Sportpunter

With NHL teams getting less and less power plays, the total number of goals has decreased dramatically this month. The average number of goals per match this month has been 5.20 which is the equal second lowest since 1989, after 5.17 was averaged in 2002 and 5.2 in 1998.

We’ve previously talked about how the number of goals per year has been a decreasing trend, as well as the decreasing trends in April and onwards, the link for this is shown here. However, it seems that this year, the total number has decreased quicker than normal.

Here is a table of the average goals since 2007, the percent above 4.5, 5 and 5.5 goals. Also included in the number above the bookmakers line.

As you can see the average goals decrease quite dramatically in month 4 (april) and onwards, however the percentage above the quoted bookmaker line doesn’t decrease, indicating that the bookmakers line lowers late in the season along with the totals goals scored.

However, in 2014/15 this has changed dramatically this month. A massive decline in total goals was scored in march this season, and the amount of times that the total went over is only at 42%. Thus indicating that the decline in goals scored has been quicker than the bookmakers odds. This is shown in the table below:

Whilst Sportpunter’s NHL model had an amazing start, (18% ROI from the first 200 bets in 20 weeks), it has recently fallen away due to a larger number of over bets. The overs, are not winning as shown above, and a correction, or a change to the model to more quickly dynamically change to different conditions should be looked at, and that’s just what I’ll do.

It appears that PinnacleSports has been sold to undisclosed buyers. Whilst rumours are going around that it is a Las Vegas firm, evidence suggests a UK or Ireland company.

And this makes perfect sense. It wasn’t long ago that Pinnacle had to close its doors to all UK customers, and hence would have lost a big chunk of their turnover. Perhaps it’s only a matter of time until other countries follow the same suit. Being based in Curacao – which is in the Caribbean Sea – probably didn’t help their cause, and if they were going to stay ahead of the bunch, then a move, or change of direction really had to occur.

I said, stay ahead of the bunch, because we at Sportpunter rate PinnacleSports the number 1 bookmaker in the globe. Out list of recommended bookies is shown here.

And why not? With up to 102% markets, and their statement that they never ban or limit anyone, there is really no other bookie that comes close.

So how do PinnacleSports survive with such rules? Simple. They don’t advertise offline, which helps keep their costs down, and they rely on high turnover and smart gamblers to make the markets as accurate as possible. Their lines move instantly on any decent bet, more so on some punters than others, and they release odds with small maximum bets early, and increase the amount one can bet until the start of the match, when the odds are more efficient.

But with the UK out of the market, their turnover will be a lot less, and as stated before, if more countries say no to Pinnacle, then their whole model is in ruin. As I said, they rely on high turnover and large limits to smart gamblers.

The sports gambling industry would take a massive blow if PinnacleSports were to exit the scene. Not only because the smart money would have to bet elsewhere and accept lower limits at worse odds, but also because there are many other bookmaker sites that rely on PinnacleSports to frame their own market (Matchbook for one).

So what will happen to Pinnacle from now on? Will it continue to run as is? Well if they can get the UK back, then increased turnover will only help Pinnacle as well as helping out everyone who bets there. But considering that it was sold, most likely, to someone either in the UK or Ireland, will the new owners inforce UK and Ireland bookmaking techniques?

This of course means, banning successful punters and give out bad odds.

Banning successful punters, will at first give PinnacleSports a greater profit, however, without the successful punters framing markets, it will mean that the next string of punters will have better odds to work with and hence it’s hard to say if Pinnacle will increase or decrease profit with this technique.

Having worse odds, maybe equivalent to the standard bookmaker, will make Pinnacle less enticing for smart punters. Whilst the percent made on turnover will increase for Pinnacle, the amount of turnover will decrease, most likely netting the bookmaker with a lower profit overall.

But there is one thing that PinnacleSports could do that will increase turnover.

Advertising.

Holding a licence in the UK (and also Australia, the slowly opening USA and other countries) will welcome back the UK customers, and increase their customers. Surely Pinnacle (who pride themselves on not advertising), will have to come to the conclusion that advertising in countries where they are allowed to operate, will only help their bottom line. Tom Waterhouse is an obvious example here.

Ohh, and a website that doesn’t just look like a list of numbers (us pro punters love it, but it’s boring to the average joe), and a social media onslaught (sporstbet have to be the best in the world at this), would help every little bit.

So let’s hope that the new owners of PinnacleSports have the right idea. Keep the same business model, but increase on it, by obtaining access in the UK, and hopefully a little bit of advertising.

As we have discussed previously, the Kelly criterion is mathematically the optimal method of money management when betting. It takes into consideration the probability, and the odds in working out what percentage of your bank one should bet. The higher the overlay (advantage that you have over the bookmaker) and the shorter the odds, the larger the bet size. Whilst the smaller the overlay and bigger the outsider, the smaller the bet.

But can we ever be sure that the probabilities that Sportpunter’s models produce are accurate? No they aren’t. They are never the same as what the actual exact probability of a team to win actually is. This is because there are many things that the Sportpunter’s models cannot take into consideration. Perhaps a player recently got married, or had a family member pass away. There are countless things that make the probability not exactly correct.

However, it doesn’t need to be, and it is impossible for that to happen. What we require is that the probabilities are more accurate than the odds that the bookmakers set. Then we have an overlay and an advantage.

If you were playing certain card games, you may be able to work out the exact probability given certain circumstances, and then could use the full Kelly criterion for betting, but considering that the probability that we produce may not be 100% accurate, how do we use the Kelly criterion for betting? If we use the full Kelly criterion, surely we would be over betting?

And this is the case. A method to reduce this over betting is to use a fractional Kelly – basically decreasing your bet size by a certain factor.

I’ve always said that it is unwise to bet more on any one bet than 5% of your bank, but how do we determine the optimal Kelly fractional for each model?

Let’s have a look at some data and determine this. We are going to look at the MLB Totals model since it went live on 7/5/14, to look at what perhaps might be the optimal Kelly fraction for next year.

Since going live online, the baseball totals model made 7.24% ROI from 719 bets, and the average overlay during this time was 10.7%. This means that the optimal Kelly fractional would be 10.7/7.24 = 1.482.

This at first seems quite low, but that is credit to how well the Sportpunter MLB model went. If in hindsight, you were to use this Kelly fractional during the 2014 season, then you would have turned a $10,000 bank into $53,943. A very nice investment indeed!

However on closer examination, some of the bet sizes might be too large. The maximum bet size suggested using the 1.48 Kelly fractional is 27%. I think a lot of people would feel a bit cautious about betting $2,700 out of their $10,000 bank. However the average bet size is only 7.5%.

If we decide to keep with the previously stated rule, never to bet more than 5% of one’s bank, then we can adjust the optimal Kelly fractional to 0.27/.05 * 1.482 = 8.

This means that the optimal Kelly fraction to bet, so much so that we don’t bet any more than 5% of the bank would be 8. In this scenario, we managed to increase our bank from $10,000 to $19,152, almost doubling the bank in one year.

The maximum bet of the bank was indeed 5%, and the average bet size was 1.4%. Betting an average $140 into a $10,000 bank may not be risky enough for some, and one could adjust as so they desire. Perhaps you would chose a max 7.5% of bank bet which equals Kelly fractional of 5.3, and an end of year bank of $25,145.
Either way, the above calculations, whilst complex for many, show that there is a way of working out the optimal Kelly fraction. If it has all gone over your head, not to worry; just set a Kelly fraction that you feel comfortable betting.

Keep in mind that this includes one massive assumption: that the overlays and profits as seen in the past will continue in the future. Perhaps 719 bets might not be enough to accept this with absolute certainty, and in fact no amount of bets ever will. It’s always better to lean on the side of being conservative, which, for many punters, is a very hard thing to do.