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This is the second year that I and my partner, a.k.a., Fund Manager, are going to go very public with our NFL wagering. Last year we started with $9,981.60 and ended up with $18,764.14 – a return of 88% in just over four months. That will be a tough act to follow, but Hope Springs Eternal. With the season just days away, we’d like to take this opportunity to provide a bit more information about our methodology.
It starts with a disciplined, statistics-based approach. We know (at least historically) how frequently the home team wins and the likelihood of various margins of victory. We know (based on history) what the mean and median points scored per game. These metrics anchor our decision-making process.
At the same time, we recognize that there are “biases” in the marketplace that impact the lines set in Las Vegas and we’re going to use a side-bet we made (This will not be part of the performance record this year) to demonstrate.
The following odds to win the NFC East were indicated by Caesar’s Palace, as of July 13, 2016:
Dallas Cowboys 9/5
New York Giants 11/5
Washington Redskins 17/5
Philadelphia Eagles 7/2
This implies that Dallas has a 35.71% (5/14) chance to win the division, New York a 31.25% (5/16) chance, Washington a 22.73% (5/22) chance, and Philadelphia a 22.22% (2/9) chance. When you add all of them up, it totals 111.91% which means that if equal sums are placed across the board, Caesar’s will collect $111.91 and pay out $100, resulting in a very tidy return of 11.91%.
However, it is my belief that the market has it profoundly wrong with two teams in this division: The New York Giants and the Philadelphia Eagles.
The Giants will have a new coach which places an important element of uncertainty. The team has undeniably added a lot of talent on the defensive side of the ball, but 31.25% seems very high to me. Particularly considering the recent mediocrity: 7 – 9, 6 – 10 and 6 – 10 in the past three seasons.
And as for the Philadelphia Eagles: New coach… turmoil around the QB position… the slowest wide receiver corps in the NFL… I don’t give them a 22.22% chance to win the division – it’s more like 5% at best.
Which suggests that the Division comes down to either Dallas or Washington.
There are a lot of reasons to like Dallas. Tony Romo, when healthy, is a top tier NFL QB. The offensive line is generally acknowledged as the best in the game. And Ezekiel Elliott seems like the perfect RB to line up behind it.
On to the Redskins. They won the division last year, and history tells us that about 50% of the time last year’s division winner repeats. That’s a positive. There wasn’t a better NFL QB (statistically, at least) in the second half of the year than Kirk Cousins. And my argument would be that the single best free agent signing this off-season was Josh Norman, the shut-down corner, who matches up unbelievably well against division rivals Dez Bryant of the Cowboys and Odell Beckham of the Giants.
My Division Probabilities, summing to 100%, would be:
New York Giants 25.0%
Or looking at it another way:
Washington wins Division 32.5%
Washington doesn’t win 67.5%
The odds are 17/5 which means if you wager $5, you win $17 if Washington wins the division and lose $5 if they don’t win, giving an Expected Return on that $5 investment: $17 x .325 – $5 x .675 = $2.15 on a $5 investment or an expected return of 43%.
Note the following – and it’s critically important. I don’t think that Washington will win the division. In fact, I think it is relatively speaking, highly unlikely they win. It would be foolish, given my outlook, to place an even money bet on them; however given the odds presented and my outlook, it would be equally foolish not to place the wager I did.
And, in a nutshell, this is how we operate. Statistics and probabilities anchor our process. Throughout the season, we will be wagering either 2.5%, 5%, 10% or if an extraordinary opportunity presents itself, as much as 25% of the portfolio at any one time on any one betting line.
Starting Balance: $10,085.49
September (4 weeks): $11,143.82
Return = 10.49%