Racing Forum

here we go again :)

Posted By: ricky
Date: 19 May 02, 5:12 pm

In Response To: Reponse (D)

"And while you're gonna bet at the best possible # on the hedge-- chances are- its still gonna be a -EV bet. So the question arises-
why not simply bet a # that if the bet comes to fruition- you dont have to make a -EV bet- in the end?
In other words-- why arent you betting appx. $200 on the 50-1 shot-- in the first place? Its this first wager that has +EV. "

I think this conversation has gone on before, but I don't mind responding.

Let's say a bet is offered that gives me a 49-1 shot (2%), but I think the true value is 24-1 (4%). For every dollar I bet, I make a dollar theoretically.

So, I make a $1000 wager today at 49-1....I think I've made $1000 right then and there, because they are paying me $49,000 4% of the time (49Kx.04=1,960 minues 1Kx.96 = -960, yielding a 1000 profit) when they should only be paying me $24,000 4% of the time.

Now let's assume for simplicity that if they get to the finals, they will be 40% to win that game (which is more realistic than 50%). At that price, my $1000 bet is now worth $19,000 (.4x49,000 = 19,600 minues .6x1000=600). The true odds on the money line should be the other team -150, but since I am betting into the line, I will have to pay -160...160 = 61.5%. If I make the perfect hedge, my value will get decreased down to $18,230, thus I lose $770 in my hedge.

For now, let's keep out the following issues : 1. I wouldn't be hedging the whole thing, since I'm comfortable with a $5000 risk, so I'm actually losing alot less than that. 2. If I think the fair line is -150, and I shop like I have done, I am very likely to find something alot better than -160 to bet into. If the last 3 years is an indication, I should do no worse than -155, and possibly even get -150 or better.

So, let's ignore all those issues and say they are a wash for now. So what I've done is that I've bet $1000, made a theoretical $1000, and if the bet comes into fruition, I will lose $770 back in hedging. So I'm making a $230 profit.

Now, you can say that if I made a $230 bet, and make a $230 profit, isn't it easier? Yes it could be, but that's withholding the fact that I think I will be able to get better than -160 in my hedge when the time comes, and also that I won't need to hedge it all. So, the bet I can make is obviously a lot larger than $230.

Take also in consideration the fact that I am theoretically winning $1000 when I make a $1000 wager, but I will only theoretically lose the $770 for hedging about 8% of the time. Because the other 92% of the time, that $1000 theoretical profit turns into a real $1000 loss. But the 8% of the time when I have to hedge, I've won $18000.

The more I think and type this, the more I realize that when I make that $1000 futures wager that nets me $1000 theoretical, that I am in fact winning that $1000 theoretical, if I know with 100% certainty that I will hedge away all but $5000 of the risk, and I know that I can get out better than -160 vs -150, then its a no brainer to me.

The only real tough question that is left for me is simply this : Am I really betting a 49-1 shot when the truth is 24-1. That is the difficult part because those things don't happen very often.

I hope there are no holes to my logic....but if there are, please let me know since if my logic is off, I will need to change my future futures tactics.

Messages In This Thread

Belmont questions -- ricky -- 19 May 02, 2:38 am

Answers to the easy ones.. -- Sluicebox -- 19 May 02, 8:10 am

a few more answers -- Dunbar -- 19 May 02, 8:32 am

Bid got hurt though... -- StevieY -- 19 May 02, 11:41 am

yep -- Dunbar -- 20 May 02, 3:14 am

added question -- ricky -- 19 May 02, 11:28 am

No -- Rusty Starfish -- 19 May 02, 11:36 am

thanks smartass. (nt) -- ricky -- 19 May 02, 12:26 pm

Not your most important question, but -- Gladstone -- 19 May 02, 1:26 pm

A week isn't enough for horses... -- Burnt Card -- 19 May 02, 1:56 pm

Ricky, the dark cloulds gather around, but we aren't dead yet. -- Fezzik -- 19 May 02, 12:42 pm

don't worry about me -- ricky -- 19 May 02, 1:13 pm

Hedging( War Emblem) futures -- D -- 19 May 02, 4:18 pm

2 & 3 -- ricky -- 19 May 02, 4:38 pm

Reponse -- D -- 19 May 02, 4:47 pm

here we go again :) -- ricky -- 19 May 02, 5:12 pm

Im not the one- -- D -- 19 May 02, 5:39 pm

if you disagree, please respond to this post -- ricky -- 19 May 02, 6:19 pm

Nothing to worry about yet -- patrick -- 20 May 02, 8:20 am

issues and answers -- Dunbar -- 20 May 02, 8:35 am

response -- ricky -- 20 May 02, 9:58 am

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