A team of researchers has found a way to legally make money on online bookmakers. But then their troubles began.
Want to know how bookies and casinos stack the odds against you? The most striking example is roulette, where 36 red and black numbers plus green numbers 0 and (in the USA) 00. A total of 38 options. When betting on red or black, the odds of choosing the right one are 18/38, and the fair payout for $1 bet is $2.111. However, the house pays only $ 2 and keeps the difference. Thus, he guarantees himself a profit.
A similar bias is observed in the coefficients of bookmakers for horse racing, football and any other sporting event. Bookmakers always ensure that the odds are in their favor. But setting these coefficients is more difficult than for roulette, because the calculations are more difficult.
And it gives a good opportunity to win. Can you think of a better way to calculate the odds and thus beat the bookies?
The answer to this question can be obtained thanks to the work of Lisandro Kaunitz from the University of Tokyo and a few friends, they found a way to consistently make money in the market of online football betting.
But their work is in danger of Kaunitz and his friends say that as soon as the bookies have learned about this success, they prevented the researchers to bet on.
Gamblers have long played in the scheme to beat the odds, but success is rare. This is because the bookies are working hard to calculate the exact odds. They usually use teams of statisticians to study historical data for a sport like football and then develop sophisticated models to determine the appropriate odds for each game.
Kaunits says that, as far as he knows, no one was able to defeat this system by developing excellent statistical models.
But despite this sophisticated approach, there is a weakness in how bookmakers work. This is due to how they hedge their bets to protect against the possibility of large payouts.
For example, when two teams play football, bookmakers set odds for each team, fixing a win, loss or draw. Sometimes a large number of people can bet on a specific result for reasons unrelated to odds-for example, this team may be more popular than expected. In this case, the bookmaker is set for a big payout if this result happens.
Thus, bookmakers can hedge their bets by offering better odds on the opposite outcome. Thus, they attract bets that cover at least some of the potential losses.
Kaunitz says that this process also creates an opportunity for anyone who can notice it. The trick that the researchers have perfected is to develop a method that consistently determines the odds in favor of the player, not the bookmaker.
Their method is very simple. They start by assuming that the bookmakers themselves are good at setting odds and that the prices they offer are an accurate reflection of the real probability of winning, draw or losing, as well as their own margin.
In this case, a good indicator of these probabilities is the arithmetic mean of the coefficients offered by bookmakers – this is a kind of wisdom of the crowd. This gives average odds, which, according to Kaunits, are a surprisingly accurate reflection of real probabilities.
Then it’s a simple question to analyze all the chances and find the emissions. Then it turns out how favorable external chances. If they are good enough, then the rate should be calculated, at least in the long run.
And that’s what made Kaunitz. He built a web crawler that collected the odds offered by online betting companies on football games around the world. Calculated the average coefficients, found any emissions, and then found out whether the rate is favorable to them or not.
Before you commit any real money, the researchers tested the idea on 10-year historical data on the rates of closing and the results 479440 football games played between 2005 and 2015. This simulation is paid 44% of the time and deliver a yield of 3.5% over a 10-year period. “For an imaginary bet of $ 50 per bet, this corresponds to an equivalent profit of $ 98,865 through 56,435 bets,” they say.
The important question is whether this result could be a pure chance. Maybe they just got lucky. Thus, the team compared their results with 2000 simulations in which they placed bets randomly on the same games. In this case, bets are paid 39 percent of the time when returning -3.2 percent, which is equivalent to a loss of $ 93,000.
This allowed the team to calculate the probability that their first result was an accident. “The probability of earning an income greater than or equal to $98,865 in 56,435 bets using a random betting strategy is less than 1 per billion,” they say.
This gave Kaunitz good reason to think that this method would work in the real world, but there was a problem. Regular players may not always be able to place bets on closing odds, which may differ significantly from the odds specified in advance of the game.
So Kaunits decided to model this. After a more realistic simulator, in which bets were made on the ratio from 1 to 5 hours before the start of each game.
The method of changing odds in anticipation of the games is not publicly available, so a bot was created that collected these odds from betting websites around the world from September 2015 to the end of February 2016. They then tested their approach in this dataset.
The results were even better. Their rates paid off 47.6 percent of the time and gave 9.9 percent of the profits. ” If each bet was $50, our strategy would yield $34,932 in profits at 6,994 rates, ” they say.
Curiously, the strategy of random betting on the same data brought an income of 0.2 percent and a profit of $825. This may be the result of intense competition between online betting companies, which sometimes offer more favorable chances to attract players in a kind of losing policy.
The team then tried an approach using a strategy known as” paper trading ” in which they make bogus bets using real-time data rather than historical data. This is important because it allows them to check whether the quoted odds are really available in the online bookmaker.
Indeed, they found that about 30 percent of the time the odds had changed by the time they tried to check online. In these cases, they refused to bet.
But the strategy was still profitable. After three months of paper trading, their rates returned a profit of 5.5 percent, earning $ 1,128.50 on 407 rates on 50$.
Thus, repeating their approach for five months using the same procedure, except that the human operator would actually place a $ 50 bet on the Internet after checking the odds. During this period, their rates paid off 47.2 percent of the time and they made a profit of $957.50 for 265 rates. That’s an impressive 8.5 percent return.
Keen readers will notice that the number of bets placed was significantly less than during the paper trade. The reason for this is that there was no special operator betting on all available opportunities 24 hours a day, and as a result many of the bets that appeared were missed.
But fewer bets doesn’t matter. “Our paper trading and actual betting activities have confirmed the profitability of the strategy,” Kaunits says.
This is a smart approach and a fascinating result. Kaunitz found the Achilles ‘ heel in the betting industry and used it to his advantage.
But their story is accompanied by a bite. “Although we played by the rules of the sports betting industry, a few months after we started betting on real money, bookmakers started to severely limit our accounts,” the teams say.
Bookmakers often limit the rates that they can supply, or offer “manual check” rates before its adoption. Under these conditions, the team could not place bets.
If bookmakers chose bets for the survey at random, this should not have affected the profitability of the strategy. But Kaunitz says that this is unlikely and that the actions of the bookmakers would have a serious impact on them. “In these circumstances, it was impossible to continue this betting strategy, ” he says.
Kaunits and his partners are clearly unhappy. The sports betting industry has the freedom to publish and offer odds to its customers, but these customers are expected to lose, and if they start winning, they may be limited in bets.
Kaunits notes that such practices may be illegal. Advertising of goods or services with the intent not to sell them as advertised, or advertising of goods or services that do not intend to supply sufficiently anticipated demand, but with the intent to entice the customer to buy another product (in practice often called ‘bait ‘ or ‘ bait and switch to advertising), is unfair advertising and carries penalties in the UK, Australia and the United States.
Kaunits and his team urge governments to properly regulate the gambling industry and prevent similar practices in the future.
It is not yet clear whether this kind of regulation of the gambling industry will take place. But their results, however, are very interesting.
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