Ladbroke’s has Obama at 4/11 and Romney at 2/1. This translates to Obama -275 and Romney +200.
Aside from the fact that this is a truly piratical spread (NFL games, for example, would have about half this spread on a money line), do you like either of these prices? Would you plop a Benjamin on Mitt (to win $200)? Are you certain enough that Obama will win that you’d risk $275 to win $100?
By the way, the unofficial Vegas line has been Obama -138/Romney +128 for some time now, so if you wanted Mitt, you should bet with Ladbroke’s, but if you wanted Obama, you should find someone in Vegas to take your action. (It’s interesting to speculate why Obama is a heavy favorite with London bookies for only a slight favorite in Vegas.)
My guess would be that betting lines are always set to make the betting come in evenly so the house makes a profit either way, and Ladbrokes has to make the line on Romney enticing because of all the bad publicity Mitt got for his trip to London. British bettors aren’t likely to wager on Mitt unless the payoff is good.
Intrade puts the chances at 56.8%. The fivethirtyeight blog still has Obama up over 70%. The trends haven’t changed much either. Romney has never broken 45% on Intrade, and only topped 40% for a moment in May on 538. That’s because the number the oddsmakers watch is the electoral vote prediction, not the popular vote polls. The latter stay a couple of points apart, but Obama won 68% of the electoral votes in 2008 and making up 19 points is a feat.
Unless you’re a sucker for long shots, the way to bet is on Obama.
Or why not arbitage and bet both sides, one on this side of the pond, the other on the other side? I mean, that’s quite a discrepancy, isn’t it? What am I missing?
The rates quoted in OP show extremely low vigorish, so I assume there’s an additional fee, but let’s ignore it.
Bet $4000 in Vegas on Obama.
Bet $2000 in London on Romney.
If Romney wins, the London winnings cover your Vegas losses and you break even.
If Obama wins you get $2900 profit from Vegas, for $900 net profit.
Sounds good. Sign me up!
The vigorish is actually extremely high. In “money line” betting, the vig is the difference between the two quoted lines. The larger the difference, the greater the vig. In the classic Vegas “dime line” for baseball, there’s a ten-cent difference between the prices: Yankees -140, Blue Jays +130. In the quoted Ladbrokes line, there’s a seventy-five-cent difference between the lines (-275/+200).
The real problem with betting Obama in Vegas and Romney in London is finding action in Vegas, as it’s illegal to bet on elections there. But Vegas being Vegas, I’m sure you could find someone to fade your action…
I’m not a gambler, but isn’t exploiting the difference between two sets of odds like this called “arbitrage”? If not, what’s the difference between “arbitrage” and “hedging.”
Yes, it is called “arbitrage,” and is the reason Vegas sports books prohibit cell phones. It is quite possible to cobble together a series of bets which must show a profit regardless of the outcome, if two books with lines that differ enough from one another can be found.
In fact, Vegas sports books engage in a kind of “reverse arbitrage” wherein if one book finds itself too heavily invested in Team A (because a disporportionate number of its customers bet on Team B), it will shop around, looking for another book that is in the opposite position, and “lay off” its action with the other book.
What I find interesting is that the various online bet sites (which anyone can participate in) also show significant differences in their odds. The fact that they can remain un-arbitraged for long enough to write an article about them at a major blog should conclusively disprove the hypothesis (taken as gospel fact by so many) that markets are inherently efficient.
Yes, it is called “arbitrage,” and is the reason Vegas sports books prohibit cell phones. It is quite possible to cobble together a series of bets which must show a profit regardless of the outcome, if two books with lines that differ enough from one another can be found.
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This is indeed arbitrage.
This, however, is hedging.
I’m not familiar with the +/- odds you refer to, but then, I’ve never bet baseball. Football, IIRC, has its point spread, and basically a bet-$11-to-win-$10 bet whichever side you take.
The British bet you cite doesn’t appear to have a huge vigorish: bet $11 on Obama and win $4; bet $5 on Romney and win $10; do both bets and you’ll be laying down $16 and walking away with $15.
Yes, it is called “arbitrage,” and is the reason Vegas sports books prohibit cell phones. It is quite possible to cobble together a series of bets which must show a profit regardless of the outcome, if two books with lines that differ enough from one another can be found.
That’s the wrong way to figure the vigorish. It relates to how close the two fractions (11/4 and 2/1, in this case) are to each other. Since the house takes in $275 from a loser and only pays out $200 to a winner (in the case of a Romney win), the juice is 75/550, or 13.5% (substitute any amounts you wish, as long as they’re equal).
If you wish, bet $11 on both sides of the proposition and see how much money the house retains of the total $22 wagered (for each possible outcome).
No, you have it exactly backwards. It proves that markets are efficient. The varying odds offered are simply prices (in fact, the bookies call them exactly that). One site may take in more bets on one side than the other and thereby lower its price on the other side in order to attract bets on that side and reach, or at least attempt to reach, the bookie’s goal, which is to have equal action on both sides and thus be disinterested in the outcome.
Think of it as a series of fruit sellers. Two stalls sell both bananas and cherries (the Yankees and the Red Sox). As the day wears on, one seller may find that he’s selling much more of one fruit than the other. He may lower the price on either bananas or cherries in order to sell his excess inventory of that fruit. However, across the street, another vendor may have the opposite problem. Savvy shoppers will therefore buy either bananas or cherries from the vendor who has the lower price, until their inventories are again balanced, at which point they should adjust their prices back to where they were.
The reason that the sports bets and fruit markets are efficient is that buyers are free to choose to buy or not buy, and sellers are free to sell or not sell, or to adjust prices as they see fit.
You’re almost debating religious preferences here. It all comes down to what your definitions and assumptions are about what a market is and what constitutes efficiencies.
If your definition emphasizes using demand to determine current pricing, then your examples are efficient markets. If your definition requires a notion of determining actual future value, then they are not. The differences that Chronos noticed lies in the variation between the two. The 538 blog is going for the latter, while the English bookies are going for the former. There’s no reason why the two numbers should correspond. They are not in any way measures of the same thing.
Definitions: If you’ve already made one bet, and then make a second bet to reduce risk (and also profit) that second bet is a hedge. If you construct the two bets in advance, together they represent arbitrage. The distinction can be viewed as mere semantics.
Given two (or more) bets, it isn’t clear how to define “average vigorish”, but a straightforward calculation would give
-(x+y) / ((1+x)(1-y))
where x and y are the numbers (with decimal points added) quoted on under- and over-dogs, respectively.
In OP’s examples, London has
x = 2.00 y = -2.75
yielding -(x+y) / ((1+x)(1-y)) = 6.66% vigorish
Vegas has
x = 1.28 y = -1.38 yielding 1.84% vigorish
The latter in particular seems very low to me. BTW, am I the only one slightly annoyed by the Sportsbook odds quotation method cited in OP, in which +100 = -100 ?
A friend once mentioned that he was in an East European capital at the Iron Curtain collapse, and that lots of little currency exchange booths appeared throughout the city as Forex rates fluctuated wildly. Each booth adjusted rates in real-time in response to customer demand, with many of those customers running from booth to booth, exchanging back and forth. My friend thought this was an elegant demonstration of markets! (I asked him if he participated. He answered, reminding me of myself, that he was content to amuse himself as spectator without trying for personal riches. :eek: )
Nearly a month later, Ladbroke’s has Obama at 3/10 and Romney at 9/4.
This translates to Obama -333 and Romney +225.
Or, splitting the vig plausibly and using non-gambler’s terms:
Obama 72% Romney 28%
I don’t know whether the slight rise is due to the Dem convention being much better than the GOP’s, or just the reduced likelihood of a September/October surprise with the passage of time. But for the first time I’m daring to feel optimistic.
Well, Nate Silver says Obama’s chances of winning are in the close neighborhood of 80%. While I think even a 20% chance of the disaster that a Romney Presidency would be is too great for comfort, I think that Nate’s overestimating Romney’s chances at this point.
Obama’s got a lead (not huge, but more than enough if it persists), he knows what he’s doing, the Romney campaign continues to trip over its own feet daily, Obama will easily win the debates, the Dems all of a sudden aren’t running from themselves and are attacking Romney and Ryan with great glee, Romney’s political allies seem to be thinking more of their own prospects for 2016 than the prospect that Romney might be running for re-election that year, and even Krugman’s starting to sound somewhat optimistic about the economy.
I think my money’s going to political contributions rather than bets, so I’m thinking in terms of which Senate and House candidates to contribute to.
Romney’s 20% on 538 basically means that Silver’s model thinks that there’s a 20% chance of something, anything, happening that’s big enough to upset the apple cart enough to reverse the current trend. Whether you think that that’s an overestimate or underestimate depends on how likely you consider a big event like that to be. And each day that the big event doesn’t happen, the odds slide a little bit towards Obama. The most likely outcome we’ll see will be that that number will gradually creep towards Obama, until it’s just a hair off of 100% the night before the election. Alternately, there’s the possibility that it’ll creep towards Obama for a while before suddenly jumping back the other way, or (if there’s a sudden event that favors Obama) it’ll creep towards him and then jump much higher for him suddenly.
Might I suggest Tester vs. Rehberg for Montana senate? It’s a quite close race, and it’s a small state, so your support will go a long way.