Gambling odds question
September 24, 2012 10:44 AM Subscribe
How would one (legally) take advantage of the change in odds of a given NFL team to win the Super Bowl?
Say you placed a $100 bet before the season started on the Arizona Cardinals to win the Super Bowl. The odds were 150-to-1, so if they won, you'd win $15,000.
Currently, the Cardinals are 30-to-1 to win the Super Bowl. So the same $100 bet would only pay $3,000. If this was the stock market, you could trade out of your postion and pocket $12,000 (net of transaction costs).
However, since you cannot legally accept bets like a casino, what bet(s) could you make now to guarantee yourself something close to $12,000 (excluding transaction costs)?
Say you placed a $100 bet before the season started on the Arizona Cardinals to win the Super Bowl. The odds were 150-to-1, so if they won, you'd win $15,000.
Currently, the Cardinals are 30-to-1 to win the Super Bowl. So the same $100 bet would only pay $3,000. If this was the stock market, you could trade out of your postion and pocket $12,000 (net of transaction costs).
However, since you cannot legally accept bets like a casino, what bet(s) could you make now to guarantee yourself something close to $12,000 (excluding transaction costs)?
You're wrong about what your $100 bet at 150-1 is currently worth. Today, you'd have to put up $500 at 30-1 to have a ticket worth $15k in the event of a Cardinals win. So your ticket is worth $500. You'd be able to trade out of it for a profit of $400, not $12000.
posted by Perplexity at 10:59 AM on September 24, 2012 [3 favorites]
posted by Perplexity at 10:59 AM on September 24, 2012 [3 favorites]
Your "current value" of $15000 is wrong.
Perplexity gave my answer (possibly worth $500, profit $400), but rocket88 tells you the why.
If you're thinking stock market, options might be the better parallel that straight up stock. You bought the option to win $15000 for a ticket priced $100. To buy that same option now, the ticket would cost $500.
posted by k5.user at 11:03 AM on September 24, 2012
Perplexity gave my answer (possibly worth $500, profit $400), but rocket88 tells you the why.
If you're thinking stock market, options might be the better parallel that straight up stock. You bought the option to win $15000 for a ticket priced $100. To buy that same option now, the ticket would cost $500.
posted by k5.user at 11:03 AM on September 24, 2012
So what’s the point of placing a pre season bet if you don’t keep the odds you were given? Why not just bet at the last minute?
posted by bongo_x at 11:05 AM on September 24, 2012
posted by bongo_x at 11:05 AM on September 24, 2012
What you're looking to do is called Arbitrage Betting. It is theoretically possible to place counterbalancing bets with two bookmakers giving different odds, guaranteeing yourself a profit no matter who wins.
Not surprisingly, the gambling industry tries to discourage this practice.
posted by alms at 11:12 AM on September 24, 2012
Not surprisingly, the gambling industry tries to discourage this practice.
posted by alms at 11:12 AM on September 24, 2012
To add to what alms has said, the transaction cost of 10% (called "vig" in sports betting parlance) basically makes arbitrage betting infeasible except in extreme cases.
posted by chrchr at 11:33 AM on September 24, 2012
posted by chrchr at 11:33 AM on September 24, 2012
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You can place a bet that they won't win, which should give odds of 30-to-29 discounting the house edge. If you bet $14500 of your your potential $15,000 on this wager it would pay about $15,000 if they don't win, netting you $500 minus your original $100 losing bet.
In other words, you'd win 500 if they win ($15k win - 14.5K loss), and $400 if they don't.
I didn't include house edge, so some of those guaranteed winnings would be eroded by that.
posted by rocket88 at 10:59 AM on September 24, 2012 [3 favorites]