How to Bet Away Your Christmas Money
By: Matt Barger
Tags: Soccer, Football, Premier League, Sports Betting, Analytics

How to Bet Away Your Christmas Money

Addendum — Soccer ELO: The Rebuild, Part 3.5

Let’s say I received $100 in Christmas money from my family. What better way to say thanks than to throw it all away at the betting house on Boxing Day?!?!

Okay, invest it all away at the betting house.

Investments, in a way, are just like bets. They each have a certain expected level of return and within them hold an expected level of risk. The only difference, of course, is that betting houses are notoriously (or at least explicitly) more volatile.

DISCLAIMER: I AM NEITHER AN INVESTING NOR A BETTING PROFESSIONAL. I DON’T KNOW IF THERE’S A LICENCE TO GIVE OUT THIS ADVICE AND IF THERE IS, I DON’T HAVE IT. YOU ARE BETTING ON YOUR OWN VOLITION AND I TAKE NO RESPONSIBILITY FOR YOUR FINANCIAL DECISIONS.

If we assume Boxing Day ELO and Bovada Odds (from part 3) are independently distributed, we can develop the following model based on the expected level of risk (standard deviation) and expected return (expected value):

Expected Return is the weighted average return from the market given all the results (i.e., an odds-inflated win and the loss of your bet, weighted by the ELO probability). Standard Deviation on Returns measures the fluctuation of each outcome from the expected return, weighted by its ELO probability. Here’s the Investopedia article I used as a refresher. It’s good.

Obviously, we want to maximize return and minimize risk. By mapping it out on the graph above, one can clearly see that the results make the shape of a wave on the chart. The border of this wave is called the efficient frontier, the maximum point for returns at a given level of risk and for risk at a given level of returns. Investors can decide which level of return fits their risk appetite.

This also cancels out some of the dumber value bets I wrote about in the last part. Hey, I never said I was perfect.

Betting on the Border

So if we’re betting on this efficient frontier, trying to minimize the most risk on this quadrant, and eschewing the over-complicated matrix algebra associated with finding optimal asset allocations of 30 values (my finance class stopped at two assets), we have the following bets upon which I’m willing to throw down my hard-begged-for $100:

$30: Watford Win

$30: Burnley Win

$20: Chelsea Win

$10: Draw Manchester United/Sunderland

$10: Liverpool Win

It seems the odds have changed slightly, per the betting slip:

Draw between MUFC and Sunderland.

But as I’ve decided to stay on the convex crest of the efficient frontier, aka the betting tsunami, and aside from rooting for David Moyes to make it out of the Nissan factory, I’ll keep to a risk-timid appetite. Just for starters.

Full Table below if you’d like to try and make your own decisions (this is off of the 22 December odds, however). Merry Christmas and Happy Hunting!

EDIT: Assessing Results

Let’s just casually ignore that these matches happened months ago for now.

My five bets performed as follows:

```Watford 1–1 Palace: Bet Watford, $30 LOSS

MUFC 3–1 Sunderland: Bet Draw, $10 LOSS

Chelsea 3–0 Bournemouth: Bet Chelsea, $27.27 WIN

Burnley 1–0 Middlesbrough: Bet Burnley, $87 WIN

Liverpool 4–1 Stoke City: Bet Liverpool, $12.67 WIN

Total Win: $87 + 27.27 + 12.67 = $121.94

Total Loss: -$30 -$10 = -$40

Total Value = $81.94```

While the expected portfolio value is down from the $100 I started, the volatile standard deviation allowed me to realize a 20%+ return on investment.

^ This sentence, on its own merits, should explain why no one should ever treat sports betting like an investment. But a win is a win!