Here's an excerpt from an earlier post describing what I call "Fair Moneyline Odds" (FMO):
Use week 3's DEN at OAK -125/+105 game as an example. I strictly use decimal odds* in all of my calculations, it's much easier to use in calculations. The decimal odds are DEN 1.80, OAK 2.05.
NFLSim determined the probability of DEN winning to be 77%. To determine the Fair Moneyline Odds, divide 1 by the probability (as a decimal). 1/0.77 = 1.30. Assuming the NFLSim has assigned the correct probability - and this only works if it does - then out of 100 games, DEN will win 77 of them. Starting with $100 and making 100 $1 bets, you will win 77 of bets. At a payout of 1.30, 77 winning bets gets you back to $100, you break even. Any payout larger than 1.30 will produce a profit after 77 wins.
In the case of the DEN game, DEN offers a 1.80 payout. At NFLSim's probability, 77%, you are expected to win 77 bets at 1.80. 77*1.80 = $138.6. There is an expected profit of $39. A payout of 1.80 is greater than the break even odds of 1.30 (the Fair Moneyline Odds), so it is a good bet.
On the other side of the matchup is OAK 2.05. The probability of OAK winning is 23%. The FMO would be 1/0.23 = 4.35. If you win 23 bets at a payout of 4.35, you break even at $100. Currently, Vegas pays 2.05 for an OAK win. If you win 23 bets at a payout of 2.05, you end up with $47.15 for an expected loss of $52.85. A payout of 2.05 is less then the FMO of 4.35, this is a bad bet.
In the spreadsheet, I list the break even moneyline odds for the specified team. If your sportsbook has odds greater than what is listed for that team, it is good to place that moneyline bet. However, if the odds are less than break even, it is a good idea to bet on the opposing team (even if they're picked to lose). With this system, it is irrelevant who you think will win the game. This is all about exploiting the inefficiency in the line.
*To convert American odds to decimal odds:
For the underdog, add 100 then divide by 100. OAK +105 => (105 + 100)/100 = 2.05
For the favorite, divide -100 by the odds, add 1. NYJ -125 => -100/-125 + 1 = 1.80
Sunday, September 27, 2009
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I just want to double check your theory...I understand how you got the 1.8 for Denver, but I don't think that is the payout that is offered by Vegas for them. Take a look at this:
ReplyDeleteNFLSim said Denver should win 77% of the time. You calculated that 1.3 is the decimal odds for Denver based on NFLSim's predictions. This means that Denver will win 1 out of 1.3 games. 1/1.3= 77%. The "payout" that they offer is 1.8. I see how you got that, but that just means that the Vegas odds would be breakeven if Denver won 1/1.8 games. 1/1.8= 56%.
I don't dispute your calculations or that Denver is a good bet, I just think you may be off a little bit in your profit.
Your thoughts?
You're completely right. If I understand you correctly, here's the reasoning: for the first two seasons, the confidence that NFLSim predicted was nearly perfect. Not that it picked 100%, rather 55% of 50-59% confidence picks were correct.
ReplyDeleteIn 2008, the expected number of wins for the 50-59% interval, the number of games * the midpoint of the interval, 55% was 53; the actual was 61.
60-69%: expected 46, actual 45
70-79%: expected 27, actual 27
80-89%: expected 4, actual 4
90-100%: (with rounding), expected 2, actual 2.
NFLSim assigned the correct win % to games, which is ridiculous.
That is the key assumption going into the fair moneyline theory. If NFLSim assigns close to the perfect %, the theory will work because NFLSim knows the win % better than vegas and therefore can exploit inaccurate lines.
However, this season NFLSim is much more accurate overall, which means I should stop posting the moneyline odds because the theory doesn't work under this condition.
But when it worked, it worked damn well.
I'm happy to discuss this further, send me an email at simcapper@gmail.com.
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