Man oh man, huh. What a wild couple weeks it's been. I've been slowly writing this post over the course of a few days and it's crazy how things keep changing. Last thing we need more of is a non-scientist giving opinions about a global pandemic so I'll skip the CORONA VIRUS talk. With no sports even on we'll stay with politics. Let's take a little step back today and get into the theory of market capping and what exactly it is that I'm doing here. I also have what I think is a good idea to better capture the true market value for political bets, better than just using predictit.com's current price by itself. And we'll look at two major interesting markets.
We get into all that and more! But first a quick note; the first couple posts I made here were a little rushed. I realize that posting bets I made months ago at prices and places no one else can get isn't exactly the most captivating or useful stuff. It's honestly pretty hacky. I could be completely making them up or just cherry picking the good ones (I'm not and could prove it but still. It's bad form). It was the night before Super Tuesday and I really wanted to get this going, but going forward I'll post bets a lot closer to when I actually make them. I don't for-see this blog really becoming just 'picks' though as I'd like to delve into more the theory about what exactly trading is and how and why it works. So let's do that.
When I say 'trading', I'm simply talking about making a bet. The trade is in me 'buying' a position and the bookie 'selling' it to me. So when I bet on, say, Biden to win the presidency at +500, Im buying that position from the sports book. Just as I have a bet on Biden to win at +500 odds, the book now has a position of 'anyone but Biden to win' at -500 odds. This is a subtle but important point that was one of the first light bulb moments for me in my betting 'career.' Anytime you make a bet, think about the bet you're giving to the sports book. IE, let's say you bet the Pats against the Jets at -7 -110. You're 'giving' the book the position of Jets +7 +110. Think about which side has the best of it. Would you rather have your bet or the books'? It's good practice to ask yourself that question anytime you make any kind of bet; what bet am I giving to the sports book/other guy? Which one would I rather have? And if I think mine is better, why would they willingly take it?
The second part of this equation is 'the market'. What is this market you speak of, you may be asking yourself. A market is basically any place that facilitates the buying and selling of things. The stock market, the sports betting market, the political betting market and an open air fish market downtown are all basically the same things. Whether youre buying local salmon or a position that Trump will win the popular vote in the next election, the fundamentals are the same.
For our purposes, I've been using predictit.com as a proxy for the general market for political betting. I believe theyre the most efficient market out there for politics betting, so their line is as close to the true line as you'll ever get. It's easy and legal for almost anyone in the world to bet on predictit and they publish the amount of shares traded in each market. The big ones have over 100 million dollars in them (123 million shares have been purchased in the market for Dem nomination alone and each share is $1). That means that hundreds of thousands of individuals, all independent of each other have backed up their opinions with hundreds of millions of dollars to buy and sell YES/NO positions from each other. As more people buy up one side, it becomes more expensive and the other side becomes less expensive - basic supply and demand. This back and forth action moves the price of the YES and NO shares accordingly with how much money comes in on both sides. Wherever that price currently is is the 'true value.'
So what I do, and what any 'market capper' does, is look for inefficient markets (the political section of my sports books for example) and find odds on certain things that are out of whack from the 'real' efficient market. If there's a "right" price, that means there has to be a "wrong" price (that was light bulb #2 for me). If the millions of dollars on predicitit.com say an event should be priced at -120 (or 54.6%, same thing) but I can bet it at even odds at a random sports book that has probably 0 dollars in action besides me, it's probably a good bet. The bigger the gap in the efficient price and the price that you get the better. You don't need to do any handicapping yourself when market capping - you're letting the millions of dollars in action on predicit (and other places we'll get into) do the handicapping and number crunching for you. It's honestly as easy as reading two line sets at once and clicking buttons. The skill is in finding and keeping these sports book accounts with ridiculously inefficient markets hidden in them and knowing what to do once you do find them.
If you want advice on how to be a more advanced bettor (on anything), you'd be better off learning about market theory and what makes markets efficient vs inefficient and all that entails rather than learning about sports and stats. This is obviously a very basic intro, there's a ton more to it which I'll get into in later posts.
Speaking of markets, it occurred to me that while predicitit.com is probably the single best indicator of true market value, there are other indicators and ignoring them completely is dumb. There are two other places I'm going to use for finding true market value; the biggest and most respected sports book in the world, pinnaclesports.com (using their no-vig line), and Nate Silvers projection model in his blog 538.
Pinnacle has always been the end all be all of market makers for pretty much everything. They always had the highest limits, lowest juice, best reputation and most importantly, they didn't kick out winners. So the best of the best end up there. They had to pull out of the US market (which doesnt really matter since everyone uses a VPN anyway) and have increased their juice a little bit so there's been a lot of talk about them not being king of the hill anymore. I don't really agree, I still see the whole market move when they do and not the other way around. But I will check the other big boys, the Bookmaker.com and BetCRIS.com too - can't hurt.
538/Nate Silver got on the map huge in 2012 for getting every single state and almost every single Senate race right, and they're generally the most respected unbiased public projections out there.
I'll have to do some more thinking and tinkering in excel but it'll probably be an amalgamation of something like 60% predictit's odds, 25% pinnacle/bookmaker/betcris and 15% 538. (Always follow money over blogs or projections when market capping. Skin in the game is important.) Doing this will also make me way more in tune with the market as a whole, as well as identify spots where the 'big 3' disagree which can be quite interesting in and of itself. I'll be using just predicitit's price until I come up with the formula though.
Alright lets take a little break. Do a little stretch. Deep breath. We're doing great. Back to it.
Let's take a look around the big markets and see where the dust has settled for today.
Odds To Win Presidency (in percentage form from predictit):
Biden: 48%
Trump: 45%
Pence: 4%
Pretty big tumble for Trump. Not what I expected at all - global pandemic and everything. But that's the thing! There's ALWAYS something you didn't for-see. There's always an excuse in hindsight. 'Oh that was a one in a million shot, the position was good, no one could have seen that coming' etc. We heard a lot of that from the "smart" people with fancy degrees on TV during the 2008 recession. Good thing to keep in mind; you don't know what you don't know.
Clearly my 5 or whatever units on Trump at -160 are basically toast. At least I was adding Biden at +170 for most of the amount at the same time. But still, pretty good example of why I almost always strictly market cap and not try to predict the movement myself. I could get him at even odds now! I've been nibbling a little on Trump as I'm still a little bit more exposed to a Biden win but his price has just been falling and falling. When I see it start to move back up again I'll have my fill. Then I can decide if I want a nice little free roll on election day or take a position. My original plan was to free roll on Trump (put at risk as many units as Id win if Biden wins) but nothing's set in stone. It's best to just take whatever the market gives you, so we shall see.
Odds to win Democratic VP nomination
Klobuchar: 31%
Kamala Harris: 28%
Stacey Abrams: 14%
Liz Warren: 9%
This has been the most interesting market to watch. 13.5 million shares bought in it already so it's a mature market. I'm looking good in it too, backing Klobuchar with 3 units risked with an average price of +638 (current price is +222.) I have enough on Harris to break even if she wins and got lotto ticket numbers on Warren, who has fallen off sharply. My only exposure here is either Abrams, who I have to win for about half of my total units at risk in this market, or an unknown. Biden already committed to a woman (which is such pandering, by the way. Can't we just have the best person? If I were a woman this would enrage me. It feels like charity. And is gender a real thing or not? I don't see how it can be so important to have a woman in office if gender is a 'social construct'... but I digress). So unless he throws a complete curveball, there are only a few women that make sense and have been floated about. I just happened to find really good prices on Klobuchar, especially right after she endorsed Biden and he won Minnesota, but I do think he'll pick her. Harris attacked Biden pretty hard and her campaign this year was universally considered a disaster. She was expected to make a real run and flamed out fast and hard. Plus she's getting killed lately after proposing giving 'only' $500 a month to CA families during the pandemic while others (including republicans) have called for $1k per person. So I'll be watching this one closely, taking little nibbles as they come but overall I'm pretty happy with the position I have.
The Illinois and Arizona primaries settled last night. You'll see from my first post that I had 'anyone but Bernie' at +250 risking 2u in Illinois and 'anyone but Bernie' at +650(!) risking 1u for Arizona. Both won for a NICE little win of 11.5 units. The only primary/caucus bets I have left are Biden to win Wyoming at +400 risking 1u and 'anyone but Bernie' to win Ohio at +185 risking 1.5 units (all in the first post). Ohio was actually supposed to be last night but was cancelled last minute due to the virus. Biden has it wrapped up but still, always worrisome when something like that happens. Books will look for any excuse to no action a winner. But overall obviously very good so far with over 12 units in the bank and lots of good numbers on Dem nomination, VP nomination and President winner.
Lastly, now is actually a good time to really scan whatever sports book accounts you have. They're all offering tons of new random stuff and whenever sports books try something new there's always money to be made. I've been thinking of taking on a completely new sport and trying to model it. If I really get stuck at home soon I'll probably take that on. I actually read a research paper about Curling last week that was interesting. I found a couple weird things they do with score keeping and some in game stuff that seems possibly exploitable. There's a lot of conceding mid match which doesn't factor into the stats...I've already said too much! I'll probably get into some actual modeling in my next couple blogs which is the exact opposite of market capping. It's coming up with your own line, better than the markets. Stay tuned!
So that's it! Jesus this was long. Thanks for reading it. Have fun and stay home everyone!
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