Tuesday 1 April 2014

The X-Factor

An interesting idea from the product development team at Betfair is the new variable handicap market. One issue with opening up a market for a particular point spread or total is that should the line change, a not uncommon occurrence in a sport such as basketball, the prices on both sides are no longer close to the 50/50, evens, 2.0 mark, but can be off by quite a bit.

The solution Betfair have previously chosen is to create new markets, but again, this new line can prove to be 'off' also, and you end up with several markets. Below is a screenshot showing four totals markets on one game, spanning a difference of 20 points, and two handicap markets.

The result of several markets is that liquidity suffers. More choice is not always better, and this is one situation where this is certainly true.

So Betfair's quite ingenious answer is to introduce the 'variable' market from today. I must admit, at first this made no sense to me. Variable speed limits might work well enough, but variable handicaps?
After reading the rules on this, it appears there is either a loop-hole, or I am missing something rather obvious.

Early results show that the optimal trading strategy is to back Team at as high a price as possible, and then lay at the lowest price possible before the game starts. A second strategy would appear to do the exact opposite, i.e. lay Team at the lowest price possible and back it back at the highest.

Team always wins, the tricky part is selecting the correct one, and determining the value of x. This is where that 'A' Level in Pure Mathematics and Algebra comes in useful; solving a simple equation for the value of x.

Betfair's Rules say "Who will win this match with the stated handicap applied?" but offer little help on how to solve for x, which is good for those with expertise in solving equations.

From reading Betfair's Press Release on this new market, it appears that they are anxious to return to the days where "Sharp Minds" had the advantage, 

No comments: