Monday, August 31, 2015

Who Pays the Vig?

Vig is short for vigorish, which is the amount of money that the bookmaker takes to handle wagering. It’s also called the juice. It’s how bookmakers make their money.

Who pays the vig when betting on football?  Even people who’ve bet football for decades get this completely wrong.

When a gambler bets on a football game, he bets 11 to win 10. If a gambler wins his bet, he wins $10. If he loses his bet, he loses $11. Who pays the vig, the winner of the bet or the loser? The answer almost every person will give is that the loser pays the vig by virtue of the extra dollar he pays.  However, this is incorrect. The winner pays the vig. The winner always pays the vig in games of chance, whether it be in the casinos, the lottery or in sports betting. The reason for this is that the loser of the bet always loses what he had at risk, no more, no less. The winner always receives LESS than the proper payout. The difference in what the winner should have been paid and what he received is what the bookmaker kept, which is the vig.

Let me give a simple example. If two friends decide to bet $11 on a football game, one wins $11 and the other loses $11. There’s no vig in play here. Let’s say the same two friends decide to bet another game, but this time with a bookie. Once again they both bet $11. When the game is over, one of them loses $11, just like in the first case. However the winner wins only $10, as the bookie keeps a dollar as his fee, which is the vig.  In both cases, the loser loses the same amount. It doesn’t matter to him if a bookie was involved or not. He loses what he bet. Does it matter to the winner if a bookie was involved? Absolutely! He wins $1 less when the bookie was used.

I once had a friend tell me that I had it all wrong, that I was playing with the numbers somehow. He tried turning things around. His reasoning went like this: If two friends decide to bet $10 on a football game, one wins $10 and the other loses $10. There’s no vig in play here. Let’s say the same two friends decide to bet another game, but this time with a bookie. When the game is over, the winner still receives $10, but the loser loses $1 extra for a total of $11. In both cases, the winner wins the same amount. It doesn’t matter to him if a bookie was involved or not. Does it matter to the loser if a bookie was involved? Absolutely! He loses $1 more when the bookie was used.

Can you spot the flaw in that reasoning?

What my friend forgot is that while the winner wins the same amount either way in his example, he risked more when the bookie was involved. He was still shorted $1 in the payoff, which is the vig. 

Remember, the loser ALWAYS loses everything he risks, no matter the game, no matter if a bookie or a casino is involved or not. The vig is always deducted from the winner and never added to the loser. The winner wins less than the correct payout. The difference between what the winner receives and what he should have been paid is the vig. 

It’s true that this knowledge isn’t going to save you any money or help you win more games. It should, however, serve as a warning of how little most people know about sports betting and handicapping, even those with lots of experience.  

Sunday, August 23, 2015

Bet Sizing and the Cost to Your Bankroll


When it comes to betting on football games there are many systems out there. The most popular systems seem to follow the same basic idea. It goes along the idea of raising your bets when you’re winning and lowering them when you’re losing. That way you take full advantage of winning steaks and don’t get hurt on losing steaks. The reasoning behind this seems logical enough. That certainly sounds like good advice, but is it? It’s very bad advice actually. Before we get into the nuts and bolts of it, I have a simple question. How in the world does someone know they’re in the middle of a winning streak? And if they know that they’re in the middle of a steak, why wouldn’t they bet everything they have on the next game? After all, they would know they’re going to win the next game, because being in the middle of a winning streak means just that. The advice is silly on its face. As it turns out, that piece of advice has hurt far more gamblers than it’s helped. Raising and lowering your bet sizes actually makes it harder for you to win. Here’s an example. Take any series of 10 bets with 5 wins and 5 losses. If you bet the same amount on every game, you’re going to break even, no surprise there. Now let’s look at a sequence of bets, raising and lowering after a win or loss. It doesn’t matter what the order is for these 5 wins and 5 losses. I’ll do two below. The one on the left is 5 wins followed by 5 losses. On the right, 5 losses followed by 5 winning bets. The bet size will be 10% of the total bankroll after the last bet. The bankroll stars out at $1000.


   Bet size
   Bet size

The first thing we notice is that both sequences end up losing money. Remember, when you bet the same amount on each game you start with $1000 and after 5 wins and 5 losses you still have $1000. When you change bet sizes, you end up with about $950. You’ve lost about $50 in both examples, picking the same games at the same win rate, 50%. The wins and losses can be in any order. As long as there are 5 wins and 5 losses the results will be the same, minus about $50. The second thing to notice is that when you juggle the bet sizes, you have to win at a higher percentage rate to make money. Where 50% was break even, when varying bet sizes it’s a higher number.

There’s no doubt about it, raising and lowering your bet sizes makes it harder for you win money.

This doesn’t mean to never raise your bet or lower it. If you use a bankroll, there will come a time you should change bet sizes. As your bankroll grows it only makes sense to raise your bets, and vice versa. However, you should change your bet size very rarely, as changing it does come with a hidden cost. If you don’t use a bankroll, you should never change your bet size during a season.

Most gamblers don’t understand this concept and consequently make it harder on themselves to win. Don’t fall into this trap!


Saturday, August 22, 2015

The Best Way to Predict Scores


When people try to predict football games they often fall into a trap of their own making. That trap is called averaging. When two numbers are averaged together, they sometimes cause false results. When two teams are playing, many handicappers try to predict the final score so they can make an informed decision on which team to bet on. To arrive at a score they average the two teams together, comparing offense to the defense.  

Averaging two numbers when the numbers are on different sides of average works ok. The trouble happens when both numbers are on the same side of average. That may be a hard concept to visualize, but after a couple examples it should become clear.

The average number of points scored by a team in the NFL during the 2014 NFL season was 22.7  which can be rounded up to 23. If team A comes into the game scoring on average 34 points a game and team B comes in allowing 10 points a game, averaging the totals together gives a result of 22 points scored for team A. (34+10=44. Divided by 2 equals 22.) One team scores above the league average of 23 and the other team allows below the league average of 23, so that works well and gives a good result.  

If team C comes in scoring 34 points a game and team D comes in allowing 28 points a game, averaging the totals together would give a result of team C scoring 31 points, which is less than what they normally score. That just doesn’t make sense. Team C comes into the game with a really good offense that scores well above average, and when faced with a poor defense that allows more than average, why would they be predicted to score less than they normally do?

The problem is both teams are on the same side of the league average, which gives false results. It makes good teams seem worse and bad teams seem better. The fix is simple enough. Add the two scores together and subtract the NFL average to get a good prediction.

Using teams C and D, the better number is calculated like this:


 62-23(The league average.)=39.

 Where averaging gave a score of 31 for team C, subtracting the league average gives a score of 39, a huge difference of 8 points. To get consistently better results, don’t average numbers together to make predictions in the NFL.

Here’s a full game mock up to illustrate the difference. These numbers are just an example and we’ll use the Seahawks and Lions for the teams.

The Seahawks come in with a season average game score of 31-24, the Lions come in with a season average of 20-27. When using averaging, the result is a predicted score of the Seahawks winning 29-22. (31+27=58/2=29 for the Seahawks and 20+24=44/2=22 for the Lions.) When using the recommended method, the predicted score becomes Seahawks winning by 35-21. (31+27-23=35 for the Seahawks and 24+20-23=21 for the Lions.) Using the average, the Seahawks are predicted to win the game by 7 points. Using the correct method I’ve laid out, the Seahawks are predicated to win by 14 points.  If the Seahawks were a 10 point favorite, a handicapper could be fooled into thinking the Lions were a good bet if he averaged the numbers. Using the correct method, the Seahawks are the clear choice.

Averaging when comparing teams is a very common mistake and also once of the costliest. Be aware and beware.

Wednesday, August 19, 2015

Picking Winners Against the Spread

It’s almost that time again! With the NFL season right around the corner, I thought it would be a good idea to start posting a few thoughts. In the coming weeks, I’ll be posting a couple of times a week with some handicapping strategies, things to look out for, and goals for the season.  I plan on correcting some misconceptions and defining terms so we’ll all be on the same page. I think it’s safe to say people will be learning a few things they didn’t know.

I’ve often been told by people that they have no trouble picking the winners of NFL games, but that they don’t do well against the spread (ATS). They have a hard time believing me when I tell them that if they can pick the winner of the games, then they should be crushing the bookies by betting against the spread.

Here’s the proof:

The NFL sees 256 games a year. In the 2014 season, there was 1 game that ended in a tie and 3 games that saw the teams push ATS. Of the 252 games remaining, the winner of the game covered the spread 209 times! The winner covered the spread 82.9% of the time.

If someone can truly pick the winner of the games, they’d be a huge winner ATS. So maybe they aren’t as good as they think they are. The real lesson here is how very important it is to keep records of wins and losses when gambling. Whether your game is blackjack, horse racing or football betting, it’s easy to fool yourself that you’re not doing too badly or that you’re winning for the season. The truth is, without records people just don’t know and so they err on the side of breaking even or winning.

The first step in being a better gambler or handicapper is honesty, and nothing helps with honesty like numbers to back up how you’re doing.