Will Leicester really stuff the bookies?
Lot’s of PR, sorry, I mean talk, from the bookies recently about how much they will pay out if Leicester win the title. But is that a reality?
My worst bet ever!
Here is a confession – I will lose money if, when, Leicester win the title. But I have to say it will be one of the most enjoyable losses of my career! Why, because it’s great to see a competitive season in the premiership. As a supporter of a ‘small’ club, it’s nice to see that it is possible to pull off the impossible. I had that feeling a few seasons ago 🙂
When I bet on Leicester to not win the title, it was in mind that something like this last happened 40 years ago and that the mean return time wasn’t a bad judge. It was also in mind that I had successfully done the same bet many seasons in a row with great success, apart from this one it seems.
My main feeling is that it’s refreshing to see it happen and it’s worth a few quid, but am I crying my way to bankruptcy like the bookies because of it? No!
The real position
Wind yourself back to the start of the season. Chelsea were at 2.60, City 4 and Arsenal also at 4 for the title. Man Utd were at 6’s.
In total, my early season snapshot showed that £1.456m out of £1.53m were bet at those odds or lower, 95% of the money staked back then was on the ‘big four’. They are ALL LOSING BETS now. Let me repeat that 95% of all the money staked at the start of the season has been lost. Leicester started the season at 3.75 for relegation!!!
Skip forward one month and Man City had crashed into 1.38 for the title. £1.645m out of £4.4m was punted on Man City and big chunks of that at short odds. That is ALL LOSING MONEY.
I had a nibble against Man City at 1.40’s so you can already see that the bath I took on Leicester was offset to a fair extent by that nibble on City. By the end of the 2015, they were back out to 2.90.
The PR position
Bookies like to make out they are hard done by, but the truth is far from that. When there is a string of winning favourites, like Cheltenham this year, they bemoan their luck. They have always done this and it’s generally false. Though I can see how competitive pricing on the favourite could have hurt at Cheltenham.
What bookies love most is a rank outsider winning, why? Because nobody bets on them! So much so that value is often created at bigger prices and less so at shorter prices. So what better than Leicester winning the Premiership?
I dumped a lot of money on Leicester, but a big chunk was offset on the disasters of the other ‘top four’ this year. Ying and yang. That’s how this game works. You balance your book, where possible.
£2.2k was matched on Leicester at 1000 on Betfair. So that’s a liability of £2.2m, but I bet you a lot of that was balanced. Somebody laying at short odds need to lay some off at 1000 to balance this out. That’s often why you see money at big odds.
With about £2k bet on Leicester at 1000, that’s equal to 0.00013% of the total money staked. That means that 99.9987% of money staked at the start of the season lost. If you did a rather rough conversion of odds to money staked that’s 7692-1. While no such calculation exists, it gives you some idea of scale in disparity. Very few people won and I bet you a chunk of that money was to balance liability elsewhere, so that number is even higher / smaller.
I reckon this will most likley be the same at major bookmakers.
Hedging
The role of odds compiler in recent years has shifted from that of true risk taking, to deciding if they want to accept or hedge liability. Even in Leicester’s case, you can see any liability was offset by massive losing bets on the original top four favourites.
In the event that a position gets skewed then you can easily hedge nowadays. So there really is no excuse for taking a massive hit at a modern bookmaker. If you do, it’s incompetence really. Thanks to exchanges, no risk needs to exist at all! Even if it does, then you can hedge it out if needed, before it becomes a problem.
Safe to say, I don’t think bookies will do too bad from the ‘top four’ having such a mare this season. If they didn’t, they need to seriously look at themselves or sack their trading teams!
For me, my Leicester loss was large on its own, but not a mare in aggregate. This was mainly thanks to the failures of other teams at short odds. But I have to say, as a true football supporter, it’s the most satisfying loss ever!
Category: Football trading strategies
