Sunday 12 October 2014

Obfuscation And Conditional Bets

The ongoing issue of the price at which a selection or tip should be recorded continues to be debated. I attempted to explain my thoughts on this on Twitter last night, but the limit of 140 characters means that this medium doesn't lend itself to considered thought, so here's another attempt to get some of my ideas and opinions across. The post is written with football betting in mind, and assumes a majority of service subscribers are UK based.

In a nutshell, the problem is that most tipsters want to record the highest price they can get away with, (the better the profits appear to be, the greater the probability of new subscribers signing up in the future), while everyone else wants the recorded price to accurately reflect the quality of that service.

While the price on a casino bet is fixed, prices on sports events are dynamic. Not only do prices change between the opening of a market and the close at kick-off, but at any one moment in time, there are broad differences between sportsbooks themselves. Manchester City play at home to Tottenham Hotspur next Saturday, and prices for the home team range at this moment (using Sky Betting's Oddschecker site) from at least 1.4 (Spreadex) to 1.5 (four firms). Oddschecker include just 22 books, the most notable omission being that of the punters' favourite Pinnacle Sports.

Services have two choices. They can either record their official service price themselves, or they can effectively outsource that process.


If services choose the first option, then they need to take a few considerations into account. When does the price get recorded? What book or books are offering the price? Do most subscribers have access to place bets at those books? How solid is that price? And most importantly how many subscribers have a realistic expectation of obtaining that price?

The first consideration is not so important with top games such as the EPL. Obviously a service can't record a price from prior to sending out selections, and needs to wait a certain period of time before recording them.

In regard to what books are offering the price recorded, it would be somewhat disingenuous in the City v Spurs example to record 1.55 based on a price that was offered for five minutes by a recently opened sportsbook in Outer Mongolia. Most subscribers, and probably not the service themselves, would be unable to take such a bet.

In a liquid market like a Premier League game, it would be hard to take issue with a service sending out a City recommendation recording 1.5. It's currently generally available at bigger named firms (Coral, Ladbrokes, William Hill, Stan James) and although most serious investors will long ago have had their accounts with these firms either closed or limited, that's an issue for the individual to work through. If those four are offering 1.5, most serious bettors will be able to obtain at least that price. It would be unfair to the service to exclude these names, and a price that is available at more than one book is likely to be more stable than one stand-out price would be, e.g if Labrokes were offering 1.52.

Things get a little more complicated in a less liquid market such as the Conference. Here one service can move the markets, and apparently does if the TFA emails are anything to go by! Graeme mentions one service, Blogabet, (with which I am not familiar) saying:

Given Mark can only quote odds which are available at the time of release, he is pretty relaxed about odds movements as at least when he releases his bets, the odds are there. The fact they might only be there for 10 seconds is something that doesn’t sit comfortably with me but then again, that’s an issue for Mark and Blogabet.
While 10 seconds might be an exaggeration, recording a price almost immediately suggests that the service provider understands that it's a price that will not be attainable for the majority of subscribers, and that's what shouldn't sit comfortably with anyone. Essentially in these illiquid markets, the prices are too soft to support the money coming in. As Graeme eloquently phrased it:
“some bugger took 0.85pts off one at Pinny at 7pm on the dot”
“We all go for same bets at once in poorest liquidity league”.
It's apparently a big problem if prices are moving by that much. I'm not sure I fully understand waiting until a certain time to release selections anyway. If you let people know what price they should be looking for at a minimum, then why not send the selections out as soon as you have them? Some people might like a set time, but no time will be convenient for everyone, and if anything is going to trigger a plunge in prices with the books, it is dozens of people suddenly piling in on a soft price at 7:01pm on a Thursday evening or whenever.

One final thought for anyone favouring self-recording of prices. Use the prices that you yourself are able to obtain at some point after sending out selections, and ideally after more than 10 seconds has elapsed. It shouldn't be unreasonable to self-audit and show subscribers evidence when sending out the update or the following set of selections.

Out-Sourced Recording

Rather than self-record official service prices, another option is to take the price as recorded by an independent third party at a future time. It's the approach I choose to take because it takes away any concerns about timing or availability, and frankly I have the freedom to do this because this is a hobby for me, and official returns are less important to me than perhaps they are to others. The method I use is to take the prices from Pinnacle Sports as recorded by Football Data Co uk  

It isn't perfect, but it's totally transparent. Pinnacle are (or were) widely available with their policy of using incoming money to refine their lines, rather than to close or limit accounts. They are competitive, although they can often be beaten, (for example they currently offer 1.456 on Manchester City).

The prices are taken on either a Friday afternoon (for weekend matches) and a Tuesday afternoon (for the midweek games). I am not aware of anyone providing 'official' closing (kick-off) prices, but 24 hours or so before most games is acceptable.

Conditional Bets

Apparently my Twitter attempt at explaining the logic behind 'conditional bets' apparently failed miserably, with Football Investor writing:
I really don't get the concept of conditional picks. I can see it alienating a lot of members wrong side
I'll have another go here. Basically it's a necessary protection for the service against a dramatic price movement after releasing selections. The key to remember here is that any service worth its salt is not sending out selections to be backed regardless of price. The name of the game is value, and a selection is only made because it represents value assuming a certain price can be obtained. It would be unfair to a service to expect them to send out selections early in the week, and hold them accountable against prices perhaps three or four days in the future, especially when the service states "do not make this bet if you can't get better odds than..."  There has to be some protection. This policy has been well received:
I value your service very highly, so highly in fact it is the only one I am subscribed to as a 'paid service'. I think you're very fair, overly so in your recording of prices and can totally except you cannot record prices of draws below 3.15 because of their lack of profitability long term.
So that's the concept. Not one person has suggested this is in any way unfair, (at least not once the logic is explained to them). Out-source the bet recording to an impartial third-party, and protect yourself against drops in price by having a minimum in place. To me, it's a win-win. The service can send out selections knowing that they will be recorded at or above a certain price. The subscriber knows what price to look for, and if they can beat that price (as is usually the case) then great, if they can't, then the selection was never a value bet anyway. How any member could get upset about such an idea seems odd to me. I suppose if a service simply sends out a selection with no mention of price, then later saying it was a no-bet won't sit well, but surely no one simply says "Back Dover Athletic" and leaves it at that. A selection is only a selection at a certain price. If the price moves wildly, then the value is on the other team. It's how value works.

As I said earlier, the official prices I am recorded against aren't hugely important to me. I know that they are beaten more often than not, but I'd rather have a P/L that reflects the worst case scenario than have an inflated one that just doesn't reflect reality.

The ultimate measure of a service is its retention rate. If subscribers return year after year, that's the true measure that you are doing something well. Every subscriber keeps their own P/L and I doubt that any two have the same returns after a full season. And it's fine with me that all (including my own) will be above my official recorded results.

1 comment:

Greekvik said...

I really like the idea of conditional bets as a fair and useful tool.

As punter we have basically two demands
a) At the time when we decide if we want to sign up or renew a subscription we want a benchmark to compare the performance from different services.
b) When we have decided to follow a service our interest change. Now we want an estimate of the value of a potential pick at the time we place the bet and with the best price that is available among the bookmakers where we are allowed to place a bet. In reality we have no more a direct interest in the recorded price from the service. Our direct interest is to know if a potential bet has value or not with the odds we can obtain. The focus has moved from the recorded price from the tipping service. The focus is now the available odds for a potential pick. To make a wise decision we want an estimate from the tipping service of the lowest odds where a potential pick still has value.

The concept with conditional bets is flexible both for the punters and for the tipping services. As punters we will not follow the same strategy. But if we are serious about our betting activity we will all focus on an estimate of the value of a potential pick.

For the tipping services the concept is too flexible. The service might have different strategies for the lowest odds that should be accepted.