Friday, 2 March 2018

Major Losses

A rare visit to the Betfair Forum led me to a YouTube video featuring a TEDx talk from a former problem gambler. After leaving the Army, the speaker somehow managed to lose £750,000, as well as his wife. 

One slide from the presentation looked familiar, but I can't for the life of me place why:
It wasn't the happiest of talks, (possibly the most upsetting part was that five million people buy the Daily Mail each day), although the ex-Major seems to have got his act together, at least for now, but is a good illustration of how vulnerable some people are to self-destructive behaviours.

Somewhat related was another YouTube talk I found today on the topic of Risk Intelligence, which included this slide:
The speaker, Dylan Evans, explains how for problem and leisure gamblers, betting isn't about making a profit, it's about the thrill of the win. 

For expert gamblers, there is no thrill, it's work. It's something I've written about previously - if you get excited about a big win, you should probably quit betting. 

Evans describes the motivation of the expert gambler as "the cold, rational pursuit of profit, with a certain degree of intellectual satisfaction", something else that I have long suggested, for example these words from a 2010 post on Why We Gamble:
I do find trading and investing a challenge, but an intellectual challenge rather than anything resembling a “war”.
He also talks about how expert gamblers don't see betting in terms of the maximum amount they might win but in terms of expected value, and that by thinking in this way, bets are considered with a longer time horizon.

He ends with a Damon Runyon quote: 
The race is not always to the swift, nor the battle to the strong, but that is the way to bet.  

Thursday, 1 March 2018

The Rule of 40%

There was an embarrassing error in the Wall Street Journal’s article on pundits and the strategy of the 40% probability claim. 

The full article is below, but first see if you can spot the error in this section:

Citigroup’s Mr. Suva forgot to hedge. He put a 40% chance on Apple buying Netflix, but also a 25% chance Apple buys Walt Disney Co. , a 10% chance each it buys one of three videogame makers, and a 5% chance it buys Tesla Inc. That sums to 100%, implying it is mathematically certain Apple buys one of them.
How Do Pundits Never Get It Wrong? Call a 40% Chance

Talking heads have learned that forecast covers all outcomes; ‘I just said it was a strong possibility.’

What are the chances that readers will make it to the end of this article? About 40%.

If you do make it, that prediction will look smart. If you don’t, well, we said the odds were against it.

Such is the nature of the 40% rule, a favorite forecasting tactic of Wall Street analysts and other prognosticators trying to make a bold call without being too bold.

Former British Prime Minister Tony Blair said last month there’s a 40% chance that Brexit will be reversed; Citigroup Inc. analyst Jim Suva wrote that there’s a 40% chance Apple Inc. buys Netflix Inc.; and Nomura Holdings Inc. economist Lewis Alexander said there’s a 40% chance Nafta gets ripped up.

The nice thing about 40% is that you never have to say you were wrong, says Peter Tchir, a market strategist at Academy Securities. Say you predict the Dow Jones Industrial Average has a 40% chance of hitting 30000 before year-end.

“Get it right and you can say ‘See, I was telling everyone it could happen,’ ” he says. “Get it wrong and you can weasel your way out: ‘I didn’t say it was likely, I just said it was a strong possibility.’ ”

With a 24-hour news cycle, outlets from cable channels to newspapers are always looking for an expert to weigh in. If they offer an audacious estimate that will get clicks, all the better. The trend has boosted the industry of analysts and talking heads who predict everything from election outcomes to corporate earnings.

A whiff can ding a forecaster’s reputation.

Nate Silver became America’s most famous election forecaster when he called all 50 states correctly in the 2012 presidential election. Four years later he was criticized for repeatedly projecting that Donald Trump stood no chance in the Republican primary and for his final pre-vote projection that gave Hillary Clinton a 71% chance of victory.

Mr. Silver says he deserves some criticism for his primary projections, but not his general election forecast, which he called “highly informative and useful” since others gave Mr. Trump a smaller chance.

To protect their reputations, pundits hedge. They may not provide a date by which a forecast will occur. They often “cluster” forecasts together with other analysts around a “consensus” figure so that everyone will probably be the same amount of wrong.

Citigroup’s Mr. Suva forgot to hedge. He put a 40% chance on Apple buying Netflix, but also a 25% chance Apple buys Walt Disney Co. , a 10% chance each it buys one of three videogame makers, and a 5% chance it buys Tesla Inc. That sums to 100%, implying it is mathematically certain Apple buys one of them.

A Citigroup spokeswoman said Mr. Suva doesn’t believe a deal for one of those companies is guaranteed. She said the forecast was really a conditional probability, contingent on Apple using its huge cash pile for what she called a “mega deal,” which she said Mr. Suva actually views as less likely than a large stock buyback. The conditional probability wasn’t specified in Mr. Suva’s research note.

“Pundits and gurus master the art of going out on a limb without going out on limb,” says Philip Tetlock, a professor at the University of Pennsylvania who has made a career analyzing which people forecast well, and why. One of his pet peeves is how gurus use vague terms like “distinct possibility” instead of percentage odds when they describe probabilities. That makes it easy to wiggle out of, or take credit for a forecast, since it isn’t clear at all what a distinct possibility is.

But one drawback of percentage odds, Mr. Tetlock says, is that people are often unclear on what they actually mean.

Mr. Silver can relate. Some of his harshest critics took his 71% projection of a Clinton victory as a sure thing that she would win, he says. “You wouldn’t cross the street if there was a 30% chance you’d get hit.”

Courageous contrarian calls are the best way forecasters capture the public’s attention, and get television time. New York University Professor Nouriel Roubini was dubbed “ Dr. Doom ” for correctly predicting the financial crisis. Then in 2010 he projected a 40% chance of a “double-dip recession” in the U.S. It didn’t happen.

Mr. Roubini says he doesn’t remember the projection, but that he takes pride in sticking his neck out, as with his latest call that Bitcoin is the biggest bubble in history and will go to zero.

“I would not rule out that I’ve committed the sin of the 40% rule,” said Prof. Roubini. “Everybody has done so.”

“There’s an aspect of infotainment” that Wall Street forecasters always keep in mind, says John Kilduff, portfolio manager at commodities hedge fund Again Capital. In September 2015 Mr. Kilduff told CNBC viewers that crude oil had a 40% shot at falling to $20 per barrel. Then at $45, oil followed its downward trend before bottoming at $30.

“You’re always riding the hero-shithead roller coaster,” says Mr. Kilduff, “we all have plenty of haters, and they’re even more visible now with Twitter . ” He noted one correspondent who took a forecast personally. “Hope you lose EVERYTHING [on] your short,” the person wrote in a salty email reviewed by the Journal. The correspondent also called Mr. Kilduff ugly.

“The old 40% trick!” recalled Stephen Roach, formerly Morgan Stanley’s chief economist. “A warning of a looming forecast change, a rising risk assessment, a way to cover your rear—or a combination of all three.” Mr. Roach said that by stamping a 40% probability on a possible outlier he could call clients’ attention to shifting winds without changing his underlying forecast.

A nonrigorous examination of Mr. Roach’s past forecasts showed he put a 40% chance on two recession predictions in 2002 and 2004, and then another recession projection in 2010. All of those he got wrong, or rather, got right, since he said the odds were against.

The 40% rule can be useful for all manner of punditry. British boxer Anthony Joshua speculated in 2015 that underdog Tyson Fury had a 40% shot to beat heavily favored champ Wladimir Klitschko. Mr. Fury won, and now wants to fight Mr. Joshua. A spokesman for Mr. Joshua didn’t respond when asked what chance the boxer would give himself against Mr. Fury.

By the way, if you made it this far, we always predicted you might.

There was also another nonsense click-bait headline and article from the Yahoo!Finance pages this week.
The MarketWatch headline read:

Steve Wozniak had $70,000 in bitcoin stolen after falling for a simple, yet perfect, scam

Well, not exactly. At the time the Apple co-founder tried to sell his 7 Bitcoins, they were worth about $700 each, so the writer is being somewhat disingenuous in claiming that the loss was $70,000 when it was actually less than $5,000.

Then there’s a Mashable article on the same topic with the false headline:

Even Steve Wozniak said he fell victim to a bitcoin scam
No, he didn’t fall victim to a bitcoin scam. He fell victim to an old fashioned credit card scam, and that the object stolen happened to be bitcoins is irrelevant.
As for the probability error in this post's lede, anyone who has a basic understanding about probability will know that the probabilities of independent events do not sum as the authors suggest.

Using their numbers, I make it a 31.16% chance that Apple buys none of the companies listed, not 0% as the writer suggests.

I’m not suggesting that any bet listed in the example here would be the best value ever, but should Crystal Palace be quoted at 2/1 next season to win the Premier League, 2/1 for the FA Cup and 2/1 the League Cup, the probability that they will win one of the competitions is not 100%.

Someone miserably failed Basic Probability 101.

Tuesday, 27 February 2018

The Unimaginative Fool

A year ago, I wrote about Warren Buffett's annual letter to shareholders of Berkshire Hathaway, and as tends to be the case with annual events, the 2018 edition is now available, though at 17 pages, a lot shorter than his usual missive. 

As usual, the letter is full not only of common sense, but also of amusing lines.

On acquisitions, he writes:

Why the purchasing frenzy? In part, it’s because the CEO job self-selects for “can-do” types. If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life.
On the Berkshire 5K run this coming May, he writes: 
Entrants in the race will find themselves running alongside many of Berkshire’s managers, directors and associates. (Charlie and I, however, will sleep in; even with Brooks running shoes, our times would be embarrassing.) 
On retail 'savings':
Remember, the more you buy, the more you save (or so my daughter tells me when we visit the store).
As his daughter is 64, I'm not convinced this is a true story.

On dining:
Show you are a sophisticated diner by ordering the T-bone with hash browns.
On the magic of compound interest and the benefits of a buy and hold strategy, Buffett writes, after showing a chart of short-term price declines in the last 53 years:
This table offers the strongest argument I can muster against ever using borrowed money to own stocks. There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions
As I mentioned last year, there are always parallels with sports investing, and that last sentence certainly applies to sports investing. 

Buffett continues:
In the next 53 years our shares (and others) will experience declines resembling those in the table. No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow. When major declines occur, however, they offer extraordinary opportunities to those who are not handicapped by debt. That’s the time to heed these lines from Kipling’s If:
“If you can keep your head when all about you are losing theirs
If you can wait and not be tired by waiting
If you can think – and not make thoughts your aim
If you can trust yourself when all men doubt you
Yours is the Earth and everything that’s in it.”
Other words of wisdom that stood out to me:
In the meantime, we will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.
On risk:
Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained. 
On self-delusion, and also with relevance to sports investing and those promises of riches beyond your wildest dreams: 
As well-known analyst V.J. Dowling has pointed out, the loss reserves of an insurer are similar to a self-graded exam. Ignorance, wishful thinking or, occasionally, downright fraud can deliver inaccurate figures about an insurer’s financial condition for a very long time. 
Finally, most readers will be aware of the ten year $500,000 bet Warren Buffett made in 2007 that passively investing in the S&P 500 would beat any portfolio of at least five actively managed funds. As the years ticked by, the result was never in doubt, with 2008 the only year where the S&P 500 was beaten. 
The bet illuminated another important investment lesson: Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential.
One very recent example is that after the markets entered correction territory a little over two weeks ago, the three main indexes I track are all back within 3.5% of their all-time highs, and in profit on the year, while the Brexit handicapped FTSE languishes a little further back, and negative in 2018, for those who didn't take my advice to follow US indices.
In more traditional financial markets, once again the main US benchmark index outperformed the UK's FTSE100. Only 4 times in the last 24 years has the FTSE prevailed, and the disaster that is Brexit means the US and Overseas markets are where most of my investments will again be in 2018.
Back to 'the bet' and Warren Buffett summarises:
Let me emphasize that there was nothing aberrational about stock-market behavior over the ten-year stretch. If a poll of investment “experts” had been asked late in 2007 for a forecast of long-term common-stock returns, their guesses would have likely averaged close to the 8.5% actually delivered by the S&P 500. Making money in that environment should have been easy. Indeed, Wall Street “helpers” earned staggering sums. While this group prospered, however, many of their investors experienced a lost decade.
Performance comes, performance goes. Fees never falter. 
In case you've missed earlier posts on the subject, of which there are several, invest in low-cost index funds and stay the course. 

Friday, 16 February 2018

NBA Systems Half-Time Report

With the NBA idle this weekend for their All-Star weekend, it's a good time to look at how the current season is playing out. 

Some of you will recall that back in September, I made a case for backing the Overs on games where the total was set at 215.5 or higher, a system I named The Beast. How many of you took action on this I don't know, but you missed out if you didn't.

I predicted a very manageable average of around two bets a day, and the 264 selections to date is very close to that number, and the results so far are very good:

The higher totals are even more profitable, for example 219.5 and higher has a similar P and L but from just 57% of the bets:
Although the BLUnders system lost money last season for the first time since 2010, I've been excluding the high total games (over 215) resulting in just 25 selections so far this season, and only one in the entire month of January, but the 9.3% ROI so far is a good reward for patience. 

Friday, 9 February 2018


Another disappointing day in the markets yesterday, as the markets move into 'correction' territory, my draw-down moves into six figures and my decision not to apply for early retirement is looking fortunate, if not prescient.   
As I said in my last post, perspective is important, and overall I'm back where I was at the end of November, which doesn't seem so bad. As Winston Churchill said:
The farther backward you can look, the farther forward you can see.
This tweet from a couple of days was rather bizarre:  
The sooner the market realises it is making a big mistake, the better! The trouble is, this is not how markets work. My Economics A Level was a few years ago now, but markets have never been so simplistic.

Before my last trip, I was looking at the EPL Draw, with games between the "Big 6" of particular interest after David Sumpter's observations that the:
"Draw in these big matches is value if greater than 3.2ish"
Previous posts have shown that using Pinnacle Sports closing prices, backing the Draw in matches featuring two Big 6 teams is profitable across the board.

Broken down by a number of parameters, here are the results for all qualifying matches, for Big 6 matches, for non-Big 6 matches, for a Big 6 team versus a non-Big-6 team, and for "Little 14" matches:
The edge for the Draw in Big 6 contests is clearly bigger than in other matches, (only one category sees the Big 6 returns beaten, albeit in a low sample size category) but there are some clear trends which apply to all matches.

It's unfortunate that there are only 30 Big 6 matches a season, but there are another 350 each year where the Draw still offers potential value.

Clearly it's not a smart strategy to blindly back the Draw in matches where just one of the teams is a Big 6 team for example, but certain matches between Little 14 teams show a positive ROI from a few hundred matches.

The premise that in matches between 'relatively' closely matched teams, the market underestimates the draw, appears to be backed by the evidence, at least in the EPL.     

There's one Big 6 match this weekend, Tottenham Hotspur v Arsenal, with Spurs currently at 1.952 with Pinnacle, and a 'true' price of 1.98 (currently 2.0 is available on the exchanges). 

Previous Big 6 matches where the win probabilities are approximately the same as this game show a profit from backing the draw of 3.84 points from seven matches:
For all matches of a similar profile, the profit is 21.31 points from 111 matches, an ROI of 19.2%.    

Wednesday, 7 February 2018

Fear Index

A little under a year ago, I wrote about the Vix trader nicknamed '50 cents' who was obsessively buying call options priced 50 cents. With barely a blip over the past year, 

the bets have been steady losers, although they were likely a hedge, but out of nowhere at the end of last week they would have been very profitable. Here's the five day chart:
After a year of trading below 20, the Vix traded at over 50 yesterday before closing at just under 30.

Who the trader worked for was revealed in May last year and this Business Insider article from last August was published after a $21 million profitable day, although not a win that made much of a dent in the estimated $150 million lost prior to that in 2017.

Personally speaking, Cassini's spreadsheet has struggled this week, with a single worst ever daily decline, a record that will hopefully last for a very long time, but with the US markets finishing strongly yesterday, I'm hoping for a big day today, although the Nikkei 225 has faded after a strong start. It always helps to maintain perspective after a market correction, and going back over the past seven years, the markets have been kind:

The biggest pull-back came in the August 2015 to February 2016 period, but after taking another six months to recover, it's been onward and upward ever since. I've talked about the benefits of buy and hold before, and an interesting tidbit on Twitter was this one from last month, which came via the excellent @bespokeinvest account: 
Traders closing out their positions every night are missing out! SPY is the exchange traded fund (ETF) designed to track the S&P 500 stock market index. It would be interesting to see the numbers for this strategy for other indexes.

Sunday, 4 February 2018

BP3 And PC3

I'm back from another (almost) two weeks of travel, which included just the one speeding ticket, and a few tweets caught my eye while I was on the road. 

One was from Betfair Pro Trader @Betfairprotrade who wrote:

Unfortunately I may be missing out on the fun, since a click on the link brings up a message that "This blog is open to invited readers only" and "It doesn't look like you have been invited to read this blog. If you think that this is a mistake, you might want to contact the blog author and request an invitation."

I'll let the reader ponder why someone might start a blog and then restrict who can read it, and point them to this post from August 2016.

If the premise of the new blog is that the writer is currently a highly paid, globe-trotting, CEO but that "in exactly x weeks from now I will resign from my job and start a new life working for myself" - well, it's déjà vu.

Also complete nonsense. No actual CEO would contemplate for a moment giving up his, by definition successful, career for full-time sports trading. If this is Big Pairs again, this is at least the third time he has tried this pitch.

In addition to Betfair Pro Trade's mention, @LESSismore44 (only the essentials) bought this blog to my attention, and after responding that it was locked, added that:
At the risk of tiring you out before the Superbowl tonight, again I'll let the reader ponder why someone might lock a blog and restrict who can read it as soon as it garners some interest? Not someone with nothing to hide would be my guess.

The Big Pairs leopard needs to change his spots next time, or at least substitute "CEO" with something more realistic - unless it stands for "Cleaning Effluent Outlets".  

There have also been a couple of Betfair Premium Charge related tweets worth looking at. 

The always interesting, and certainly dedicated, @PremiumCharged wrote that:
Betfair Premium Charge is an unfair restriction by a monopoly exchange that penalises past success from over a decade ago
Have your say @GamRegGB consultation … copy in @HbfBritain by email
PremiumCharged also responded to a posting of a video link to last November's Matchbook Traders' Conference, although in typical Webbo style, he manages to get the year wrong!
No one can ever accuse Webbo of worrying about the details. The video is here, and on the topic of the Premium Charge, as PremiumCharged suggests:
My personal take on the reactions is that I suspect Webb is genuine in this regard, and was probably over the £250,000 threshold when the Super Premium Charge was introduced. 

Peter started trading in 2000, so he had a four year head start on me, and I didn't reach the threshold until September 2012. Unfortunately, if memory serves, I was close to £200,000 at the time the limit was announced, and too far down the road to implement strategies that would reduce the impact on crossing the line. 

As Premium Charged rightly states, the:
Betfair Premium Charge is an unfair restriction by a monopoly exchange that penalises past success from over a decade ago
Worth mentioning perhaps that while £250,000 might sound a lot to someone new to Betfair, but over ten years or so, it's a rather more modest amount. If you are full-time, it's an extremely modest amount, and comes with none of the usual benefits of paid holiday, pension, National Insurance, career advancement etc., but instead comes with unsociable and often long hours, and a cut in pay when you've made a certain amount!

As someone who is not interested in tennis, I have no idea about the merits of Dan Weston's claims to pay the Premium Charge, but all the indications (body language and circumstantial) are that it's not a concern for Caan Berry. 

Fortunately for the likes of him (the Badger springs to mind) who make their money from the sales of worthless pamphlets and videos, the Betfair Premium Charges does not apply to those sales. 

The Bodger's claims to avoid the Premium Charge by defying the laws of probability and choosing where his losing bets happen, are simply neither credible nor logical. 

For the third and final time this post, I'll let the reader decide for himself why someone might make such claims.

Finally, another two winners for the EPL Draws today. Not sure what the 'official' Pinny prices will be, but Liverpool v Tottenham Hotspur was 4.0 on the exchanges, and for a Big 6 match with neither team odds-on, this was very good value as I'm sure Mr. Sumpter would agree.  

Monday, 22 January 2018

Crisco Cops

A profitable NFL Championship round yesterday, with only the New England Patriots failing to cover the spread v the Jacksonville Jaguars a loser. Unders was a winner continuing the sequence for the Patriots in this round.

In the second game, the Home Philadelphia Eagles made the +3 look silly, winning the game v the Minnesota Vikings by 31 points and an easy win for the Overs.

The Eagles win means another trip for me to that city, for Superbowl LII weekend. 

During a moderate to heavy session in the city of brotherly love last November, I recklessly promised to return should the Eagles make it to the Superbowl. 

I'm a man of my word, so I plan to be there. It should be a great experience, and the Crispo Cops will doubtless be out in force that weekend.

As I already have a work trip starting today until January 31st, it will be a while I'm home for any length of time. My wife will not be happy.

I leave you with some numbers from a system that backs the EPL Draw on a simple weighted scale of 0 to 5 points.

Since the Pinnacle Closing Era, the results of this method are:

I did also go back to the six seasons prior to Pinnacle, and using Bet365 prices and their 105%+ books, this strategy is still profitable. 

Remember that Pinnacle's prices can often be beaten, so these figures represent an 'at least' amount.

The first column shows the percentage of matches resulting in a Draw for each season, while the selections is the number of matches, and the staked column is the amount staked, between 1 and 5, although 5's are rare. Returns by staking level are here:
This past weekend's Draw selections were 3 points on the Everton v West Bromwich Albion game, and a point each on Stoke City v Huddersfield Town and West Ham United v AFC Bournemouth which resulted in a profit of 7.28 points. 

Back in February.  

Sunday, 21 January 2018

Championship Weekend and More on the Draw

The Home team and Overs is the trendy play in the NFL Championship round. From the 2001 season, Home teams are 17-15 ATS (against the spread) while Overs has a 19-12-1 record.

The first game is the AFC's Championship game between the New England Patriots and the Jacksonville Jaguars. The line is currently 7 points, and of the 11 previous Championship games with a spread in the 5 - 9 point range, the home team is 7-4. When New England are hosting the game, the Unders has a 5-1 record, the one Overs being last season's rout of the Pittsburgh Steelers. While this type of team stat is generally useless, it's a little more relevant here given that the head coach (Bill Belichick) has been there since 2000, the same year current quarterback Tom Brady was drafted. 

The second game is the NFC title game between the Philadelphia Eagles and the Minnesota Vikings. The Road Vikings are favourites, giving three points, only the sixth time the road team has been favoured in a Championship game.

In 2016, the Patriots were three point favourites at Denver Broncos and lost the game.

In 2012, the San Francisco 49ers won and covered against the Atlanta Falcons when getting 3.5 points, and in 2010, the Green Bay Packers were also 3.5 point favourites at the Chicago Bears, and both won and covered.

In 2008, the Eagles were 3.5 point favourites to win at the Arizona Cardinals but lost by seven and in 2005, the Patriots were three point favourites in Pittsburgh and won by 14 points.

In the last four seasons, all eight home teams have won, and by some big margins. The average line for the home team has been 4.5 points, while the average margin of victory has been by 17.25 points.

While looking at the numbers this week, I discovered that the Week 18 for Wild Card games, Week 19 for Divisional and Week 20 for Championship wasn't actually the case in the 2001 season, which was extended by a week following the 9/11 attacks. The spreadsheet has been corrected.

I was also corrected by the esteemed Jospeh Buchdahl on my numbers for the EPL Draws for 2013-14 in my post on the EPL Draw last week. The problem was that I had resurrected a spreadsheet that only had results up to February of that season. The numbers by season are tabulated below, although the 2011-12 season was a more exclusive XX-Draws sub-set of the selections from 2012-14. Also worth mentioning that we did not have Pinnacle prices in 2011-12, so I have used those from Bet365. I've also used those for a couple of matches in Serie A where there were also no Pinnacle prices, presumably due to the Dodgy Draw in those games. 

The table shows the XXDraws by league and by season, and for comparison also the results of blindly backing the Draw (not a good idea) and of backing it in matches where neither team is odds-on, which in the EPL at least is a good starting point.

Regarding the numbers for 2013-14, this was a very poor season for Draws across the big leagues: 

Joseph's thoughts on this season were that:
This show that with other European leagues included XX Draws failed to make a profit that year. Does this not illustrate my original point about data dredging?
For me, this is not what "dredging" is about, and in the same way that a managed mutual fund will tend to go down if the indexes go down, and up in an up year, the measure of its worth is how that fund compares with a benchmark.

The benchmark in 2013-14 for Draws performed rather poorly, which isn't surprising given that compared with the previous ten years, Serie A was at its fewest ever, the EPL was at its second fewest ever, one Draw more than in 2005-06, the Bundesliga was also at its second fewest ever, one Draw more than 2010-11, La Liga was at its third fewest ever, and only in Ligue 1 were they close to average, albeit still below average.

There were 47 more draws the following season, a number repeated in 2015-16. 

To me, data dredging is more along the lines of 'discovering' a pattern in data, and trying to back-fit a system for it. For finding value in Draws, there's a logic to it, first mentioned by McGovern, and later expanded upon by David Sumpter. It makes perfect sense logically that closely rated teams should draw more frequently. The trick is whether this is profitable or not, i.e. is the market inefficient here? since Draws by themselves are meaningless. If the percentage of drawn matches shoots up to 50%, and the price in general plunges to odds-on, not a lot of good! 

Joseph's response was that:
It depends how you developed the system. If it was via back-testing a load of data there is always the risk that this is exactly what it is. How did the earlier seasons for the other European leagues perform? Have you got those figures?
There was no back-testing at all. I tried to explain how I stumbled across the draws being (relatively) good value in last week's post. Back testing wasn't even possible because the results were based on constantly changing Elo ratings and goal expectancies.

After the 2013-14 season, I realised that the time necessary to perform the updates each week and determine the selections wasn't worth it. A simple system based on the prices, and the differences between the teams, worked well enough. It works even better if the stakes are additionally weighted by Big 6 as well. 

Incidentally, yesterday's three selections by this basic (exclude odds-ons) method threw up two more winners in the games at Everton and West Ham United, with a loser at Stoke City. 

Joseph also made a comment on Derek McGovern’s book “On Sports Betting …And How To Make It Pay“ which I had mentioned had planted the seed of the idea that the draw might potentially offer value.
Joseph tweeted
It was actually a rather disappointing book which has not aged well as betting has evolved, and as I replied to Joseph, I very much doubt that he is paying Premium Charges to Betfair. We could ask him! He does have an account there, posting on the Forum under the name charwell as recently as Friday. I suspect a lot of self-published authors are better at selling books than they are making actual money. It used to be said that Those Who Can, Do; Those Who Can't, Teach. In the world of betting and trading, it's more along the lines of Those Who Can, Do; Those Who Can't, Sell Books About It.

** 21 January: The table was updated to reflect correct percentages on the All Draws column. Thanks to Joseph Buchdahl for pointing that out.

Thursday, 18 January 2018

Beloved Draws and Wives

Prompted by Richard's above reply, I did look at the 0:0 and indeed the number of goals scored in matches sorted by the difference in the teams, using their implied win probabilities. I even threw in the Under 2.5 totals for you all.

The expectation would be that in games between evenly matched teams, there would be fewer goals and a higher frequency of the beloved, or hated, 0:0.

With 2130 games since the Pinnacle Closing Era, one quick way of seeing if this idea has merit is to sort the games by difference into deciles of 213 matches each.

The average number of goals per game is 2.72. By decile, with the first decile between the most closely ranked teams, the numbers are:
The results are as expected, with 45% of the 0:0 scores in the 'closest' 30% of matches. As I cautioned yesterday, without the 0:0 prices, whether this is a profitable strategy or not remains uncertain.

Fifteen 'Big 6' matches (of 168) ended 0:0, ten of those in either October, November or December. 

Marty left a comment on yesterday's post, perhaps thinking I am an LDS member, offering some marital advice:
If you get made redundant please don't forget to spend some of that spare time with your older wife.
Very droll Marty. When you get to my age, there aren't too many women older than me around, and talking of age, and multiple wives, I did like this tweet from legendary financier T Boone Pickens, who was recently in the news for calling it a day for his "energy-focused hedge fund he has run for the last two decades as his health declines". 

I guess at his age, energy starts to run out, but perhaps not his sense of humour. Asked his opinion on cryptocurrency, he replied:
For the record, he's currently on his fifth marriage. He can afford those divorces. 

Wednesday, 17 January 2018

More Draw, Tense Situation

My post on the English Premier League Draw last week proved to be one of the most popular articles ever with esteemed writers David Sumpter (@Soccermatics) and Joseph Buchdahl (@12xpert) both commenting.

David wrote:

I hope David wasn’t disappointed by my research. In the days of 111% over-rounds, and minimum bets of trebles, the idea that the draw might offer value was of academic rather than practical interest. David publicised the idea when it was actionable.

Joseph wanted me to resuscitate the XX Draw system but the idea of going back almost four seasons, and re-activating an old spreadsheet, and processing 1,370 matches with each taking maybe 10 minutes, (i.e. 28 days at 8 hours a day), is a non-starter. This excludes the time for adding in newly promoted teams at the end of each season, so we’re probably talking about a full month in total. My wife would not be happy.

There’s also nothing to be gained from going back. The mention of the XX Draws was to demonstrate my long history with the Draw rather than to make a claim on my model at the time, which would be pointless given that it was put to sleep years ago.

If the XX Draws continued to be profitable, it’s highly unlikely that any extra profit would justify the time required to find them. If they turned into losses, it only confirms my suspicion that the days when an individual armed with an Excel spreadsheet could compete with the well-resourced likes of Starlizard are over.

The truth is that while the XX Draws were profitable, a simple strategy of avoiding matches with odds-on favourites was also profitable. 
Time isn’t free, and the reason I abandoned the model. Perfect is the enemy of the good. If I can find in five minutes a method of generating an ROI% of 10%, it’s probably not worth nearly two hours as a hobby punter to increase that to 11%.

Other comments on the article included:
I'd suggest me, and anyone on the Unders. 

Some readers will know that I call this the Perfect Draw, while others refer to it as a Bore or Snore Draw. I'll take a look at the 0:0 as time permits. 

Presumably the premise is that a 0:0 is more likely in games between two closely matched teams, and while overall the 0:0 makes up 32.7% of Draws in the EPL, when the difference in win probability is up to 30%, this percentage increases to 34.4%. Without the 0:0 price though, whether this is a profitable strategy or not remains uncertain. 

I took a look at the English Championship to see if some of the findings from the Premier League held up, and found that the simple no-odds-on filter again made for a profitable outcome, although much reduced by comparison:
I'll publish more Draw related data from other leagues in the future, likely in the summer. I have another trip with work starting next week which will keep me away from home until February.

A different angle on the draw being value when two teams are ranked as close comes from A Lucky A Day who tweeted:
This is not an area I've looked at, but the same logic would seem to apply. It would be interesting to have some stats on this. 

Speaking of stats, with the Australian Open this week, it's probably a good time to publish the results for the Men and Women since 2013 at this event. First the Men, where the favourite holds sway:
Nothing so clear cut on the Women's side of the competition:
Finally, for an, albeit self-published, writer, retired blogger James Butler demonstrates an alarming inability to understand some of the more subtle nuances of the English language. 

Hot on the tail of his confusing Technical Analysis with Fundamental Analysis, he now misunderstands his verbs, tweeting:
Indeed, nothing is for sale. Note the present tense being used there. Is. Words mean things, and apparently James missed that small, but important, detail.

I guess it is arguable that including links to sites where James’ books are sold is technically a breach of the “nothing is for sale” mantra, but I think 99.9% of readers understand what is meant by that line. It certainly doesn’t mean, nor is it intended to imply, that nothing will ever be for sale at some point in the future, but a book remains a long way off.

While the reference to writing a Green All Over book was mentioned as one possibility to fill my spare time should I be made redundant and while my younger wife is still working, the chances of any publication are certainly slim, if not none. The suggestion of a film based on the book was also a casual comment, not one that I intended to be taken seriously.

In the extremely unlikely event that a Green All Over book and film are produced, James can rest assured that the blog by-line will be changed to reflect this, and readers will be encouraged to both buy the book and see the film. I've heard it’s common practice after writing a book, to try and sell copies of it.

The theory that retirement leads to mental deterioration seems to have gained some traction in the light of James’ recent and frequent confusions.

I think I’d better keep working for as long as I can, lest I suffer the same fate! 

Tuesday, 16 January 2018

NFL - Fly Bird Teams Fly

The NFL Division Round this past weekend wasn't the most successful for followers of the road teams.

In the first game of the weekend, the Atlanta Falcons, giving 2.5 points to the Philadelphia Eagles, were only the third road team to be favourite in this round, and lost the game, with the Overs also a loser. It shouldn't have been a surprise really, given that...
Tuck that little gem away for next season.  

13.5 point underdogs in Game Two, the Tennessee Titans lost by 21 points to the New England Patriots, but at least the Overs came in, even if only by one point.

The third game was a double winner with the Overs winning as well as the Jacksonville Jaguars who not only covered the spread (7 points) but won straight up at the Pittsburgh Steelers.

Finally, the New Orleans Saints were beaten on the final play of the game by the Minnesota Vikings. The 'official' spread was 5 points, and the game ended 24-29, so when the Vikings took a knee rather than attempt the extra point, (with no time left, the game was already won), anyone getting 5 or 5.5 (as many books had the line) got very lucky. Quite possibly the only time in NFL history that there were two punters on the field for a play. Overs was again the winner. 

For the Championship round next Sunday, the Patriots are currently 9 point favourites at home to the Jaguars, while the Eagles are again home underdogs (their starting QB was injured late in the season), this time getting 3.5 points versus the Vikings who are attempting to become the first team to play a Superbowl in their home stadium.

History favours the home team in this round overall, but road teams have the edge when favourites. The Overs are the totals play, but beware the small sample size.

For those who like trivia, two NFL teams have previously played a Superbowl in their home city. In 1980, the Los Angeles Rams played at the Rose Bowl, and in 1985, the San Francisco 49ers played at Stanford Stadium.

Saturday, 13 January 2018

Probability, Difference And The EPL Draw

The Draw result in football has been a mild obsession of mine for several years. 

I’m not sure when I first stumbled upon the idea that the odds on the Draw might not be efficient, but it may well have been when reading Derek McGovern’s book “On Sports Betting …And How To Make It Pay“ maybe ten years ago. 

The book was published in 1999 but my interest in betting wasn’t re-awakened until discovering the Exchange concept in 2004, by which time some of the book’s content had become obsolete.

Much of the chapter on football betting dates back to a time when punters were far less sophisticated than today and bookmaker restrictions meant that for most matches, home teams needed to be backed in accumulators of at least five, and the draw and away selections in minimums of three. The typical over-round was 111%, a far cry from today 102% with Pinnacle and in theory close to 100% if you shop around and have access to several books.

McGovern intriguingly wrote:

Regular soccer punters will know that in football betting the odds are very much in the bookmaker’s favour. In a match in which theoretically all three potential outcomes – home win, away win, and draw = are equally likely, the true odds should be 2-1, 2-1, 2-1 [for younger readers, 2-1 is 3.0 in decimal odds]. But such odds give bookmakers no profit margin, so instead they will offer, say, 6-4 [2.5] the home team, 6-4 the away team, and 11-5 [3.2] the draw, the draw being longest price because bookies know that few punters ever back it. This produces a book of 111% giving bookies a theoretical profit of 11 per cent whatever the result.
Unless there’s a fix in place, the Draw will never be favourite, but the interesting part was that a book might be offering value on an outcome simply because the bet might not be popular.

Later in the chapter, McGovern talks about bookmaker Ron Wadey, who at the time owned five betting shops in the north of England. On the subject of odds-compilers, which such independent bookies used in those days, Wadey is quoted as saying:

“Their job is to come up with odds for a football match that will attract three-way support – for the home team, the away, and the draw, although I accept that the draw will never be popular with punters”.
Further on, McGovern writes:
Bookmakers freely admit that few punters back the draw in football matches. Punters want an allegiance in a game, to shout on a given team. Backing the draw is almost an admission that they can’t make up their minds.
The football punter in those days was clearly recreational.

After writing that roughly 30% of matches in the top two English Divisions in 1998-99 resulted in a Draw (implied odds 9-4 [3.25]) he observes that:
“Yet very often 12-5 [3.4], 5-2 [3.5] or even 11-4 [3.75] is available about the draw in a top-flight game. Bookies can get away with offering over the odds for the draw because they know it will attract little money, and it allows them to tighten even further odds for the home and away sides”.
This led to the logical conclusion that:
"a loophole could be exploited in matches in which bookmakers could not split the two sides, for instance offering 6-4 [2.5] the home win, 6-4 [2.5] the away win and 11-5 [3.2] the draw.
Bookies were saying, I argued, that there was absolutely nothing between the two sides, that an away win was just as likely as a home win. But by doing that they were also implicitly admitting that the draw was an equally likely result. Indeed you could argue that if the two sides are so evenly matched, a deadlock is the likeliest of all three outcomes. Therefore, the true odds of each outcome must be 2-1 [3.0], translated into 7-4 [2.75]  once the bookmaker’s in-built margin is taken into account.
If you could consistently get 11-5 [3.2] or more about a 2-1 chance, my reasoning went, profits were inevitable”.
What a lovely thought – inevitable profits. Nothing is usually this simple but it was an idea that stuck in my mind.

Around 2009, and in hindsight I was something of a pioneer in the field given the recent surge in interest, I started calculating expected goals (now referred to as xG) and deriving probabilities, and thus odds, for all goal related markets – e.g. match odds, over / under, Both Teams to Score.

My Excel spreadsheet maintained Elo based ratings for teams in the top five European Leagues (English Premier League, La Liga, Serie A, Bundesliga and Ligue 1). After each round of matches I would enter match data, and update the ratings. I would then enter the upcoming fixtures and the spreadsheet would calculate probabilities on various outcomes.

It was while entering data from completed matches that I discovered that for drawn matches, more often than should have been the case, the outcome was that the ratings for both teams would remain unchanged, or almost unchanged.

It wasn’t too difficult to reverse engineer these findings so that by entering an upcoming fixture, it would generate a figure for how much a draw would change the ratings. A number between -0.1 and 0.5 was a strong indicator that a Draw might result, with higher positive numbers indicating a home win, negative numbers an away win.

From this came the hugely successful XX Draws which were profitable for the three seasons (2011-14) I shared them, until a work promotion reduced my free time and I suspect my very basic xG calculations were about to be improved upon by far better resourced enterprises anyway.

The XX Draws included selections from the top five European Leagues, but the EPL results from these years are below:
My model was also rather good at finding the Draw in matches where it was priced at 4.0 or higher, although the effort of finding an average of seven selections a season can't really be justified. 
I mention the 4.0+ (IP 25%-) mark because blindly backing the Draw at this price in the EPL is a losing proposition.
In a recent post, I published the results of backing the Draw selectively from the 2,120 matches played in the EPL since the start of the 2012-13 season. Those numbers used the maximum price for an apples to apples comparison with Soccernomics' numbers, but the Pinnacle Closing price is more realistic, and using these, the following table might be of interest to some of you.

Th Big 6 and draws have received some recent attention for good reason - blindly backing the Draw in these fixtures has an ROI of 14.3%, a number that is easily exceeded by being selective on these games. 

To help make the table easier to understand, P is Probability, D is Draw, H is Home, A is Away, W is Win. The 'Difference' is a measure of how far from the favourite the other team is - the lower this number, the closer the two teams are. For examples, the Draw in matches between teams with a difference of 2.5% or less has an ROI of 40.3%, but a low sample size. 
For Premium Charge mitigation, you can do worse than blindly back the draw when it is priced at under 4.0, but a couple of simple additional parameters, such as excluding any matches where one team is odds-on, can improve returns hugely. 

I'll update these numbers in the summer, and may take a look at some of the other leagues in the meantime. 

Looking at today's games, and we have an odd situation with the Albion derby match, West Bromwich v Brighton and Hove. At the time of writing, Pinnacle have:
This 46.5% v 23.2% 'profile' hasn't been seen before. When the probability of the home team winning is .465, the average Draw and Away prices are 3.44 and 3.79 respectively. 

When the Away side is around 23.2%, the Home team has always been odds-on, 1.93 on average, with the Draw at 3.72!  The Draw has only Closed at 3.1 or less on 29 previous occasions, (since 2012), and was a winner in 14 of them, so don't let that short price necessarily put you off. 

Has word of the EPL draw value finally got out?