Key Takeaway: Don’t cash out your value bets.
In recent years, sports bettors have been given the option to Cashing Out their bets in the middle of a game. This has grown to be a very lucrative revenue source for bookmakers. In this article we will explain:
What it means to “Cash Out” in sports betting
The formulas behind Cashing Out
Exemplify an option to Cashing Out
Conclude whether one should take advantage of Cashing Out or not.
TLDR: Don’t cash out your value bets.
Cashing out in Sports Betting is something that is considered to be the safe option, a middle-way between partially winning the bet and risking to lose it all. This option makes sure that the bettor can receive payment at any given point in time during the game, as the bettor withdraws from the bet when in the lead.
Let us say that we have a soccer match between “Team A” and “Team B”. If you bet $100 on Team A, with decimal odds of 3,20, your full payment from the bet would be $320.
If Team A is ahead at half-time, but not in an impressive fashion, you have the opportunity to cash out, and immediately receive a portion of the full payment. This will cancel the rest of the bet, and you might only receive $160 instead of $320.
This is due to the elimination of risk throughout the second-half, where Team A might not be able to keep their lead to the very end of the game.
What formula lies behind the Cash Out?
The formula behind Cashing Out is compiled from real-time odds and the full payment of your current bet.
In the example previously stated, the Cash Out option at half-time was at $160 instead of $320. The Cash Out option is obviously lower than the full amount, but if we look closer it is actually lower than what the correct, or “fair” amount is as well.
The fair amount of a Cash Out option is found by the following formula;
Full payment of bet / Real-time odds
If we use the formula on the example given, we have;
$320 / 1,60 = $200
This means that by Cashing Out during half-time, you would lose $40 compared to what the real and fair value of the bet is at this point in time.
This is more than likely to be the case in any given game, as the bookmakers are looking to take advantage of every opportunity to make money of the bets, or in this case make sure that they do not lose additional money from the bet. The bookmakers are likely to have a margin on the odds, and have a margin on the offered opportunity of the Cash Out as well.
This is largely why the Cash Out is an option that will harm your profitability in a long run, and should not be included in your betting strategy.
But, are there situations in which the Cash Out option is an attractive option?
- The short answer is: Yes (see examples below)
When the Cash Out option offered exceeds the market price
In some rare cases, the Cash Out option will have a higher value than what the odds from other bookmakers are. This is an indication that the offered Cash Out option is listed at a value above what the actual fair price is, and is definitely a favorable option for the bettor to take.
High values and acting rationally
As previously mentioned, the long-term strategy of a bettor should be to maximize profits through seeing out all bets to the very end. Despite this being the case in most situations, acting rationally should also play a part in your betting strategy. This means that you should be observant of your bets as they are happening, and always look for the best options for yourself.
Cashing Out might be relevant when discussing bets that are of very high sums of money or if a bet with very high odds has almost been fulfilled. In these situations, the bettor can choose to act in a rational way and Cash Out with the guaranteed payment.
For example, a bet on a team considered to be on the lower side of the table to win the league, with a $2000 stake and 200,00 in odds is nearing the end of the season. However, the competition, has improved their play lately and is very close to re-gaining the lead.
In this situation, the sensible thing to do might be to Cash Out, and receive some payment as a guarantee, rather than risking being left with nothing.
The full payment of the bet would have been $400000, and the Cash Out option might be $205000. The fair price however, would be the full payment / the real-time odds of 1,80.
This would have given a correct value of $222222. In this scenario, it might be wise to explore the option of Cashing Out, even though you might feel like it is a loss. So if you find yourself with a big bet on Leicester to win the Premier League again at 200 i odds and they are in the lead with 3 points and 3 games to go. You should consider cashing out the bet. (Really you should not place these bets in the first place, as they have sky high variance. In addition the bookies take very high margins on futures markets, which diminishes the value to be had).
Lowering the opportunity costs
When operating with bets that are connected to a long timeframe, the opportunity costs will increase. The opposite is the case for bets connected to a shorter timeframe, as the opportunity costs will decrease. Therefore, to lower the opportunity costs, it might be useful to Cash Out on some of the bets with the longest timeframes, if the right opportunity presents itself.
There is, however, an alternative to Cashing Out;
Hedging a bet will contribute to a reduced level of risk, but will also decrease the return on your investment. This alternative to Cashing Out will also put the bettor at greater risk of having your bet voided. However, If you place the hedge side of your bet at a sharp bookie or betting exchange you should be fine in 99.9% of the cases.
Hedging, in short, means to exploit the differences and changes in odds between the different bookmakers, to create a guaranteed profit from a certain game. This is a rarity, and does not happen in a bunch, but there are certain situations in which this can happen (see great example from an article we wrote on How to Hedge Your Sports Bets here.
If Team A has very high odds long before kickoff, and this suddenly changes into Team B´s favor, it would potentially be possible to exploit this. As long as the profit from the bets on each side covers the risk on the other, the total profit from the bet will be guaranteed. Typically you will get better odds on hedging the bet than you will on cashing out. So it is the recommended option of the two.
Cashing Out is not an option for Sports Bettors who want to make money from betting in the long run
In addition to losing on the margins the bookmakers take from the bets and from the offered Cash Outs, the Expected Value of the bet will decrease compared to seeing out the bet. Read more on Expected Value here. The bettor also runs the risk of getting limited or even banned from certain bookmakers.
Key Takeaway: Don’t cash out your value bets.
Lean about the main differences between sharp and soft bookmakersRead More
What is a soft book? What is the difference between a soft book and a sharp one? If you are wondering about this, check out this articleRead More
This post originally appeared at www.daily25.com and has been reposted here with the permission of Steve from the Daily25 blog. It is written by Matthew Trenhaile who has worked as an odds compiler for many years and is now out on his own taking on the bookies. You can follow Matthew on twitter @CrazedAlchemist and he also has his own blog. Over to Matthew.
In the following article, I will be looking into the subject of profiling. I will discuss and analyze the process and how it has changed over time, rather than just looking at the business- and morale-perspective of it. In my fourth article I will look at account restrictions, as I wish to explore and explain all relevant elements of the case.
In this article, I will also be looking at take a closer look at how tipsters work, in addition to take a closer look at how they influence the trading decisions at bookmakers and their management of risk. Bookies will a lot of times profile tipsters to some degree, rather than profiling the actual clients themselves.
Profiling in the olds days
Bookies are known to have profiled bettors on a consistent basis throughout the years, be sure of that. For example, when betting at the racetrack, bookies had the option of rejecting your bets, change the place terms, only allow stakes that they were comfortable with, or even lay off bets to another bookmaker to have the liability change hands. There were definitely differences between tracks and areas, as they would demand different behaviors from bookies. This did not change the fact that they might have forced you to play at worsened odds, as they wished for you to change bookmaker to someone else. The knowledge of each bookmaker and their ability to identify the profitable bettors were extremely important back then, just as the situation is today. In the old days, they had to recognize people that were playing on behalf of the profitable bettors.
There is a chance that it was easier to place a great bet of a decent size, due to the approach of some bookies. Bookmakers used this information to create their own books the way that they wanted to. This was at the cost of the liability of the accepted bet, but also to over hedge the bet with another bookie at the same track, before they understood that someone placed a smart bet and that this could destroy their odds.
This way, it was sensible to earn smart money in manageable stakes early, rather than to get picked off in the future, when the opportunity to hedge the bets where a lot lower. At a certain point, this attitude changes and was abolished at European and American bookmakers, with the exception of a few that still remained in the Asian markets. If anything, as the number of bets have risen in the whole world, the hunger for early smart money in Asia has increased, as the fight to become the smartest and quickest has become something of extraordinary importance. So what happened to the rest of them?
Profiling with The Rise of Online Betting
Bookies in Europe and in America understood that when the online betting-markets were on the way up, there was a great amount of money to be made. However, when there is an unsatisfied need in a market, a lot of competition will arrive, and that quickly. As the world of online poker had a dramatic increase, the market saw a betting boom. “Everyone” made a lot of money, and as a result there was a possibility of making money of Sharp betting and bonus-bagging, or even Arbitrage betting for a while. This was, of course, before anyone noticed and closed their accounts. Unfortunately, when the market stabilized itself and in addition was struck by the collapse of the US poker market, the job for bookies became a lot harder.
Customer acquisition-cost became a lot higher, due to the increased number of competitors, all trying to get a hold of the current pool of clients. This was increasingly important, due to the decrease in poker revenues. At this point, the bookmakers had to lower their restrictions and limitations, to make sure that they kept customers. Profiling was now driven by odds compilers, who were able to see bets laid, due to the vast improvements in technology at the time.
I cannot speak on behalf of other compilers, but there were situations where the relationship between I and the bettor became personal, and I would pressure for a limitation or restriction of an account. This situation also happened in the opposite direction, as sharp clients betted once the market was settles, and in a moderate stake on a decent market.
Sometimes I would like the relationship between myself and the clients that played smartly, as long as they stayed “honest”.
As far as the online industry goes, the increase in Arbitrage Betting and the exploitation of bonuses took its toll on the bookmakers. This saw an extreme increase in how many clients were turned away from betting, just as much as how many they managed to get in. To the bookmakers it was all about becoming, and staying successful.
Risk Management Departments
To some bookies, it came as a huge surprise when they realized just how many of their bettors were making money from their sites or exploiting their bonus offers. This realization only came around after they started to analyze their figures. This effectively meant that the common odds compiler did not have the time or the ability to do all of the profiling. Therefore, risk departments appeared at every major bookmaker.
A risk department is a team of people, who are rewarded if they manage to keep out the players that manage to turn a profit at their sites, meaning that the bookmakers lose money. As risk departments are paid after how many bettors they manage to keep out, there will always be people that look to exploit this, and take it too far.
Risk managers in the United Kingdom used to have the greatest tool available for them. This was because Betfair was available to them, and was advantageous because odds compilers weren’t able to beat Betfair at all markets every time, and therefore they knew that bettors that played at higher odds that at Betfair, would have to be sharp bettors. This assumption continued and escalated, to the point where there was a consensus that compilers couldn’t beat Betfair on any market.
The high focus with Arbitrage Betting in the United Kingdom betting industry was mainly aimed at backing the bet at the bookie, while at the same time, laying the bet at the Betting Exchanges. This was in place of placing three separate bets at the different bookies, for a guaranteed return. It is necessary to point out that there is still some risk involved.
People that work with odds compiling do not like traders that focus on Arbitrage, but will in some situations tolerate a sharp trader. This is due to the work ethic of certain sharp bettors, as they have to put in the time necessary to be able to calculate the results of matches and events. An Arbitrage bettor only has to worry about placing a bet after receiving a notification on a site, and cash in on the opportunity. In many compilers` eyes this eliminates the competition between opinions and knowledge, and therefore, they are less respected among odds compilers. Some compilers will the you that the work is mentally and physically stressing, and takes a toll on them.
Arbitrage Betting actually did a lot of positive for the risk departments, as they informed them about how the markets work, in addition to have them realize that the Pandora’s box was opened by sites that compared odds. It was also useful to understand that copying already established sets of odds in the market was efficient, and it was also a factor in being able to decrease Arbitrage Betting-opportunities and certain types of sharp betting.
The situation in the present is that there are entire teams and departments that are concerned with surveillance and monitoring bettors on a constant basis. This is because the bookmakers want every client to be a part of paying for the excessive budgets in marketing and advertisement, in addition to affiliates. If the bettor doesn’t generate a profit of some sorts to the bookie, it is more than likely that the bookmaker will take action, and either limit or eject the account. By now, it has become clear that is very difficult and complicated to beat a widespread arbitrage across all the markets, without changing the prices, and therefore these accounts get flagged.
If you don’t change the prices along with the market, there is a clear chance that when you have the best price at any outcome, there will be an Arbitrage opportunity with another bettor in a place somewhere. In this situation you will end up having the best price, even if it was unintentionally. This is if you don’t change your prices, including when you haven’t struck a bet yet.
The bookmakers have completely gotten rid of the thought of potentially losing money on a client of theirs, even if it was to make money on other clients. When we look at it like that, they have rejected the thought and concept of making a book. In reality, it would be very difficult to make a balanced book without the assistance of the Pinnacle Model, due to the high number of bookmakers one can bet with. The bets that are most often struck on a market are Arbitrage openings, and on some occasions Tipster selections.
Books that end up lopsided are a reality that is hard to avoid for most bookies, because of the fact that square money has a tendency to bet exclusively one way, in addition to betting at a different time compared to the sharp bettors. In some cases, however, they tend to bet the same way as the sharps, only at a changed price and at a new time. The latter of these bets are the best bets to take, even though they will be a part of creating a one-sided book. It is important that, when you have to cheer on a particular outcome, you make sure that it is one that the worst bettors have placed money on.
What do they look for when profiling?
It is important to note that risk departments aren’t exactly the same at all bookmakers, but there are a few things they look for in general, that apply to most of them;
Is the account profitable? As crazy as this might seem, this is the reality of the situation. If your account is profitable, you will get noticed. It is impossible to hide from this fact.
Is the account considered to be sensitive to prices, and has the account placed a bet through a medium that is considered to be price sensitive? This might, for example, be a site that compares prices. Sharp bettors are considered to be price sensitive, and as a result they are not wanted.
When was the bet placed? If it was placed earlier than a day before the match or event will signal that something might be “wrong”, and raise attention to your account.
Is the price to be considered an Arbitrage price?
Did the price decrease greatly following the placement of the bet? The closing price is a lot more accurate than what the opening price is.
Did the bettor only place one bet, or did the bettor place a series of bets? This point might be debatable, but the common bookies like to see you place more than one bet at a time. This is because they want you to want as much action as possible, and for them to be able to profit at a maximum from you.
Have you made withdrawals rather than deposits? Bookies do not like to lose money.
Did you use an E-wallet when you had plenty of options that are more directly connected with the bookmaker available? This could be recognized as betting sharply, as you give the impression of wanting to move your money in fast fashion. This could also be mistaken as money laundering, which might lead to having your account flagged, regardless if you are or not.
If you haven’t used the casino, you should consider doing it.
Bookmakers don’t like bettors that place bets at niche markets, and don’t play the events that they highlight themselves?
Bookies also don’t like high stakes, as they make more money when people bet “for fun”. This is usually synonymously with placing low stakes.
Consider using the mobile platform that the bookie suggests. If not, be vary when changing IP Address.
Bookmakers actually raise their eyebrows when a woman places a bet, as they are not thought to be the “conventional” client. If they do, the bookmaker might suspect that they are going to exploit Arbitrage opportunities, or are a bowler account.
Do your bets match your demographic? Bookmakers are more thorough in gathering of background information nowadays. In the old days, the bookmaker might only want rich clients, but in the present they even accept students.
Do you allow their cookies on the site?
Have you placed bets at the same time as other bettors? Or have you placed bets at the same time as Arbitrage Bettors or Tipsters?
Never bet on a match that is fixed, or that might be considered to be fixed. This will flag you whether it was intentional or unintentional.
Never establish yourself in the industry of tipsters, don’t associate yourself with the industry, don’t be friends or follow people in social media that are associated with betting.
There are probably other factors that play their part as well, but the list above works like a pointer, and if you follow these tips, your accounts might be safe. If you end up being limited or cancelled, ask yourself if you followed the list.
In the closing paragraphs, I will discuss the subject of Tipsters. Most of the time, bookmakers aren’t concerned with Tipsters (when considering the sharp betting perspective). Most bookmakers have a very high number of clients that follow the tips of Tipsters blindly, and therefore they don’t instantly inspire fear. Again, Steve has expressed his thoughts on Tipsters, as they in no way are a guarantee of a profit. Tipsters contribute to creating markets that are heavily weighted on one of the sides, which is unfavorable in the smaller and most liquid markets. Tipsters might also create overlaps with the points in the list above.
In general, a Tipster will try to tip at the best price and a long time before the event starts. Often, Tipsters are the reasons for why prices collapse. If some of their subscribers place high stakes at the exchanges, they might make other bettors look like Arbers (Arbitrage Bettors). This collapse could trigger those who bet on prices that are currently dropping, to push the market even lower, leaving the bookie with a negative and horrible result. This result would be difficult to turn into something positive, as they weren’t quick enough when changing the price. This is why bookmakers follow Tipsters closely.
I, myself, have signed up for trials at Tipster services, to see and to understand the angle the Tipsters were taking, and if I had overlooked anything. Generally, compilers respect Tipsters that appear to be compiling their own price further, before they eventually tipping a selection. A compiler that knew what he/she was doing, would always use the Tipsters to learn, if they had a great merit and history. Compilers will quickly dismiss Tipsters that don’t have any results that are verified, that don’t seem to have a clear strategy, and the ones with inflated ROIs beyond what they deem to be likely.
Said in other words, we as compilers, were trying to do the same as the punters are doing in high volumes nowadays, in addition to seeing who we should take seriously.
Websites that were related to betting, with useful stats and calculations of models were of high interest for us. Most of them were checked, but as it turned out, we were already sitting on the information from the past.
This post originally appeared at www.daily25.com and has been reposted here with the permission of Steve from the Daily25 blog. It is written by Matthew Trenhaile who has worked as an odds compiler for many years and is now out on his own taking on the bookies. You can follow Matthew on twitter @CrazedAlchemist and he also has his own blog. Over to Matthew.
Matthew's background as an odds compiler
My name is Matthew Trenhaile, and I have worked for six years at the UK Sport Spread Betting division of the IG Index, as an odds compiler. Steve was kind enough to allow me to utilize his blog to show my abilities in writing, through a series of articles from someone who has actually worked with a major bookmaker and in the industry. To begin with, I’d like to address some phrases I am going to use continuously throughout these articles, as the names and nicknames for different situations are different from nation to nation;
Jolly = Favorite to win
Rag = Underdog to win
Sharp = Smart punters
Square = Losing punters
Books = Bookmakers
Bowler = An account in another person’s name, used to place bets
When I describe my odds it will be in decimal (European) odds, and when I am referring to an amount of money, the currency will be Pounds (UK).
A lot of the articles I have read lately, in addition to television pieces, have generated a lot of debate. This is completely fine by me, as long as it has good intentions. These are my opinions, and I respect the ones of others as well.
An evolving betting industry
In all of the following and future articles, I am hopeful as to tackling subjects from the past, present and future perspective. To begin I will take a look at odds compiling and how this has changed over the years, with my main focus on the last fifteen years. I will also be looking into how bookies copy their prices off each other, which is a topic that is relevant in the industry today. The industry concerned with Spread Betting stands responsible for every change that is of any significance in odds creations of the last 25 years. This is also where my perspective and experience comes from.
I would advise readers that aren’t familiar with Spread Betting to read at Sporting Index`s site and go through their training section to get an idea of what’s involved in this. In sports Spread Betting you could oppose an outcome before you could lay on Betfair, and you could bet in-running online at the spreads before any of the fixed odds bookies. The doomed to be a failure product Extrabet, with the dreaded close out button, was also created by IG Index. Even though this doesn’t necessarily mean that I am extremely great at compiling odds in comparison with others, it definitely means that I was at the center of advancements in technology in the sport betting industry. This was the reality back then, and the sports spread betting industry is still the leader. This goes through the employees, who devise the models of other bookies. It can also happen through firms such as Sporting Solutions, a spin-off from Sporting Index, where in-running prices towards bookies is the product. It is a clever move by fixed odds bettors to take a look at the spread betting firms prices, as their secondary check or backup before actually placing their bets.
How Odds Compiling Works
Databases, Statistics and mathematical models all play an increasingly large role in compiling odds, rather than personal experience, intuition and feel. When I worked, I was fortunate enough to work alongside odds compilers that worked in the “old” way, and that had watched thousands of hours of horse racing, and could distinguish the smallest of nuances of how the horse was ridden and of the strategies of the trainers. I also worked with people who broke down sports into their fundamental inputs and turned those inputs into probabilities. This was done before and ruing races.
Initially, odds compilers were split on the prospects of Betfair, and especially on its uses with regards to compiling prices. When I started working, Betfair had only just reached liquidity levels that were significant, and couldn’t be ignored due to the fact of the increasingly large number of arbitrage bettors. After 6 years, we priced all horse racing products after our Betfair API, only using one person to oversee that the process was correct. This was an extreme contrast to back when I started, where we had one trader for every horse race and a room filled with 40 traders, even though the number of sporting events and matches were only a tenth of what we have now. As a result of being a subsidiary of a large financial firm, was that we were paid more than the remainder of the industry, and our resources topped every other bookmaker.
Our resources were ploughed into trading at more events in-running and to develop more complex models to generate odds in-running, at an increasingly high rate. Generating these odd provided us with liquidity to the betting exchanges, and in turn generated a significant secondary revenue stream for us, in addition to providing these odds for our clients` sake.
Creating Statistical Models for Sports
The statistical odds compiling mostly consisted and originated from the counting of how often an event had happened previously. If we were compiling data from two football teams, we would for example look at how many times the home-team had won in their last 20 home-games, and how many times the away-team had won in their last 20 away-games.
This was prior to my time. In the old days, the edge was found by bookmakers, simply by studying the game more than the bettors and comparative odds knowledge. In other words, if a bookmaker found a 50% chance for a team to win its home games, and decided to put up a 1.85 odds, the bookie could trick the punter the next time, by putting up a 1.75 odds. This is just because the bettor remembers what they played, and places the same bet the next time, regardless of what the odds is. The bookie will then have extracted value from the bettor, just by knowing what punters have played recently.
Odds compiling used to be more focused on the bets on the punters, rather than the probability of the outcomes. To this date, this is the very difference between bookmaking and punting. The bookies` job is to understand where money will flow, as opposed to the punter, who has to understand the probability of outcomes and recognize value.
In the world we live in today, the odds will reflect probabilities of an outcome more and more precisely, and is lesser concerned about the opinion of the public. The upspring of in-running betting is what stands behind odds compilation through mathematical modelling. This meant that it became too difficult for people and compilers to recognize prices in multiple markets for multiple events in-running, only through the use of a pen and some paper, rather than computers. Bookies had a need for automatization, preferably running through models.
The Possion Distribution for Modelling Sports
Almost every model for sports betting can be found on the internet, and have been available for quite some time. These models have been improved over a number of years, making the data greater. “Poisson” distribution led the way as the best football-model, because of its accuracy, as a result to being improved, in addition to being easier to add time decay to the inputs.
Each team has their goal inputs, and for every minute the game goes on, the model decreases. This means that as the simulation continues, the odds is recalculated, and changes a little bit every second, even when not significant enough to be visible. In the beginning, Poisson distribution was the only way, but we later changed to custom distribution for every league, and from goals scored to the expected number of goals based on shots.
These days, compilers measure the overall quality of the shots being taken, in addition to measure the individual players impact on the shots, to create a better understanding, and to create highly improved shots-models. Or are they actually doing this?
Every sport has a model that reminds of this model, and all can be improved as the level and amount of information and data are made obtainable. The important point to focus on for bookies, is whether or not they wish to go down this road. Do they go through with the payments to secure this information, and to they pay people to work for them and maintain it? Or do they hire someone else to do it for them?
Multiple firms are already in use of the same price from the same provider of in-running football, for example. How good would your odds need to be to bet the average punter, if you only used in-house compiling? Can great management of risk hide a multitude of sins just by letting the best of the punters move the prices so that they have the best outcome for you?
It is sad to say, but only a small number of bookies allow that style of management of risk, or for the investment in greater pricing. Compilers are now understanding that a pound spent on advertisement and marketing can initiate a greater profit than the pound they could have invested in improving the quality of the software or on staff.
In general, any bookmaker has a goal of beating the 98% of all punters with the lowest number of staff possible. If we go into greater detail, bookies are most cost efficient when hiring young and inexperienced staff, in addition to give optimization of software little or no thought. This is seen as a better option that hiring experienced odds compilers.
How Bookmaker's Business Models and Views on In-House Odds Compiling has Changed
You might be convinced that since odds are the product served by bookies, they would be better off with focusing on developing their product. However, in the world we live in today, this is not correct.
For example, you wouldn’t base the choice of your hotel based on the cost of a beer in the bar compared to other hotels. Bookies look at odds at about the same level of importance as the price of that beer. The real product they are selling is entertainment, and not the intellectual contest between the bookie and the punter. It would be foolish to think that they have ever sold the product of this sort of competition. The product bookmakers sell is a rush of adrenaline, and those who still believe that characters competing with punters, and playing against each other in betting rings concerned with horse racing is what betting used to be, are greatly mistaken.
All punters have a different story and feeling towards how sports betting and bookies used to be. People I have spoken with remember the taxes in the UK, large margins, only a choice between a few bookies, refusal of payment when trying to withdraw money, and in some cases threats of violence when trying to get paid. I do not know where the image of a gentleman-bookmaker comes from. Over the years, bookmakers have taken bets and they have refused bets, they have allowed high stakes and they have refused them, and some have filed for bankruptcy and some haven’t. This has been the truth for square and sharp punters.
Every bookie expects to win in almost all cases, no matter what the quality of their odds are, and to improve channeling of their efforts in getting punters in the door, rather than having a cheap price in the bar when buying beer. I do not care much for this model, but I believe it is going to stick.
There can only be one Pinnacle
Now, let’s dive into the compulsory paragraph about Pinnacle. Why doesn’t every bookie operate such as Pinnacle?
Well, the simple answer to this question is that there can only be one company at a time with the business model that Pinnacle possesses. Some might use parts of it in some areas of their business, but the model that Pinnacle uses, isn’t easily duplicated.
Pinnacle`s tagline is that they openly welcome winners, and has stated that this is due to their wish to beat all square book with the best proprietary trading models that the market can offer.
Having the greatest employees (including odds compilers), betting on tiny margins, welcoming arbitrage- and sharp traders, in addition to changing the odds according to how sharp they are, the odds at Pinnacle will be the best representation of the probability of any outcome at sporting events.
Start with your limits low, and increase them according to the increase in your price. Not a penny will be spent on marketing, but everyone’s allowed to use the affiliate banners, in addition to giving your API to everyone you can. This especially includes arbitrage and services that compare odds. The low margins result in you being at the other side of arbitrage trades. The square bookie your price is up against is so bad at placing the price that you must be getting the value side of the arbitrage bet.
Actually, you will be getting this scenario again and again, but will always end up moving your price to make sure that you get every bit of value every single time. This ends up with you becoming the greatest punter that William Hill, Ladbrokes, Bet365 and every other bookie has, without the need of opening even just one account. The risk management group that are in your possession are almost fully automated, and you need the services of an investment bank. To be able to set up- and use this kind of model must be doing so with smaller margins than you, in addition to having a greater risk management and a lot of capital. The only example of someone giving this a shot at the moment, is Marathon, and they are still nowhere near the point where they can afford to keep winning accounts in their books.
But what about the Asian bookies that keep accepting winning punters?
- Well, as long as they see a great amount of money coming in, they are happily accepting them to play. This is the case in football, certain American sports, and in the more known tennis-matchups.
The Asian Handicap Model was designed to function at a low margin, move quickly, have a great volume of trades, in addition to not working with the sharp money, as they is some cases were irrelevant. In some cases, it was designed to play at early and low limits, just like Pinnacle, while the market still forms. This should result in the risk being low.
Still, they don’t directly run a Pinnacle Model, but they have large enough square volume to use some of the same features of it, and handle a loss comfortably. This is IF the books as a whole result in a positive profit.
The Future of Odds Compiling
So where do I personally see the future world of odds compiling going?
In the end, I think that compiling of odds will strictly become an outsourced function for bookies. Companies that specialize compile the odds, both pre-match and in-running, will arise. Already, multiple companies provide this option, in addition to there being companies that provide liquidity to the betting exchanges. Homogenized pricing is also something that will occur more often.
The reasoning for why you see a lot of similar pricing in today’s market, is that the liquidity in certain sports betting markets is of such a high volume, that we can see something that reminds us of a market price, similar to the financial markets. It doesn’t make sense for bookmakers to have deviating prices from each other in football that can be categorized as top-level. Trust me when I say that substantial studies have been completed, and that they conclude with the fact that trading against the market in a liquid sport is a loss in the making as a bookie. When you are going to provide thousands of odds over a very high number of events, it is easier and better, to simply just follow the market.
Though, this might not be the case for a punter.
An increasing amount of companies will look at a market and tell you that the combined price from a liquid Betfair, Bet365, SBO, IBC and Pinnacle easily can be put together, and function more than well enough. These operations are not going anywhere, and see a very high amount of trades, which helps maintain the prices at a correct level.
“Why do they put up arbitrage opportunities, even in the liquid markets?”
- The answer is that we are in a period of time, where the industry as a whole is in transition and sees changes. Some are still trying to understand and accept that the price of the market should be set from the flow of money, rather than the opinion of a trader.
I predict that bookies will have a growing confidence towards these consolidated feeds. They will eliminate arbitrage opportunities, or at the very least, with sharp sources, they will be cheap in use. I also believe that bookmakers will outsource all of the risk management tasks. There will forever be exotic markets attached to the core liquid ones, and if the bookies have any sense they will increase the limits at the core ones and decrease the limits at the exotic. This should be at a level of a 100 pounds takeout, which is a great amount for punters that are in this for the entertainment of it.
When focusing on horse racing, I have few predictions to come with. It might go in the direction of Starting Price only. I actually think that pari-mutuel betting with very low margins could be the way forward, making it into a universal Betfair with Starting Price. This type of pool betting has not been prevented in Asia, not with punters or professional bettors.
The problem that we have with the UK is the high amount of bad racing. Who knows what would have happened if bookies had pooled tickets, and if Betfair and the Tote had shared the profits, maybe it could have resulted in something valuable for everyone. This could potentially also have put pay to some of the bad Starting Price rigging that is happening.
Betting will become just as much about beating the market as a whole, and not picking off the sick and the weak prices from the books. This will lead to a requirement towards punters and tipsters to understand the weaknesses and the strengths of the markets they work in, just as much as the sports themselves.
As a final word, I would like to say that you shouldn’t concern yourself with how the prices and the odds are set and compiled, or whether bookies show the same prices, as the only thing you should concern yourself with is to beat them. There will always be flaws and edges to be found in every sport, even though they get harder to spot, and shrink in size.
Written by Matthew Trenhaile
You can follow Matthew on twitter @CrazedAlchemist and he also has his own blog.
This post originally appeared at www.daily25.com. It has been reposted here with the permission of Steve from the Daily25 blog. It is written by a guest contributor at the Daily25 blog. He works at one of Australia’s biggest bookmakers but does love his job so wishes to remain anonymous. Being one of many sportsbook insiders I converse with on a regular basis, I shall cleverly name him Spinsider. I email with a number of people who work at sportsbooks, they have all stumbled across this site and contacted me. You can imagine that we have a lot in common and a lot to talk about. I have found that all the workers of these big corporations are great guys. I always feel a tinge of guilt when calling out sportsbooks, as I personally know workers there, but it is not the workers who are the issue, it is the way the owners have created a culture in each company much like those seen in the wolf of wall-street. The goal of all employees is to make as much profit for the company as possible and this sometimes leads quite nice people into doing reprehensible things in the name of profit.
This article will give a small glimpse into the lengths that bookmakers go to profile every single customer and then weed out any that may one day make a profit. This is a major issue in our little sports-betting world, and an important story to get out there to the general public. I’ll hand it over to the Daily25 Spinsider and I’ll be back at the end of the post to add some of my own opinions.
From inside a corporate bookmaker
A while back, Steve reached out and wanted me to write an article for his increasingly popular blog, daily25.com. As I have had some personal things to settle and an international trip to complete, but finally, here it is. Normally I would not be writing an article like this, but in this particular situation I can relate to Steve trying to educate others. This will work towards a fairer world of betting, and I have understood from my previous conversations with Steve, that he is a genuine and a great person.
Who knows in the future, I might enjoy writing so much that I will publish my own blog. Hopefully Steve will give me some feedback on whether that would be possible to do or not.
A little about me; I have worked in the industry and world of gambling for about four years now in Australia, and I am currently working for a large corporation. Previously and currently I have done quite a bit of sports betting, and punting, and therefore I can relate to the two sides of sports betting. I have read articles, in papers such as The Age, that have annoyed me due to the one-sided nature of their writing. I have complete understanding for the bookie – and I will be the first to admit that I would not have a job if punters did not lose and paid my wages, but I also understand the perspective of the bettor, if their account gets limited or even closed. On the other hand, if bookmakers are incapable of turning a profit, you would, as a punter, have less opportunities to bet and exploit offers and campaigns.
It’s a circle. And the circle is of the vicious kind.
Why Bookmakers Limit Winning Players
The main objective of this article is to take a closer look at how betting accounts and profiles gets noticed, and the process of them being taken all the way to restriction and closure. No bettor ever wants to try to place a stake, and get rejected. “Why will they not take my money?” The short answer to that question: Yes, bookmakers limit or ban any consistently winning player. The most important takeaway from this article is how bookmakers profile players, but firstly, let us understand why they do it.
A corporate bookmaker has an overall objective of creating a profit for itself. This is the point of emphasis from the owners and the shareholders. If you are not able to create and increase your profits, you will be shown the door. Employees at the bookmakers look for ways to satisfy their individual targets and expectations set for them, and the easiest way for them to reach profitability and to increase their margins is to remove any punters that look like they might cut into these margins. Corporate bookmakers are not easy to understand and are a tough opponent to have. These corporations have a high number of employees, with different areas of expertise. All of them have a need to get paid, and the same goes for the owners and the shareholders. In my honest opinion, there is a culture of being unfair towards the customer on a constant basis, when there is no need for this. This means that bookmakers try to mislead and use the very people that pay their wages.
Personally it annoys me as a punter, because I know for a fact that they do it to me. The difference between me and other punters is that I understand how it works.
How Bookmakers Identify and Profile Winning Players
Now, let us get to the point of this article – how accounts are noticed. At the bookmakers where I have worked previously, we have had teams that work entirely with risk, and who monitor the activity of customers, trends in the market and at specific players, etc.
Below I will go through a few techniques the bookmakers use to profile:
IP Addresses are tracked for accounts and for bets. This means that even though you create a new account with the names of, for example, your family, it will not work. If you ever place a bet or use the same account that has the same IP Address, the account will be flagged in an instance, and will be under observation in the time going forward.
Another example is the MAC Address, as this is information that is captured, but to my knowledge is not used in the filtering process. In addition to this, bookmakers will notice if you and “your mom” begin placing the same bets, as your profiles will match each other.
Unique Accounts are put in place to monitor every person on the site. This means that the bookmaker has the information necessary to positively identify you, for example through date of birth, address, and so on. In addition, they get the device id from your computer or phone. Whenever a new account is created somewhere, it is run through a database of information, to check whether it matches information from existing accounts. These accounts will then be grouped and monitored.
Cookies are used to track your movement on their sites, whether you are logged in or not. In Australia, cookies are automatic, meaning that you don’t really have a say in them being placed in your browser or not. In Europe, however, there have been created laws to protect users from cookies. Every movement on the website is tracked, gathered and analyzed, and there is no way around it. The information gathered here is used to put users in certain categories, and to offer different campaigns and bonuses to them. These might be offered to exploit your weaknesses, or they might be used to make sure that you will stay and use their site.
Social Media – The two bookmakers I have worked with, have had intricate systems that are concerned with CRM, Customer Relationship Management. These systems are in constantly evolving. The teams that are assigned to working with risk and customer service are constantly monitoring bettors that are active in social media surrounding betting, bettors that have industry knowledge, employees from other bookies, in addition to tipping service subscriptions. This information is saved at the account. Reports are compiled daily, on all betting-activity of the user, and these reports are monitored closely. People with similar twitter-activity are pooled together, whether they are official or not. This is the reason for why some accounts are closed immediately after creation. Even before creation of the account, the person is flagged for any of the reasons in this article, and might not be able to gain access to the intended site. I have seen examples of accounts being pre-created and banned, even before getting signed up.
The easiest way to flag an account is when people post their betting-slips in social media, and are immediately removed from the bookmaker.
Staking – When an account is opened, the staking level is the same at every account. Once you start consistently winning over a longer period of time, for example weeks or even months, your staking level will be reduced to cut the losses they have on your account. However, if you seem to be a winning player in most sports, but for example struggle with winning in racing, your possible stake-amount will increase, only in this area. This can be done through shifting levels of staking between different bets, sports or competitions.
This is why you sometimes notice that you can stake very high on cricket (because you constantly lose here), and have a reduced stake at racing (because you constantly win here). The bookmakers are clever in this sense, and figure; “Why ban you completely, when we can still turn a profit from you?” At the moment, most of this is manually performed, although the data to make the decision is automated.
Trends Betting – This occurs when you and your friends bet the same types of games at the same time of day. This will definitely get noticed.
At one of the two bookmakers I have worked at, we had measures to collect data that would expose bettors that played the exact same bets, even across bookies, and ultimately looked for trends in the market. If a big group of people place the same bets at the same time, it is clear that they come from the same tipping service. Let me make one thing clear: Bookmakers subscribe to these services themselves, to make sure they are always in the loop of things.
Tipping – One of my favorites. If you and your friends have ever created a personal tipping competition, it is extremely likely that you have been grouped together. If one of the bettors in the “group” is great at recognizing what bets to take in one sport, the group as a whole is more than likely to have a reduced stake, due to this person’s expertise and probability of giving away this information.
Betting Back – Do not make the mistake of thinking that every bettor with a profit on the horizon will be removed, as the bookmaker’s eye yet another opportunity to make a profit. This happens by the bookmaker following their players’ bets, and placing the same ones at another bookie or exchange, and turn a potential loss into a potential win. I have heard somewhere, that bookmakers have systems to check players that utilize arbitrage betting on Betfair markets, but I have never seen or been made aware of this myself.
Why Believing You Are Better Than the Bookmaker is a Bad Idea
Since the Australian market has been in constant growth over the past five years, bookmakers have become highly advanced. Every participant in the market want a piece of the pie. Don’t be blinded by the offers and campaigns they swing your way, as these are all for show and work in their favor. When Tom Waterhouse challenges you to play the same as him with enhanced odds, do not take it, because of the high probability of losing. This is something he is very aware of.
Bookmakers have models that will give them an indication of who the winner of a race or matchup will be. Someone who does this for fun stands no chance against the fifty traders that do this for a living in companionship with highly developed models. You will never win.
A bookmaker will only survive if it manages to take your money. They are not anything alike a charity, they are a business.
How Bookmakers Will Identify Winning Players in the Future
The techniques listed above is just the most occurring ones, and there are plenty more. I am certain that personalization software will have the capability of pointing out every customer touchpoint or interaction that one has at any given time, so that they accurately can predict our next moves. Do you want to stay clear of the attention of the Bookies? – Well, Big Brother is always watching you.
- Do not make more than one account at each bookie, clear your cookies, do not involve social media in your betting, and throw the bookie off a little bit every now and then by placing a bad bet. Everything is automatically reported and monitored.
I could talk all day about an abundance of topics, but I’ll leave it there. Hope to speak to you again in the future.
End Comments by Steve from the Daily25.
The first thing I want to do is to give a great thanks to your industry insider, Spinsider. While the list is not fully complete, it will serve a purpose, as you have learned the rules of the game and you can take certain measures towards improving your abilities of setting up accounts and keeping them for a long time. I am in the fortunate situation where I have been working with IT in the punting-area for fifteen years, ten of them with casinos and five of them with sports betting. The harsh truth is that creating clean accounts is a difficult process, but definitely a necessity in today’s world. If you are dedicated to place the correct bets every time, you will have to stay under the radar of the bookmakers, for good.
Techniques such as following your IP Address and MAC Address is easy to trick and work around. You also have the option of turning off cookies in the browser, and this can be easily avoided by using the incognito-option in the browser. Social Media, however, is a difficult part to stay away from, as from something as unremarkable as a “like” or a “follow” will lead the bookmakers to a large amount of information about you and your friends. The accounts where I have succeeded in staying away from the spotlight have all had non-present Social Media activity.
I am hoping that this article made you a little bit more aware of how much time and resources the bookmakers put into making sure that winners are kept out of their service, and that their winnings are limited as much as possible. Every bookie spends millions every year on staffing and the latest technology, to make sure their customers are only the losing ones. So much for the Australian ethos of a fair go. As most bookies are British, they do not understand that this will not be able to survive over a longer period of time. At least not in Australia.
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