Friday, September 28, 2007

Week 4 - Hedging Sounds Like Balls

HEDGING: so basically in order to come up on top you need the favorite to win, but not cover the spread. If they win and cover, your losses probably are cut in half, right? Figure a $10 bet on each... Moneyline bet wins $5, spread loses $10, for a net of -$5.
ok, so here's where i'm thinking it's not such a good idea.... Had you just bet the moneyline, you would have not lost the $10 on the spread, for a net gain of $5. Now assume the opposite happens and the moneyline bet loses, so you win your spread pick. You win maybe $9 on your spread, and lose $10 on the moneyline for a net of -$1. Now assume you actually hit the middle ground and win both for a net of +$14. OK so now let's assume each scenario is equally likely to happen, you're expected winnings are:

1/3(-$-5) + 1/3($-1) + 1/3($14) = +$2.67.... holy shit. it came out positive... ok, surely someone who's been doing this longer than us has figured this out already, right? Are you plugging in the potential losses/winnings into your formula? in theory you could predict your expected winnings assuming that each scenario is just as likely as the others... then again, maybe this is the flaw. Is it really just as likely that you hit the blessed middle ground as it is that the winner cover, losing your spread bid? Consider this... the spread is designed to make it 50-50 chance that the dog will cover. If 1/2 the time they don't cover, that means that in the above scenario the odds of netting -$5 is 1/2, not 1/3, shifting expectations to:

1/2(-$5) + 1/4($-1) + 1/4($14) = -10/4-1/4+14/4 = +$0.75

ok, this is still interesting to me since it stayed positive, but since it is so close to zero, the actual payouts are critical here. I bet it can end up negative with larger lays. Plus there is one last bit of analysis i've left out... If the 'dog does cover half the time, what percentage of those games does the 'dog actually upset the favorite? This would shift expectations again. I would think you could look up this information... either use the historical percentage for head-ups upsets, or take it a step further to weigh that figure based on specific teams playing. This seems like a job for the BOX!

Having said all that... even assuming the above formula holds, a long term return of .75% return is pretty crappy, and to see any payoffs that were exciting (say... winning $50 on a weekend), you're bankroll has to be kinda high. In fact, it would take over $500 in gambling to win $50 in this scenario.

Unless you come up with some unbeatable system, I think the fun factor (i.e. potential big payoff) keeps my interest in the parlays.


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