – ELO	BP – Average	Difference
SF Giants	45%	45%	.52%	52%	50%	+5%
San Diego Padres	36%	25%	.25%	27%	26%	-10%
Colorado Rockies	27%	23%	.23%	21%	24%	-3%

So what is all this saying to us?

Well, BP are forecasting that the prices for the two outsiders, San Diego and Colorado are both “- EV”.  Bad times.

Avoid both of those prices like the plague.

Now, don’t read too much into the +5% edge on the Giants price.  Such a small margin isn’t worth chasing.

But the important thing to notice is that all of the market’s “over-round” is attached to the outsiders.  This is almost always the case across all sports.

Whether it is Uruguay to win the World Cup, Peter Crouch to be the Premier League top scorer or Bo Van Pelt to win the Masters, it is always the outside selections in a market which contain most of the over-round.

And this is the exact reason why regularly chasing away winners on a Saturday will see you in the soup queue eventually.  Villa look a sexy price at 11/5 no doubt.  But they are priced that way for a reason and the nasty over-round is only making it harder for you.

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So “Is there anything we can get stuck into to take advantage of all this new found knowledge?” I here you shout from the back.

Well, as it turns out there is.  Check out the American League East division winner market:

AL East winner market as @ 10pm on 21 September

Selection	Odds	Implied %	BP – Standard	BP – PECOTA	BP – ELO	Difference
NY Yankees	1/3	75%	.61%	65%	55%	-10%
Tampa Bay Rays	23/10	30%	.39%	35%	45%	+10%
Total		105%

The bookies are currently pricing the New York Yankees very conservatively at 1/3 (75%). This isn’t because they don’t know that Baseball Prospectus exists or because their internal models are out of whack.

This is a very conscious decision from them to price this market in this way.  And if I was them, I would do the same.

How many people in Europe want to back the Tampa Bay Rays to best the mighty Yankees?!

Pretty much nobody.

Last time Les Dennis (Vernon Kay for the whippersnappers amongst you) asked 100 Brits to name a baseball team, 74 said “The Yankees”.

And the other 26 said “What is this baseball crap?!”.

The bookies aren’t out there trying to price markets fairly by the laws of probability.  They are trying to price them to make as much cash as possible.

So they are always going to significantly discount the Yankees price.  But, to do so in a two horse race, you have to inflate the price of the alternative selection…

Do you want me to draw you a picture?!

BOTW: 3pts on the Tampa Bay Rays to win the AL East @ 23/10

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The over-round and spread betting

It is vital to remember when betting that you are likely up against such an over-round, and when placing large wagers or betting on obscure markets you should always try to check to see how big the over-round is.

In novelty markets you may be facing a huge over-round, and even the more “standard” markets such as “correct score” and “first goalscorer” often have a 25% over round included.

This makes them almost unbeatable in the long term and basically a money press for the bookies.  But we don’t mind that.  It ensures they have enough cash to payout all the BOTW followers

Here is something which you may not have realized before which puts into context what we are all up against.

When placing a spread bet, the equivalent of the over-round is the difference between the “buy” and “sell” quantities.

Say Sporting Index take two equal and opposite bets on a market, for examples sake lets say Chelsea’s point total for the current season, using an “over/under 85.5″.  They are in a no lose position.

If Peter wins, Paul loses.  So they are ambivalent (my word of the week) as to Chelsea’s hopes.

However, look what happens when they set up a 85 – 86.5 spread.

If Chelsea bring home the bacon with 87 points, Paul wins 0.5pts.

But Peter is in the hole for 2pts.

And Sporting Index have generated 1.5pts without exposing themselves to any risk whatsoever.  So all they have to do is make sure that they set the spreads in the right place such that they all the Peter’s and all the Paul’s disagree.

Pretty nice being on their side of the fence isn’t it?!

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Hope you enjoyed this one guys – because it seemed to take me bloody ages to put together!

Asta la vista!

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