Delving Deeper into Vegas Super Bowl Futures

Recently, I posted the Super Bowl Futures to get a discussion going and to gauge interest. And I wanted to show how these lines were a bad predictor of the eventual Super Bowl winner. But I think there may be more interest if we dig a little deeper, so I will do my best to explain how this works in the simplest way I know how. If I fail miserably please bear with me, I am no Jimmy the Greek so if you know more than me feel free to share.

With that said, here are some reasons these lines are not only unlikely to predict the Super Bowl winner but why professionals consider this a sucker bet. These are generally the worst odds b/c Vegas hides the cost. Believe me, Vegas loves these bets because they hold your $ for five months and you are probably more likely to visit their sports book during the football season. It's like a blue light special, problem is they triple the price instead of giving you a discount:) But this is also a fun bet, if you bet $100 and your team wins and you win $2,500, well the drinks are on you!.

Vegas cares only about one thing: Maximizing profit with the least possible risk. So, how do they accomplish this on the SB Future Lines? Let's take a closer look, the best place to start is with the "vig" or "vigorish" a.k.a. "juice."  Often, the vig is disclosed up front, for example, on the over/under for regular season wins, Mr. Bean posted recently:

Pittsburgh Steelers - Total wins in the 2011 NFL Regular Season

Over 10.5 (-130)

Under 10.5 (Even)

Now, you may ask, what the hell? Ok, it is pretty simple: To win $100 on the Steelers going over 10.5 wins you must bet $130. Now, if you want to bet under 10.5 wins you must only put up $100 to win $100 (this is even odds). So it is easy to see the vig is the $30 on the over bet and it covers both sides. Think about it this way, if I bet the over and my buddy bets the under, casino collects $230, if I win they pay me $230 and they are flat (no profit/loss) but if my buddy wins they pay him $200 but keep the $30 profit, that’s the vig. Now, obviously they want to make money whoever wins, so the vig is very high on the over to entice bettors to bet the under. We can also deduce from this lopsided vig that Vegas knows many Steeler fans & professional bettors will want to bet the over. But if the vig were closer on both sides they would not have enough betting the under. If we knew the true odds were 50/50 the under bet is much better b/c you get paid the same but put up $30 less per hundred. But, we don’t know the true odds and the vast majority of humans bet with emotion or loyalty so the real odds are not Vegas' concern.

So, let’s say a total of $10,000 was bet on this line, where does Bodog want people to bet? Well, with the odds they are offering they want slightly more than 53% of the $ betting on the over and slightly under 47% on the under. If you must know, the exact ratio is 53.06% over & 46.94% under, Vegas would earn exactly $612 regardless of the outcome.

This is highlighted in the table below, if they take 60% of the $ on the over and it hits, they will lose $615 and if they accept 55% of the action on the under and it hits they lose $1,000. I highlighted the sweet spot which shows that right around 53% their book would be nearly balanced. Steeler’s over they win $623 & under they win $600. NO RISK, GUARANTEED PROFIT! Now let’s say there is really $300mm on this line, not $10,000, that’s a guaranteed profit of $18.7mm for over and $18mm for under. Not bad, eh?

 

                     Casino Profit based on percentage of dollars bet on over/under

60%+ 40% -

55%+ 45% -

53%+ 47% -

50%+ 50% -

45%+ 55% -

over 10.5, # of bets

46.15

42.31

40.77

38.46

34.62

under 10.5, # of bets

40.00

45.00

47.00

50.00

55.00

payout +10.5 wins

$10,615

$9,731

$9,377

$8,846

$7,962

payout -10.5 wins

$8,000

$9,000

$9,400

$10,000

$11,000

pft/(loss) + 10.5 wins

($615)

$269

$623

$1,154

$2,038

pft/(loss) - 10.5 wins

$2,000

$1,000

$600

$0

($1,000)

 

This is how casinos make a lot of $. In this example, if they are properly managing their risk and the action veers too far off the 53.06% / 47.94% ratio they will react by moving the line to re-balance the book. So there may be no news but lines move all the time as it is prudent risk management by sportsbooks. Professionals make money by working both sides of these lines but that is a topic for later discussion.

Now that we have explored the vig, let’s pull back the kimono on the SB Futures. Assume I were a fair weather fan and I just had to bet $100 on the Packers to win the SB. If they win, I get back $700 (my $100 bet plus my $600 profit) but if they lose I am out my $100.  So where’s the vig you ask? Well, it’s not disclosed but trust me it is there, they are tricky like that:)  

On the SB Futures Line below, the worst payout is $600 on a $100 bet which you get on the Packers, Pats or Eagles. So if I were to bet $100 on any of these teams I would only need to win 1 in 7 times to break-even. In other words the one-time $600 gain would cover 6 bets of $100 that I lost. So if I was Nostradamus and could somehow accurately predict that the actual winning percentage was 25%, then I would bet on that outcome. I would win $600 once in every 4 bets and lose $100 the 3 other times. I would be doubling my money on every 4 bets and I would be rich pretty quickly:)

Unfortunately, not only is it impossible for any human or computer to accurately predict a winner over time, the breakeven odds include a huge house cushion. Just look at the table below with the adjusted payouts to account for the vig. The juice is astronomical if you look at the breakeven % w/ vig, it is 149.83%. Wow! That makes no sense because all the probabilities can only add up to 100% right? Correct, but that is where Vegas hides the juice. If you look at the difference between the vig and no vig breakeven columns, you clearly see where the casino is underpaying you. In the case of the top 3, they are only giving you a profit of $600 vs. a no vig payout of $949. Not only that but these vig percentages are the highest on the board. Worst payout with highest vig doesn’t sound too good to me :(

That’s insane, you say! Exactly, and that’s why professional gamblers are not making these future bets. Not to mention, you have to tie up your capital from late August thru January. But what if they can’t pay you when you come to collect? In Vegas it is highly regulated, so that risk is basically zero. But if you are going offshore or with a sportsbook you have real counter-party risk too. When Full-Tilt Poker got shut down a few months ago people suddenly realized they don’t have everyone’s money on deposit. I believe they are broke and can’t pay the $150mm they owe, otherwise they would have made a partial payment by now. A few people have $5mm on deposit with Full-Tilt, good luck that!

Someday soon an offshore sportsbook will either get shut down by the FBI or will go bust. So as in all things in life, buyer beware. If an offshore line is exceptionally better than a Vegas Line, the "true" cost is hard to assess b/c you lose everything if they go bust. What is it they say? If it is too good to be true….

But, I am not your father or priest, my goal is to analyze and open discussion. So if we look at the big picture a super high vig makes absolute sense for a sportsbook on SB Futures. Imagine some Rainman Joker putting down $10mm on the Bills and winning!  The payout would be $1.5 billion and if that risk weren’t laid off it would bankrupt pretty much any casino on earth. Keep in mind that no casino would accept a wager this size unless it was a tiny percentage of the overall $ coming in. But, while the risk is very small that the Bills or Panthers win the Super Bowl, there is still a very slight possibility it could happen. This is very similar to a "Black Swan" or "Fat Tail" stock market event.

So, if you step back you see that to have a fighting chance you must minimize transaction costs. The vig is your biggest enemy in bets like these so it is crucial to find the best deal available. Like anything else you shop for discounts, you want the most bang for your buck. If you are a Packers fan and you can’t resist, at least find a line that pays you $800-900 if you win, $600 is just too little profit. But keep in mind, even with the best lines, the odds are still highly stacked against you.

I mentioned Phil Mickelson in the first post and how he loves to tell people how he won $440,000 on a Ravens 2000 SB $20,000 bet. Yea, that’s great Phil, but how many other future bets did you lose before and after 2000? That’s probably a sore subject, because picking the SB winner is a random exercise. Yes, the better teams have a better chance but there is virtually no way to quantify it at this moment, bookmakers may have the best computer simulations but in the end it’s still an educated guess. So while any team can win, it is most likely to be a team with a 3% or higher breakeven % without the vig. This sounds about right, for the Lions to win the SB their stars would clearly have to align. Go too far below the Lions and you are probably buying a lottery ticket not making a bet:)

Any thoughts?

 

Super Bowl Future Odds

  

team

payout  $100 bet

payout  $100 bet      (w/o vig)

break-even  (with vig)

break-even (w/o vig)

$ vig

Green Bay Packers

$600

$949

14.29%

9.53%

$349

New England Patriots

$600

$949

14.29%

9.53%

$349

Philadelphia Eagles

$600

$949

14.29%

9.53%

$349

Indianapolis Colts

$1,000

$1,548

9.09%

6.07%

$548

Pittsburgh Steelers

$1,000

$1,548

9.09%

6.07%

$548

Atlanta Falcons

$1,200

$1,848

7.69%

5.13%

$648

Baltimore Ravens

$1,200

$1,848

7.69%

5.13%

$648

New Orleans Saints

$1,200

$1,848

7.69%

5.13%

$648

New York Jets

$1,200

$1,848

7.69%

5.13%

$648

San Diego Chargers

$1,300

$1,998

7.14%

4.77%

$698

Dallas Cowboys

$2,000

$3,046

4.76%

3.18%

$1,046

New York Giants

$2,000

$3,046

4.76%

3.18%

$1,046

Detroit Lions

$2,200

$3,346

4.35%

2.90%

$1,146

Kansas City Chiefs

$3,000

$4,545

3.23%

2.15%

$1,545

Tampa Bay Buccaneers

$3,000

$4,545

3.23%

2.15%

$1,545

Houston Texans

$3,200

$4,844

3.03%

2.02%

$1,644

Chicago Bears

$3,500

$5,294

2.78%

1.85%

$1,794

Minnesota Vikings

$3,500

$5,294

2.78%

1.85%

$1,794

Miami Dolphins

$4,000

$6,043

2.44%

1.63%

$2,043

San Francisco 49ers

$4,000

$6,043

2.44%

1.63%

$2,043

Arizona Cardinals

$5,000

$7,541

1.96%

1.31%

$2,541

Oakland Raiders

$5,000

$7,541

1.96%

1.31%

$2,541

St. Louis Rams

$5,000

$7,541

1.96%

1.31%

$2,541

Cleveland Browns

$6,000

$9,039

1.64%

1.09%

$3,039

Denver Broncos

$6,000

$9,039

1.64%

1.09%

$3,039

Jacksonville Jaguars

$6,000

$9,039

1.64%

1.09%

$3,039

Tennessee Titans

$6,000

$9,039

1.64%

1.09%

$3,039

Seattle Seahawks

$8,000

$12,036

1.23%

0.82%

$4,036

Washington Redskins

$9,000

$13,534

1.10%

0.73%

$4,534

Cincinnati Bengals

$10,000

$15,032

0.99%

0.66%

$5,032

Buffalo Bills

$15,000

$22,524

0.66%

0.44%

$7,524

Carolina Panthers

$15,000

$22,524

0.66%

0.44%

$7,524

Totals

$136,300

$205,807

149.83%

100.00%

$69,507

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