mathletix

Small stakes give you the minimum blues

(This is an excerpt from a larger project about sports gambling. Code and early drafts of some of the materials can be found at https://github.com/csdurfee/book.)

I'll be talking about "the public" in this installment, by which I mean the side of a wager that gets the most number of bets placed on it.

I talk about the vig a lot without explaining it. It's explained in the book, but the short version is on standard bets, a gambler needs to win at least 52.4% of the time against the spread to break even due to needing to risk $110 to win $100. That $10 difference is the vig -- how the sportsbook makes their money.

In gambling circles, bets are often framed as Vegas or the sharps versus the public. Sharp started out as a term for cheaters -- dishonest bookies setting unfair lines, or card sharps who win thru deception rather than skill. The meaning has changed a bit over time. In modern parlance, a sharp is someone who wagers on sports as a game of skill, making money over the long term by placing bets with positive expected value. But the negative connotation persists in popular chatter about gambling.

Say there's a game between the Lakers and the Charlotte Hornets, and the Hornets win against the spread. The public lost. What degenerate is betting the Hornets? Sharps, that's who. You'd think the public wouldn't have a problem with the sharps -- at least someone won money off Vegas tonight. Without the sharps, all the money that the public lost would go to Vegas. But Vegas and sharps are often conflated together. It's the public versus everybody.

It seems unlikely to me that it's always the public on one side of the bet and sharps on the other. The public is still right around 50% of the time, right? They can't be drastically worse than a coin flip, so taking the opposite bets can't be drastically better than a coin flip. That means that sharps are going to agree with the public at least some of the time. They might fade the public (bet the opposite side) more often than they agree with the public, but there's probably a fair amount of both.

How do bettors do against the spread as the season goes on?

Does the public side do better over time? If records against the spread were random and the lines totally fair, we'd expect the public's winning percentage to bounce around pretty close to 50%, spending about as much time on both sides of the line -- sometimes doing a little better than 50%, sometimes a little worse. Over the course of the season, the public's cumulative record against the spread should get closer and closer to 50%, as the sample variance gets smaller.

Here's the 2024-2025 data. This is the public's winning percentage, graphed as a 100 game moving average:

The white line is the start of the All-Star break. The public was winning well below 50% of their bets until a surge in the 100 or so games before the break, as we can see on the cumulative graph:

The public ended up going 584-614 on the season. Someone taking the public side of every bet against the closing line would have lost 91.4 units on the season, for a 48.75% winning percentage.

The yellow line is the break-even point for fading the public -- taking the non-public side on every bet over the season. Up until that surge before the All Star break, it would've been extremely profitable to do so. Even by the end of the year, the public's win percentage didn't get close to 50%. Someone betting at -105 reduced juice could have made .8 units by fading the public on every single bet.

The public were 369-388 when betting on the favorite, and 215-226 betting on the underdog. They went 293-311 when the away team won, and 291-303 when the home team won. They were bad no matter how you slice it.

While that's all super weird, it's only one season. My data source (sportsbookreview.com) only has spotty data for the 2023-24 NBA season, but they do have mostly complete data for 2021-22 and 2022-23. (Nothing before that, unfortunately.)

2021-22 season

I have data for 1108 out of 1230 regular season games for 2021-22.

The public went 566-542 on the season, for a loss of 30.2 units, much better than 2024-25.

Here's the 100 game moving average:

Except for a dip in early March, the public did consistently fairly well. Not well enough to make money, but better than 50% win percentage.

On the cumulative graph, while fading the public (yellow line) would have been profitable for the first month or so, the graph spends most of the season over the 50% line. However, it never gets over 52.4%.

2022-23 season

I have data for 1176 off 1230 games in 2022-23.

The public went 587-589 for the season, for a loss of 61 units on the season. Here's the moving average:

And the cumulative:

This one is similar to the 2023-24 graph, where the public pretty consistently lost a little bit more the 50% of the time, but not often enough to make fading the public a viable strategy.

Are team records against the spread a Martingale?

I started to answer this last time, but didn't have time to go deeper. If betting records are random, previous performance gives no information about future performance. Each game is like a coin flip, with equal chances of heads and tails. Teams will have good or bad records against the spread due to chance alone.

However, I gave some plausible reasons why this might not be the case.

The simplest way to test this I could think of was comparing records against the spread in the 1st half of the season to the 2nd half of the season. If the records are random, there should be no correlation between 1st half and 2nd half records.

I found there was a positive correlation between 1st half and 2nd half records in all three seasons I have data for. In 2023-24, the correlation coefficient was .10. In 2022-23, it was .40, and in 2021-22 it was .27. Only 2022023 was statistically significant. Assuming randomness, positive and negative correlation should be equally likely. So all three being positive is suspicious. I definitely can't rule out there being a non-random aspect to records against the spread over time.

It's not quite good enough for an automated betting strategy, though it's close. Say we track which teams had winning records against the spread over the 1st half of the season, then bet on those teams for the 2nd half of the season. (I didn't bother to filter out the games where teams with winning records play each other, so this analysis isn't perfect.)

In 2024-25, that would give a record of 297-297 ATS -- can't get more fair than that.

In 2022-23, it would have gone 279-241, for a profit of 13.9 units at standard vig, and a 53.7% winning percentage.

In 2021-22, it would have gone 247-225, for a loss of .5 units and a 52.3% winning percentage.

So, it's definitely not enough to be profitable as a strategy on its own. But for such a simple strategy to be close to profitable in 2/3 years is interesting.

A gambler needs to win at least 52.4% of the time to break even against the vig. Say they're picking from a subset of bets that have a 52.3% chance of winning, as the naive strategy achieved in 2021-22. They'd just barely need to do better than flipping a coin to be profitable. That could be much easier than picking from a set of bets with a 50% chance of winning, right?

Final thoughts

In all three seasons, the public did a little worse in the first half of the season than the second half. In the two most recent seasons, the cumulative winning percentage was below 50% for nearly the whole season.

That doesn't seem random to me. It makes sense that sportsbooks would offer slightly more favorable odds to the less popular team in order to attract equal money on both sides. It also makes sense that sportsbooks would be happy if the team with more money on it lost over 50% of the time. The difference between the public winning 50% of the time and the public winning 48.5% of the time could be significant on enough betting volume.

In all three seasons, there was a positive correlation between a team's record against the spread over the first half of the season and the second half. The correlation is strong enough that over 3 seasons, it's almost possible to make money by betting on teams with a good first half record.

On both points, I don't have nearly enough data to draw grand conclusions about how "the market" operates -- this is just one sportsbook, and an unknown one at that. Yahoo and DraftKings also provide betting percentage data, which would be useful for cross-checking these trends. I'm going to hold off for now, though -- there are too many other interesting things in the world.

The public wants what the public gets

(This is an excerpt from a larger project about sports gambling. Code and early drafts of some of the materials can be found at https://github.com/csdurfee/book.)

Two types of people

Lots of sportsbooks publish info on how much action they've gotten on each side.

Here's DraftKings': https://dknetwork.draftkings.com/draftkings-sportsbook-betting-splits/

It's a smart move. It's good for SEO (to the extent that still matters). And I'm sure they get a lot of people who decide to take bets from that page.

For example, the Pacers were playing Brooklyn the night I wrote this. 27% of the bets were on Brooklyn at +10.5. 73% are on Pacers -10.5.

Somebody who sees that and decides to make a bet based on that information could bet either way. They could either tell themselves, "Everybody's taking the Pacers, so it must be a good bet" or "Everybody's taking the Pacers, so it must be a bad bet".

What are those two groups like when they're not betting on basketball, do you think? Do they use the same kind of toothpaste? Watch the same kind of TV shows? Vote the same way?

The public gets what the public wants

One bit of gambling lore is that there are "public" teams that get bet on more frequently, regardless of the line. Like, your cousin who's a Cowboys fan is going to bet the Cowboys on Thanksgiving regardless of whether it's a fair line or not. He'd watch the game and root for the Cowboys anyway, but it's a little more fun that way. The Cowboys aren't just a random number generator to him.

There's a social aspect to gambling now that I imagine didn't exist when it was underground. Lots of gamblers will "follow" bets that other people have placed. If the bet wins, I'm sure it's a cool communal thing to be a part of. But social media can act in opposition to the "wisdom of crowds" -- in places like reddit where users vote content up and down, the conventional wisdom is going to be amplified, and people with minority opinions are going to be suppressed. If well over 90% of sports gamblers lose money long term, the majority opinions are going to be bad.

I scraped betting percentage data from sportsbookreview (SBR) for the 2024-5 season. They don't say where they get the betting percentages from. If I had to guess, it would be MGM Grand, their primary source of other data. The SBR numbers seemed to indicate more action overall than a couple other sources I found -- the betting percentages were closer together. Other sites had games where there's 10% action on one side and 90% on the other, which seems implausible on a large volume of bets. So it's probably a pretty big site, whatever it is.

As with the data from the previous installment, there are 32 games out of 1230 missing data.

The money_percents column is the median amount bet on each team. The money_game_winners column tracks the number of games where that team got the majority of the money bet on their side. Both of these can be taken as indicators of how much teams are favored by the public.

Here are the teams sorted by money_percents. The teams near the top were less popular with gamblers, the teams at the bottom more popular.

The public favorites

The most popular teams with NBA gamblers were Denver, Cleveland, Memphis, Milwaukee, and Oklahoma City.

Cleveland, OKC and Memphis were dominant for most of the season.

Denver and Milwaukee have two of the best and most entertaining players in the league. Both Giannis for Milwaukee and Jokic for Denver are fun to root for. People like to take bets on games that are fun to follow.

The ugly dogs

The bottom teams were New Orleans, Charlotte, Miami, Philadelphia and Portland. All these teams except for Portland were totall bummers to watch and cheer for this year. They all had injuries and organizational dysfunction that led to wasted seasons. People don't like to take bets on games that are a bummer to follow.

Against the spread

Here's the same data sorted by record against the spread.

Philadelphia, Washington and Phoenix were just as terrible at the sportsbook as they were on the basketball court. OKC and Cleveland had outstanding seasons in both places.

However, there's only a rough correlation between how good the teams were at actual basketball, and at beating the spread. Minnesota, New York and Denver were in the bottom 10 by winning % against the spread, even though they had good records and were doing their best to win. Toronto and Brooklyn weren't really trying to win a lot of basketball games, but ended up in the top 10.

Which teams should the public love and hate?

I calculated the amount of units a gambler would win if they bet on each team when they got the majority of the bets. public_units is the amount won/lost betting in favor of the team, and fade_units by betting against them, when they are the public team. (The two values are different because of the vig.)

Phoenix, Sacramento, Dallas, Denver and Indiana disappointed the public the most.

This is a pretty random list of teams, in both directions. It's a good illustration that gamblingball is different from basketball. It's not clear whether gamblingball is a game with an element of skill, or if it's all chance.

Are records against the spread due to chance?

If we assume that all variations are due to randomess, each game should be a coin flip whether the underdog or favorite wins against the spread.

Calculating exact odds using the binomial distribution, 94% of NBA teams should have between 33 and 49 wins against the spread over an 82 game season.

We'd expect 2 teams to be outside that range, and there are 3. Philadelphia went 26-52 in 78 games we have data for. Even if they won the other 4 games that are missing data, they'd only have 30 wins. So that record was definitely an outlier, but overall the season was about what we'd expect based on chance.

I find it very believable that some teams are more likely to have a winning record against the spread, because they are underestimated by the handicappers or the betting public. They end up getting lines that are too generous, and thus do better than expected against the spread. Toronto could be an example of that. They were bad, but they weren't really as bad as people thought.

Other teams could be inherently worse against the spread, as well. Perhaps they are super popular to bet on, so the lines tend to move against them -- a public team. Or perhaps gamblers and sportsbooks overvalue the team -- the conventional wisdom is that they'll be good when they're not. That definitely describes Philadelphia and Phoenix.

In both cases, the teams themselves aren't necessarily doing anything to be better or worse against the spread than an average team would be. It's about the perceptions of the bookmakers and gamblers.

Do gamblers follow the record against the spread?

If a team's record against the spread is due solely to random error, then we've got a LeMartingale on our hands. The current record would have no bearing on the future record. So gamblers shouldn't factor it in when deciding to take a bet or not.

By the end of the season, there was a significant correlation between money percents and win percentage against the spread. I wanted to see how that might've changed over time. So I generated the table shown above for every single day of the season, and calculated the Spearman rank correlation on that day. Here's what that looks like over time:

The money percentages are cumulative,the mean of all games in the season that have come before -- it's not showing gamblers' betting behavior on a particular day, compared to records against the spread on that day. The graph is a lot smoother that way, but we're losing something.

It also doesn't show whether records against the spread are a Martingale or not. The correlation between betting percentages and win records increases over time, but that doesn't mean this is because gamblers are behaving rationally.

The jump in correlation around mid-Februrary corresponds to the All-Star break, which is curious.

Stay tuned; I'll have more on this.

Last fair deal in the country

(This is an excerpt from a larger project about sports gambling. Code used, and early drafts of some of the chapters can be found at https://github.com/csdurfee/book.)

Efficiency of betting markets

The efficient market hypothesis says that given enough time and competition, free markets are able to establish the correct price for a commodity. In the case of sports betting, we could think of it as the price of a money line bet.

On a money line bet, you are betting on who will win the game straight up. You get a smaller payout for betting on the favorite, and a larger payout betting on the underdog. If the money line is negative, that's how much money you have to risk in order to win $100. For example, -200 indicates you have to risk $200 to win $100. If it is positive, that's how much money you win if you risk $100. If it sounds like a bad way to write the odds, you're correct.

A market maker will respond to an imbalance in bets by adjusting the price. If CLE -300 is a good value, people will rationally want to take it, driving the price up to, say -400. If it is a bad value, people will rationally want to take the other side and the price might go down to -200. These rational actors will collectively push the price towards the best possible estimate that humans can make. It serves as a sort of collective intelligence.

In the first installment, I showed that humans are irrational when it comes to sports betting, so I was skeptical of how good, or fair, the lines could be. Could I find proof of this collective intelligence in action? Are there any obvious market inefficiencies?

The data & stuff to know

Stats are from the NBA season. I screen-scraped the data from sportsbookreview.com. All data is from the MGM Grand. Unfortunately, some data is missing from around Christmastime, and a few random days in between. 32 games are missing from the data set out of 1230 total, 2.6% of all games. These are games that don't appear on sportsbookreview's website, or have incomplete data on there.

This is an analysis of the MGM Grand's NBA lines for 2025. It's not a comprehensive guide to how the lines work.

There are always two lines on each game, one for the home team and one for the away team. Each side may have different vigs. Say for instance Bucks @ Pacers starts out at IND +3.5 -110/MIL -3.5 -110. It could close at IND +3.5 -115/MIL -3.5 -105. So it costs more to bet on the Pacers, but the actual line didn't move. I'm mostly ignoring that, but will point out when it's relevant.

"Line" and "spread" mean the same thing.

"Reduced juice" means risking -105 or -106 instead of the usual -110 to win 100. A "unit" is a gambler's standard betting size. "4.1 units of profit" would mean +$410 for a gambler betting $100 a game. Both are explained in much more detail in the book.

A note about pushes

When the final score agrees with the line exactly, neither side of the bet can be declared a winner. This is called a push. The bet is cancelled and everybody gets their money back. The casino makes nothing.

The MGM Grand always keeps point spreads on the half point (eg +6.5 or +7.5 rather than +7) so that they will never push. I don't think it's a bad policy, and I'm surprised more sportsbooks don't do it. The sportsbooks know how good their customers are at betting, so they should probably shade the point spread a half a point towards the side of the bet that has the less savvy bettors on it. (This assumes the sportsbook can identify and ban arbitrage gamblers, but more about that in the book.)

Analysis

If there is a wisdom of crowds, the final lines should be more accurate than the opening lines. Are they?

My code calculates the difference between the final score and the line, called the error. Because the MGM's lines always end in a half point, that means the error is going to be artificially high -- there will never be a game where it is exactly zero.

The opening and closing lines are a set of predictions. The smaller the difference between the line and reality, the better the prediction. Mean Squared Error is a standard way to compare two prediction systems in statistics and machine learning.

The MSE for the opening lines is 191.06, and the closing lines is 184.8. So we can say that in aggregate, the closing lines are more accurate than the opening lines.

MSE can't tell us how good the closing lines are, though, just that one set of predictions is better than another set. It's a relative measure, not an absolute one. We're squaring the error, so the MSE will always be positive. The errors in one direction don't cancel out ones in the other direction.

Let's look at how far the lines were off by. the Os are the opening lines, and X's are the closing lines. If the X is closer to the center line than the O, the market action made the line more accurate. I've plotted a random sample of 300 games to make the plot more readable.

Unfortunately, that doesn't really show us much about how or when the closing lines are better than the opening ones.

Adam Smith, Handicapper

When were the closing lines more accurate than the opening lines?

Closing lines better: 467
Opening lines better: 384 Tied: 347

If the free market were a handicapper, and we interpreted the line movements as a bet on one side, they would have a 54.88% winning percentage (and 347 pushes).

While that's a respectable win percentage for a human trying to beat the spread, I was expecting better from the free market. The market only being right 55% of the time holds true for a couple of previous seasons I have looked at as well. NBA betting, as a market, is not very efficient.

There are good reasons for that. Sportsbooks that set the opening lines aren't trying that hard to be accurate. It's just a first guess. Only a tiny percentage of money is wagered at the opening line number. However, there are good reasons why lines tend not to move very much, even when the opening line is a bad one. For an in-depth explanation, check out The Logic of Sports Betting, by Miller and Davidow.

The myth of closing line value

The conventional wisdom is that sports betting markets are efficient, so that the only way to make money over the long run is by doing better than the closing lines, picking up on any flaws in the opening lines before the market eliminates them. Anyone else can only make a profit due to chance. From this perspective, the right way to measure a handicapper's skill is how their picks compare to the closing line. Say the opening line is Nuggets -3, and I take the bet at that number. The closing line is Nuggets -6. Then I captured 3 points of value against the closing line. This is known as closing line value (CLV). (We can figure out how valuable those 3 points are, and I show how in the book.)

Beating the closing line might be positively correlated with higher profits when analyzing betting records of touts -- people who sell betting picks for money. But when the market is wrong 45% of the time, focusing too much on CLV seems like a bad idea. There's no good reason to believe that a gambler is destined to lose money by picking against the closing lines. What if their strategy is to mostly bet against the prevailing wisdom on the 45% of games where the market is wrong?

CLV is a prime example of Goodhart's Law. As a measure of a handicapper's skill, it's probably fine (though not ideal). But it shouldn't be the target. A gambler shouldn't make picks explicitly to capture as much CLV as possible.

Say the opening line is Nuggets -3 against the Timberwolves. I like the Nuggets in this matchup, but I think the public will go for the Timberwolves and it will finish at Nuggets -1/Timberwolves +1.

If I was trying to capture as much CLV as possible on this bet, I should take the Timberwolves +3 on the opening line, even though that's not the side I actually like!

If I was trying to actually win the bet, I should take the Nuggets at the closing line, hoping maybe I can get Nuggets -1 or even Nuggets +1. I can never get positive CLV on the Nuggets, because the market was wrong about them. Not me, the market!

CLV gets described as being the best way to test a handicapper's skill, but it's obviously non-optimal. Maybe it's the contrarian in me, but Opening Line Value -- identifying bets where the market is going to be wrong, and waiting till the last minute to place the bet -- is more impressive.

The best way to test a handicapper is to have them write out what they think the lines should be, rather than making a binary decision about somebody else's line (favorite or underdog). If a handicapper's lines are closer to the truth than the closing lines, they are good at handicapping. Looking at what bets they took is only a secondary signal of that. If they took Nuggets -7, is it because they thought the true line should be Nuggets -8, or Nuggets -12?

When the line doesn't move

Setting aside why the market moves in the wrong direction 45% of the time, I'm curious about the games where the spread didn't move at all. Maybe those lines were perfect as-is? If so, we'd expect to see equal splits of home vs. away winners, and underdog vs. favorite winners. There shouldn't be any bias to those games. The free market is essentially labelling these the pinnacle of the handicapper's art, impossible to be improved upon.

The difference between the predicted outcome (the line) and the actual outcome is a combination of how much the line maker got it wrong, plus random variation. So the games where the line didn't move should be totally random, right?

They're not. If we look at games where the line didn't move, the away team went 184-163 in those games. Someone betting the away team in every game where the line didn't move would win 53% of their bets, for 4.7 units of profit at full vig, or 11.2 units of profit at reduced juice.

There's also a bias towards underdogs, who went 186-161 in this situation. Always taking the underdog would give a 53.6% winning percentage, for 8.9 units at full vig, or 15.3 units at reduced juice.

There's an even bigger bias if we combine the two. Away underdogs went 122-92 in these games, which is a 55.2% winning percentage, for 13.1 units of profit at full vig, and 17.1 at reduced juice.

None of these results are statistically significant, but they are very :thinking_face_emoji:

About the vig

When the vig is imbalanced, the side with the higher vig should be more likely to win, because they're winning less money in return. Moving the vig from -110 to -115 is a way for the bookmaker to discourage bets on one side without moving the line. Likewise moving it to -105 is a way to encourage bets on that side.

Since the MGM Grand always keeps their lines on the half point, we'd expect them to adjust the vig often rather than change the spread. They do for most of the games where they didn't move the lines, but 39% of the time the vig stays at -110.

If we break down the games where the line didn't move by vig, the underdogs went 62-43 when the vig was high (-115), 74-62 when the vig was at the standard level (-110), and 50-56 at low vig (-105).

Someone taking the underdogs when the line doesn't move, and the vig is -110 or -115, would've gone 136-105 this season, a 56.4% winning percentage, and around 18 units of profit (factoring in the additional -115 vig on some bets).

Now, the strategy is pretty convoluted, and won't necessarily hold for future seasons, but it's definitely evidence there could be irrational factors at work in the market. It certainly doesn't show the market to be the well oiled machine that Closing Line Value assumes it is.

Must love dogs

Winners ended up being pretty evenly divided between favorites and underdogs by the end of the season, but underdogs were way ahead for most of the year.

Betting every single underdog against the spread over the first quarter of the season would've been fairly profitable -- a 165-136 record (54.8% winning percentage), and 15.4 units profit at full vig. People betting favorites got killed at the beginning of the season.

Dogs and favorites were basically even through the middle half of the season, before favorites finished off 167-144 (53.7% win percentage) to even things out.

Here's a plot of the winning percentage of favorites over the course of the season. I skipped the first 50 games because of noise. The yellow line represents the winning percentage necessary for betting all underdogs to be profitable (at standard vig). That happens when the favorites win less than 47.6% of the time (which means underdogs win more than 52.4% of the time.)

It wasn't until the last month of the season that blindly betting all underdogs started being a losing proposition, even factoring in the vig.

Did the lines improve over time?

I was curious if there was evidence that the errors were getting smaller, or more predictable over time.

The raw errors are too noisy to see any sort of pattern:

This is a plot of the 100 game moving average of the absolute error of the closing line. I don't see any trends to suggest the lines got more accurate with time.

The size of the error against the closing line isn't the ideal metric, because not all points are created equal -- the higher the line, the less surprising the error. (I'm going to skip discussing that for now, but it's explained in the book.)

Did the lines change over time?

I wondered whether the size of the lines changed over time -- did the games get more or less competitive over the course of the season?

This is a 100 game moving average of the average size of the spread. As we can see, the lines did get bigger near the end of the year.

It's possible the trend is due to scheduling, but the change at the end seems significant -- teams tend to give up near the end of the year. Bad teams want to be as bad as possible in order to get the best odds in the NBA draft, so they're not that competitive.

What type of games are affected by line movement?

There were 130 games where the winner flipped from the favorite to the underdog, or the underdog to the favorite, because of the line movement. In other words, these are games where either side could have won the bet, depending on whether you took the opening line or the closing line.

These games were perfectly balanced -- 65 times, the favorite won (vs the closing line); 65 times the underdog won.

What about games where the spread was extremely accurate (off by 3 points or less)? Underdogs went 138-121 in those games (53.2%).

The difference is more dramatic in games where the line was off by 1 point or less. The underdogs went 56-33 (63% win percentage). Of course, there's no way to use that as a betting strategy since we can't identify these games before the fact, but it does show a small potential bias in favor of underdogs.

What would "perfect" lines even look like?

It's rare to see NBA lines that are bigger than +15/-15 points. There were 15 this season, about 4.4% of all games. That's around one NBA game a week with a line that high.

By contrast, 31% of NBA games end with a score differential of over 15 points. That's 7x more often, roughly one game a day.

The lines really shouldn't be as large as the final score differential, because they are an estimate of the mean outcome of the game. If the Celtics beat the Raptors by 54 points, that doesn't mean the line should have been Celtics -54. The Celtics and Raptors played 4 times last season (data taken from basketball-reference). I'm going to ignore home court advantage -- imagine these are played at a neutral gym. The first game, Boston won by 3. The second, Boston won by 54. The third game, the Raptors won by 13. The last game, Boston won by 10.

Boston won by an average of 13.5 points, so BOS -13.5 would be a reasonable line for all four games, as that's the best estimate we can make of their difference in skill. Only 1 of the 4 games ended up close to that line. For the other 3 games, the error was at least 10 points. And Boston -- despite being the better team -- would have gone 1-3 against the spread. If the line for all four games was BOS -9.5, they would have gone 2-2, but the error would stukk be 44.5 points on the second game, and 23.5 on the third one.

The actual outcomes might be all over the place, but the spread isn't meant to predict the actual outcome, just the point where both sides are equally likely to win the bet.

Here's a histogram of the spreads (for the away team) overlaid on a histogram of the errors against the spread:

If we look at just the score differential, we can stick a bell curve over the top and it looks pretty normal:

Simulating games from the spreads

The problem is, these aren't outcomes from one distribution. Every game is essentially a sample from a different distribution. Each game has a different mean (the spread, or rather the ideal version of it) and a different variance (how predictable games are between the two teams). Combining them all together, the results end up looking kinda normal (because a lot of things do).

I decided to simulate the entire season to show how the point differentials are going to be much bigger than the original lines.

I simulated every game by sampling from a normal distribution with the mean set to that game's spread, and the variance equal to the sample variance of all games that season with that spread.

Here's how they match up:

I know that's a pretty rough simulation. There's some weirdness in the middle. NBA games never end in a tie, and they end in a one point difference less often than expected due to tactical reasons, so there's a little notch right in the center of the green curve. If a team is down one, they foul the other team and hope they miss at least one of their free throws. There's also more simulated games than I would expect that end with a differential of +1 or -1. There very well may be a bug in my code -- it is in the "ep 2 LAST FAIR DEAL.ipynb" notebook. So there's a big discrepancy in the middle. But the spread of the data is the same, which is the main thing I'm trying to show.

Hopefully the simulation shows that the lines shouldn't be bigger than they are, even though they are frequently off by many multiples compared to the final result. If the line is Dallas -3 and the other team wins by 27, that doesn't mean the line was off by 30 points. The line is meant to be an estimate of the mean outcome, if the teams played each other a large number of times. We only ever see one sample, though, and a lot of times it is far from the mean.

Cool Parlay, Bro

(This is an excerpt from my book about sports gambling. Code and early drafts of some of the chapters can be found at https://github.com/csdurfee/book.)

Sportsbooks have many ways of encouraging people to lose their money as quickly and efficiently as possible. One of the best ways to do this is a type of bet called the parlay. "Parlez" means "to talk" in French, so it's no surprise dudes always want to talk about them online.

The idea behind a parlay is that you can bet on multiple events at once and if they all win, you make a nice profit, otherwise you lose. On a technical level, if the first bet on the parlay wins, the winnings are immediately placed on the second bet in the parlay, if that wins, it rolls over to the third bet, and so on. It's a sequence of bets, with the stakes going up with each bet. The individual bets in the parlay are known as "legs".

I'm going to keep asking this question: why would they be offering this bet if it was good for you? Parlays might be more fun, but that just means they found a way to get you to part with your money easier, which sounds like a bad thing.

We can compare different bets by using Expected Value (EV). EV is the weighted average of all the possible outcomes. If the expected value is positive, we will make money over the long run; if it's negative, we will lose money.

The traditional payout on a 4 team parlay is 10:1. What is the expected value of such a play? is it higher or lower than taking the individual bets?

It's easy to grind the math on this one, and see which option is better. I can't say "make us more money" because both types of bets are guaranteed losers without some sort of edge.

Parlays are such a bad type of bet on the surface that to understand them, I have to give a little taste of parlay culture first.

Nephew Doug

Say you want to place some bets. You just learned about betting on sports, so as a newbie you're trying to learn from experts by listening to gambling podcasts. These guys have been gambling for decades. Surely they must know what's up. Their wisdom will give you the edge for sure. Surely they will keep you from making costly mistakes.

You've listened to Nephew Doug's podcast, and wrote down his Locks of the Week. You're ready to enter them into your betting app, which has been hand-optimized to be as much of a dopamine and money sink as possible.

Because you listen every week, you know Nephew Doug has been burdened by the Gods with the gift of prophecy. Just ask him. He's like a modern day Cassandra, only it's about how the Cowboys are always going to suck.

Now, the Gods like a little competition. The Olympics were invented as a religious ceremony in their honor, after all. But they're not above making a call from on high to nudge the result a little bit. Yes, Zeus is definitely a Chiefs fan.

So you believe ahead of time Nephew Doug's picks will win 55% of the time. Which way of betting these picks will bring you the most money in the long run?

1) "throw 'em all in a 4 team parlay" like Doug and his buddy Jorts Guy do
2) randomly choose 3 of Nephew Doug's picks and bet them individually. Don't do anything with the 4th one.

Maybe option 2 seems insane to you. But let's game it out.

You listen to Nephew Doug, but I don't. My assumption would be this guy is no better than a coin flip -- he only wins 50% of the time, or close to it. Parlays at old school casinos pay at 10:1 and online sportsbooks pay 12.28:1. Let's see how that works out at 10:1 payout, the ones Jorts Guy and Nephew Doug were cutting their teeth on back in the day.

There are two ways to do the comparison. We could bet $100 on the parlay, and compare to putting $25 on each leg. Or we could compare $100 on the parlay to $100 on each leg.

Neither way of comparing is entirely fair, though, because the stakes increase throughout each leg of the parlay. If a gambler bets $100 on a 4 team parlay, they're risking $100 on the first leg. Assuming they keep winning, they're risking $190 on the 2nd leg, $300ish dollars on the 3rd leg, and $600ish dollars on the 4th leg.

For each leg of the parlay, the gambler should consider the risk of losing out on $600 if they took a 3 team parlay and it won. Risking $100 on the 4 leg parlay is sort of like taking 4 different $600 bets, because each one could cost the gambler that much if it loses.

I will be comparing risking $100 on the parlay versus $25 on each of the legs.

7x worse

This difference only matters for bettors with a high degree of skill. For the beginner, who we can reasonably assume will no better than a coin flip, the parlay is always a worse option. Almost 7 times worse. The parlays lose about 30% per bet, versus 4.5% for the straight bets.

Yikes. Maybe parlays are fun, but it's like blowing the whole week's vig budget on Sunday when compared to taking one regular bet a day.

Even a stretch of good luck is going to get swallowed up real fast if you're losing 30% of the stake on average. These types of parlays are a sadness machine.

Partially blessed

What if Nephew Doug truly has been partially blessed by the Gods, and can beat the lines 55% of the time? That's pretty good. Only a small percentage of sports bettors can achieve that, in my research.

The gambler should turn a profit either way, but maybe parlays offer a better return?

The parlays have an expected return of +0.66%, versus +5% for the straight bets. The straight bets make 7.6x as much money.

OK, what about if we just don't play the 4th bet? We will bet on the first three legs, and don't play the 4th one. We put the $25 for the fourth bet in our piggy bank and earn a 0% interest rate.

We're throwing out a bet with positive expected value, and risking angering the Gods by ignoring their chosen sports prophet, Nephew Doug. Perhaps that will tilt things in the parlay's favor.

Nope! The straight bets have a return of +3.75%, which is still 5.7x better than the parlays.

Finally, let's say we flip a coin to decide the 4th bet. It will only win 50% of the time, which means it's a guaranteed loser because of the vig -- you win less than you have to risk. (There is much more about the vig in the book.)

Nope! The coin flip hurts our profitability, but we're still clearing +2.6%, which is 4x better than the parlays. We'd have to do 2 of 4 bets by coin flip for the parlays to be more profitable.

To be fair, 55% is just barely profitable for an old-school parlay. The profitability increases exponentially as the win rate goes up. There is a win rate where parlays would make more money than the straight bets. If you win 100% of the time, the parlay is definitely a better deal, right? 10x profits taking the parlay versus 4x taking the original bets.

Successful handicappers who sell their picks on the internet are only winning around 55% of the time. If you have to do as well at something as people who do it for a living just to break even, that's not a great plan.

Online Parlays

Online 4 leg parlays pay out $1228 per $100 risked, which make them a little less bad. However, they're still way worse for the average gambler than taking the straight bets. At a 50% win rate, online parlays have an expected return of -17%, versus -4.5% for the straight bets. So they're 3.7x worse. They're half as bad as the old school parlays, but still terrible.

That $1228.33 payout for online parlays was chosen deliberately. It means that online parlays have the same break-even point as the individual bets (at standard vig) -- winning 52.4% of the individual bets. Because parlay profits climb exponentially, that means a skilled bettor with a 55% win rate will have a much higher EV with the parlays. They will have a +21.6% rate of return, versus +5%.

EV doesn't describe the range of outcomes

Expected Value is a good way of determining whether you can make money taking a certain type of bet, but it doesn't describe the range of possible outcomes. With parlays, a lot of those outcomes are bad, even for a gambler with enough skill to make them more profitable on paper.

Simulations are great in this sort of situation, because they can convey the range of possible outcomes in a way EV can't. I simulated 200 individual bets versus 50 parlays, and ran that 10,000 times. Our virtual gambler wins 55% of the time, and bets $100 on parlays, $25 on each individual bet.

The individual bets made more money (or lost less money) than the parlays 38% of the time. Just because the expected value is higher for the parlays, that doesn't mean they will always be more profitable.

More concerningly, the parlays had big losses (down more than $1000 on $100 bets) 33% of the time. That only happened 0.2% of the time on the straight bets. There were almost no small losses with the parlays, because the payout is so high and the number of bets (50 parlays) is so low. Winning one more parlay could be the difference between being down $1000, and breaking even.

Expected Value can't be the only thing we consider, because we don't live an infinite life. Our whole life is a small sample size, if the variance is high enough. Our bankrolls are always finite. The fact that we might make more money over 100 years is undercut by the fact that we'll die or go broke before then.

Even for the skilled bettor, parlays make it more of a game of luck. Let's say my simulation represents an entire season of betting on basketball. Imagine playing the parlays with a 55% win rate, being better than almost everybody at handicapping, and still having massive losses one season in three? When you'd make more money taking the individual bets 40% of the time?

Parlay psychology

There's a weird psychology to the parlay as well. These parlays only win once every couple of weeks, so they'd be kind of a grim strategy in practice. A good bettor taking the individual bets will have winning days over half the time. Is it better to feel like a winner most days, or every other week?

Most people don't have to consider that question, though. Without a huge amount of skill at betting, the only scenario where they might make sense is as a lottery: something that can deliver a tiny chance of massive payouts without any skill.

What happens if we do the same simulation, but the win rate is 50%, like a coin flip, or most sports bettors? The parlays make money 38% of the time! Taking 200 straight bets will only make money 26% of the time. Isn't that a little surprising? Even though the straight bets have better expected value (well, less bad), they also offer less of an opportunity to make money based on chance alone.

What about over a longer time frame? I simulated 500 parlays versus 2,000 straight bets by flipping a coin. The parlays make money 12% of the time, versus only 1.74% of the time for the straight bets. However, the losses are much, much bigger than the wins:

12% is 1 in 8, which isn't that rare. 500 parlays could end up stretching over multiple seasons, perhaps a lifetime of sports betting. That means somebody who was making picks by flipping a coin could end up looking like a pretty good bettor for a long stretch if they are taking parlays. Of course, 88% of people will lose money, far more money than the 12% of profitable bettors win. In practical terms, it's like a lottery where you have a 12% chance of winning $3617, but an 88% chance of losing $10,221.

It's really, really hard to tell if someone taking bets at long odds is actually good at betting, not without thousands of documented bets. Over 50 parlays, or even 500, it's not that surprising for some people to look smart on parlays by chance alone. It would be much better to assess their skill based on the individual bets they took within the parlays.

Other parlays

Parlays with only 2 or 3 legs have higher relative payouts compared to 4 leg parlays, so they're not nearly as bad. They'll also have less variance in outcomes than the 4+ leggers. I'll leave those calculations to the reader, though. While they're one of the least bad bets offered by the average sportsbook, it's extremely rare to see people talking about 2 or 3 leg parlays online. Gamblers love the higher payouts and drama of parlays with a bunch of legs. I will have a lot more to say about how people actually play the parlays in a future installment.

Same Game Parlays (SGPs) are a new type of bet which allows the player to make multiple wagers on the same game. For instance, someone could bet on their favorite team winning and their favorite player scoring over a certain amount of points and the guy they hate on the other team scoring under a certain amount of points, with a big payout if all 3 things happen. SGPs have become the most popular type of bet I see online, and deserve their own lengthy discussion. For now just think of them as the vape pens of betting. They're obviously super addictive, extremely popular with younger people, and you can't really know what's in them, but it's probably bad.

Gambling gurus

I've taken up lot of hobbies over the years. It seems like every time I take up a new hobby, I end up spending a lot of money on stupid stuff at the beginning. Then I get into it more, and realize what matters.

There is an adverse selection process, where people who are new to a hobby have no idea what's actually good, what they actually need, or what things should actually cost. Filled with zeal to get started, they end up overpaying for inferior goods. Same thing for travelling in a new country. The guys at the train station trying to hustle you into a taxi are definitely not hooking you up with the cheapest way to get around.

Betting experts, the kind who have podcasts and big followings on social media, are supposed to know more about this stuff than the average person. They're supposed to be like the guidebooks, or the seasoned traveller telling the newbie to walk 2 blocks and take the metro for $2 instead of paying $100 for a taxi. Yet they're pushing parlays and other sucker bets, and pushing sportsbooks that charge full vig and ban anybody who wins too much. The "experts" are pushing beginners into bad situations.

Most of them don't do any better than flipping a coin, so I doubt they're actually making money on their "can't miss locks of the week". Gambling ads, sure. Everybody's taking gambling money right now, regardless of how it will hurt their brand, their audience, and sports long term. Clearly there's a lot of money in talking about it. That gambling money is there because these self-styled experts bring the sportsbooks more customers -- losing customers, specifically.

Where's all that ad money coming from? The sportsbooks wouldn't be throwing money at influencers who were actually winning consistently. Any gambling show they sponsor is pretty much guaranteed to lose you money, or it wouldn't be sponsored. Any bet they're promoting heavily, like they do with parlays, is because it makes them more money that way. You shouldn't need to know any math to figure out why they're pushing teasers and parlays and "profit boosters". I love that last one. It's like saying Idi Amin served mankind. Why would they care about boosting YOUR profits?

Unlike gamblers, sportsbooks don't make negative expected value plays due to emotions or lack of information. Your irrationality is their entire business.

Sports betting and the limits of rationality

Earlier this year, I wrote most of a book about the psychology and mathematics of sports gambling called Your Parlay Sucks. The book never quite came together, and is probably too weird to ever get published, but it has some interesting bits, so I figured I'd share them here.

Why did I get interested enough in sports betting to write a whole book about it? I think it's because I'm fascinated by the limits of rationality. Philosophers, economists and social scientists would like to treat humans as though they are capable of making rational decisions. That conflicts with the real world, where even pretty smart people make irrational choices. I certainly have.

Sports betting is a sort of rationality lab. You and I might have different values or beliefs. What's crazy to me might be normal to you, or vice versa, but we should both be able to agree that placing bets that are guaranteed to lose money is irrational.

This paper, "Intuitive Biases in Choice versus Estimation", is a wonderful illustration of cognitive bias and irrationality in the realm of sports betting.

The researchers had people bet on NFL football against the point spread. If you're not familiar, the idea behind the point spread is to attract an equal amount of action on both sides of the bet by handicapping one of the teams. If you bet on the favorite, they need to win by at least the amount of the spread for the bet to win. The other side side wins if the team loses by less than the spread, or wins the game outright.

Gamblers can bet either side, and if there are more bets on one side than the other, the sportsbook can change the spread to attract equal action. So there's a potential for the wisdom of crowds to kick in, the invisible hand of the market moving the line towards the best estimate possible.

Of course, that depends on gamblers being rational. A rational gambler has to be willing to take either side of a bet (or not bet at all), depending on the spread. If the spread is biased towards the underdog, they should be willing to take the underdog. If it's biased towards the favorite, they should take the favorite. And if the line is perfectly fair, they shouldn't bet at all.

As I showed a while back with ensemble learning, the wisdom of crowds only works if the errors that people make are uncorrelated with each other. If most people are wrong about a particular thing, the "wisdom of crowds" will be wrong, too.

This study found that people are consistently irrational when it comes to point spreads. They will tend to bet the favorite, even though both sides should have an equal chance of winning. It's probably easier to focus on which team is better, and assume that the better team is more likely to win against the point spread as well. It's harder to imagine the underdog losing the game but winning the bet, or pulling an upset and winning outright.

The study took things further and adjusted the lines to be biased against the favorite team, so that taking the favorite would be guaranteed to lose more than 50% of the time. They even told the gamblers that they did this. And the gamblers still overwhelmingly picked the favorites. The researchers continued the study for the whole season. Even after weeks and weeks of steadily losing, being told over and over that the lines are unfair, the gamblers still preferred to take the favorites. They never learned. The participants got to keep their winnings, so they had an incentive to be right. And they still couldn't do it.

Sportsbooks have a lot of ways of trick people into taking extra bad bets, as I will show. But they don't really need to. People will consistently take bad bets even if they should know they're bad bets.