Sports Betting as an Alternative Investment
Daniel B. King
Many will dismiss outright the ability to make good returns on
your investment through the medium of sports betting. It is not
really surprising as betting is hard work, solitary, and you have
to grind out thousands of bets to get your returns.
Of course to many members of society - betting also carries a
great big "loser" tag. This is not without justification since
the vast majority of sports bettors do lose. I would, however,
estimate that the percentage of "losers" would be equally high in
the world of stock trading and investment markets if you
considered those individuals who entered that environment without
the necessary experience. Most people trust their savings and
investment income to experts and no doubt if the betting public
trusted their income to the 1% or 2% of betting experts who made
a profit - the loser label might become less sticky.
So what kind of returns can you expect?
Anywhere between 18% and 22% on betting turnover (that money
actually put through the sportsbooks) annually. Of course this
could vary greatly - years of 30% and 13% would also be possible.
The laws of probability defy accurate annual estimates.
You will notice that I have not stated losing years - this is
because they are rare - I have experienced one in my life time,
my first. I am always aware of the possibility but I am confident
I will never experience one again - partly because of the
numerous hedging methods now available on the sports betting
exchanges. I wonder how many young people on Wall Street today
can confidently say they will only have one losing year? There
may be a handful, those engaging in arbitrage and those
experienced in 'selling' as well as 'buying' the market - but
there won't be many.
So do the sportsbooks close accounts if you are a winning player?
Well curiously the answer is 'yes'. I say curiously because if
the book is doing its job properly, it is taking the action from
both sides of the line (odds on the event) and simply taking the
commission in the middle. The sportsbook makes its money whatever
the result - they are merely commission-takers. Winning bettors
do not win money from a sportsbook, they win money from other
losing players. I guess some books simply do not like winners -
but many manage the action well and allow big bets. Big bets
means big turnover, big turnover means big profits.
The Sports. Very briefly the US pros generally turn to Basketball
as a major source of income simply because of the sheer number of
games - you need to bet high numbers of games to get the returns.
Remember a good bettor will still lose around 4.4 to 4.6 bets out
of 10. Football (NFL) is big too though game numbers are few.
Hockey does not have many takers but the lines are often the best
value - the prices can be very generous. Baseball runs somewhere
in between. In the UK and Europe it is mainly Soccer and Horse
Racing. There is no tax on betting in the UK which is a big
advantage and no pari-mutuel system on horse racing. The price
you get in the morning is the price you stay with - unlike US
horse betting which is subject to starting price odds and heavy
taxes.
The key to success in any trading or betting environment is
value. If you are not getting a value price, then you will find
it hard to make a profit.
You need to identify the "product" eg a stock or a team - it
doesn't matter. If your expectation of that product doing well is
higher than the price on display - in relative terms. You "buy"
it. Still, if you are not profitable in your betting after say
350 bets or thereabouts - it may be time to say "ok this is not
for me" or "ok let me re-think my betting strategy." You simply
cannot tell if you are a good or bad bettor after 10, 20 or 50
bets - with those low numbers you are still falling victim to
standard deviation and probability.
Generally I have found that sports betting produces bettor
average returns year on year. It is tougher psychologically as
you generally act in a lone capacity. No corporate social or
support structure, no lunches, no team environment. But then no
bosses, politics...you know the score.
Betting is also virtually recession proof, lets face it only a
huge war might disrupt the national sports schedule. Sports
markets are not influenced by the economy. You worship different
gods and your path is one that runs through the wilderness and is
not well trodden. You will love it or hate it..
Daniel B. King has been a professional sports bettor and trader
for eight years, helps advise a number of sportsbooks and is
actively involved in the sports betting industry.
www.sbsportsbook.com
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