Betting Nitty Gritty
Posted: Wed Nov 16, 2011 12:13 am
I have a related thread in "Around the League" but thought this belonged here.
Don't bother if a little math is gonna freak you out. This is about Vegas setting spreads to get a lot of money on one side in order to make a killing vs just taking the 10% vig and why that can be smart.
Let's call the Perfect Spread the one that equalizes the betting. Let's say it's 6.5. Suppose Vegas arrives at that number and $110 M is bet. Vegas' expected value for their profit is $10 M.
Suppose Vegas knows from experience that a spread of 4.5 will result in $88 M on the favorite and $22 M on the dog (total of $110 M).
Suppose they also have good reason to think that the dog is 60% to cover at 4.5.
Here we go.
60% or .6 of the time Vegas collects $110 M, pays out $40 M ($20 M in bets paid off but vig kept), and pockets $70 M.
That's a $70 M profit 60% of the time.
40% or .4 of the time Vegas collects $110 M, pays out $160 M ($80 M in bets paid off but vig kept), and loses $50 M.
That's a $50 M loss 40% of the time.
Vegas' expected value for their profit in this scenario is thus:
(.6)($70 M) - (.4)($50 M) = $42 M - $20 M = $22 M.
That's an EV of 22% vs 10%.
Vegas tries this every week with multiple games.
Last week they did it 3 times. The lost on the Colts but made an absolute killing on the Cowboys covering the Bills and the Seahhawks covering (beat 'em outright) the Ravens.
DarthMonk
Don't bother if a little math is gonna freak you out. This is about Vegas setting spreads to get a lot of money on one side in order to make a killing vs just taking the 10% vig and why that can be smart.
Let's call the Perfect Spread the one that equalizes the betting. Let's say it's 6.5. Suppose Vegas arrives at that number and $110 M is bet. Vegas' expected value for their profit is $10 M.
Suppose Vegas knows from experience that a spread of 4.5 will result in $88 M on the favorite and $22 M on the dog (total of $110 M).
Suppose they also have good reason to think that the dog is 60% to cover at 4.5.
Here we go.
60% or .6 of the time Vegas collects $110 M, pays out $40 M ($20 M in bets paid off but vig kept), and pockets $70 M.
That's a $70 M profit 60% of the time.
40% or .4 of the time Vegas collects $110 M, pays out $160 M ($80 M in bets paid off but vig kept), and loses $50 M.
That's a $50 M loss 40% of the time.
Vegas' expected value for their profit in this scenario is thus:
(.6)($70 M) - (.4)($50 M) = $42 M - $20 M = $22 M.
That's an EV of 22% vs 10%.
Vegas tries this every week with multiple games.
Last week they did it 3 times. The lost on the Colts but made an absolute killing on the Cowboys covering the Bills and the Seahhawks covering (beat 'em outright) the Ravens.
DarthMonk
