Handicapping vs Market Efficiency

I hear it all the time. “What you guys do is easy.” “How tough can it be to just bet off numbers?” “If you were any good you’d do some REAL handicapping.” It’s meant as a not-so sideways insult most times, but mainly it’s an expression of frustration. Many handicappers feel their work has meaning to it and takes great skill. They find it a distasteful notion that someone who simply takes advantage of market inefficiencies could outperform them. Playing the market vs. playing your opinion. It’s a murky divide existing among sports bettors that’s at its clearest when contest time rolls around. It’s also a constant element of cash betting throughout the year with each group having it’s own betting characteristics.

When wagering day-to-day, a competition between the market players and the handicappers exists, but to the average observer it usually goes completely unnoticed. A big handicapped play endorsed by both bettors and touts results in strong line movement. The cappers and their followers take whatever number that’s available when the play is released. The market players make their bets from the edges only. They’ll either beat some books to the move and get the original number or take the other side later in the betting cycle. The late bettors are seemingly fading the handicapped play but in reality are simply taking advantage of a number that’s been over bet and over adjusted. The over adjustment is often a case of a book making its number the worst out there in order to fend off any additional followers. Their objective is to attract some buy-back for a side they’re lopsided on. The market bettors take the “wrong” side, but at a fire-sale number. It’s an undervalued aspect of market betting and puts you on the same side of the books in most instances. This can help your image and account profile and is preferable to being labeled as solely a steam chaser. A market analyst is dispassionate regarding the team he bets on. It’s all about the number and its relationship to the current market for that bet.

So what does it mean to be a market analyst?

Briefly, it means you employ a strategy that’s consistent with the “wisdom of the crowd” theory. That the opinion of many within an interested group will most likely be superior to the opinion given by any of the individuals within the group. It’s a belief that the market is efficient, and when viewed as a whole, gives a more accurate assessment of the event in question than any specific opinion, including your own. This can be a difficult thing for some to process since we hear all the time that the public side is most often the square side. This is true and that’s why reading the market involves more than just looking at where a line began and where it sits now. At which book is the number at its worst on the favorite? Where is it at its best? What type of clientele do these books deal to? An experienced analyst can interpret these differences and deduce quite a bit just by viewing the odds on the screen.

The fact of the matter is that every bettor incorporates some degree of market analysis into  their process. It’s a question of how much weight do they put on their opinion vs. that of the number available. Dedicated handicappers are not easily discouraged by a number that’s seen better days. Their evaluation of the game may still indicate that it’s a worthwhile bet, just not as strong as it once was before movement. Market bettors are turned off more easily. If they can’t make a bet that has value vs. current conditions, they’ll pass and look for something not so ripe. They defer to the market and not their opinion when on the fence.

If a handicapper is also a strong student of the market, he can be a dangerous bettor. While neither is an exact science, it’s the handicapping part that carries the real variance (with a greater margin for error), because it’s subjective. The handicapper primarily relies on his opinion and analysis of a game’s worth. The market analyst is relying on his evaluation of the market and his ability to exploit any inefficiencies he can find. Both have an approach that can win, but when combining the two effectively the results can be impressive.

When using the market approach, resources come heavily into play. Handicappers put less of an emphasis on how to bet a game and where and when to bet it. The bulk of their energy is spent determining what team they prefer. Information is the cappers’ most valued resource. Once they have that, then the process becomes very subjective as they interpret and weigh their info.

For the market player, it’s access to as many betting outlets as possible and an understanding of the market for an event that’s emphasized. Where a line started, where it currently sits, and where it may close is evaluated. The more diverse their betting outlets, the better. And the more hours spent on the job, the more bets they get in. Staring at an odds screen for extended periods is a daily routine. Searching for outlier lines, market indicators, and reviewing line histories can become tedious, but will pay dividends. The more time spent analyzing and the more resources available, the greater the volume of bets one can make. Volume is what it’s all about for the market bettor and numerous smaller bets at superior numbers can really fortify a bankroll, as these bets carry high win rates and therefore lower downside variance.

Handicappers often cite these smaller limits as a negative. The fact that many outlier lines can only be bet for a fraction of what the bigger sharper books will take on a game can turn a handicapper off if he’s used to betting double or triple that amount. Sure you can get +8.5 on the Knicks at the hole-in-the wall sports book for $500 but they’ll argue that the book with the 100-foot screen and a market line of +7 takes $2,000. That’s incomplete information to say the least as far as assessing the value of a bet. If they did the math, they might be surprised that the $500 bet could be worth more than the $2,000 bet. If it’s merely just as good EV-wise, then there’s still a bankroll advantage with the smaller, but higher win percentage, bet. Differences like these regarding limits must be viewed in their proper context.

Analogies from other gambling endeavors can be easily made. Video poker is a decent example. Given the choice between playing $5 10/7 Double Bonus without a players card and without any back-end benefits or playing $1 10/7 with a half-percent card — which would you choose? The $5 game is worth approximately 25% more but is it the right choice all things considered? Seasoned VP players will understand the differences in bankroll fluctuations between the two choices. They’ll realize that the tax implications, hands per hour, and visibility factors all favor the $1 game. All these details have value that might make the slightly lower EV game the better choice. In sports betting, it’s also not all about the size of the bet. Average bet size is something that’s routinely given too much weight. I have friends whose average bet is much higher than mine, yet I’m clearly the “bigger” bettor. That’s because my total daily handle dwarfs theirs due to the volume of bets. Total dollars wagered at an advantage is the number that matters, not the size of the average bet.

Cherry picking the outliers within the market is not taking the easy way out. It’s taking the most objective and dispassionate way. When playing the market, you’re not married to an opinion or a bet size. You’re taking what the opposition gives you. Much like an offense that detects a weakness in a team’s defense and methodically grinds away at it, you apply and reapply your advantage continuously. It’s a death-by-a-thousand-cuts approach as you chip away at the opposition with a continuous stream of market-advantage bets.

Scaling obviously is an issue for the selective market bettor. This means it’s a great method of bankroll building but you’re going to top out eventually. Spreading vertically has a relatively low ceiling via most betting venues, so expanding your number of outs is required if growth is to continue. Available outs are the lifeblood of the market bettor. It’s his most valuable and important asset. The more quality outs one has, the more successful he will be.

Next week I’ll look at the 2017 football contests in Nevada and the contention that exists there between market players and handicappers.

Football Contest Formats and Strategies