Odds and probabilities: Trading live

On Saturday Aris Thessaloniki were hosting a football game against Panathinaikos and Bolton against Arsenal for the Greek Superleague and English Premier League respectively. 2 football games which at first seem impossible to be compared with each other due to strength’s difference of teams and championships, yet again have a lot of similarities in their betting odds’ movement. I’ll discuss about the odds comparison when we do have similar trading charts and how can probability calculations influence the trading in Betfair.

Aris starting the game well by scoring in the 10th minute, only to be equalized in the 19th and trail back by 1-2 in the 26th minute. That would also be the final score of the football game. On the other hand, Bolton started their game in the same fashion scoring the first goal in the 14th minute, then Arsenal made it 1-2 in a matter of minutes around the 27th minute and in the end the score line read 1-3 by Arsenal’s 3rd goal in the 87th minute. We see that both football games had exactly the same scoring (if we exclude the 3rd Arsenal’s goal) at the same timeframe with the same final ending – that is the visitor’s win. Undoubtedly the odds movements in the two games shouldn’t be different.

Indeed, although Panathinaikos’ available starting betting odds were at 2.40 and Arsenal’s were at 1.60, the odds movements were exactly the same. You can see that by looking at their trading charts below.

Let’s check out each step and the immediate comparison among them:

For simplicity sake, we will neglect the 3rd goal of Arsenal which you’d agree that doesn’t affect dramatically the charts’ comparison. Looking at the table above we can compare the movement’s percentage of the betting odds, in order to find out whether it is favorable to trade big betting odds or short ones.

1-0 in favor of PAO meant that laying $100 at 2.60 and backing $46 at 5.2, we would stand to win $54 on all possible outcomes, while laying $267 on Arsenal at 1.60 (so that we risked $160 just like in PAO’s scenario) and backing $156 at 2.74 would have made us a green book of $111 (read more about green book in betfair trading). That is, having risked the same liability in both cases ($160) with exactly the same scoring scenario, it would be a lot more beneficiary for us to have traded Arsenal.

What should we have paid attention to? We should take into account the fact that Arsenal had fewer chances to concede a goal than Panathinaikos, given the initial odds’ difference, 2.40 against 1.60. Since PAO were a lot likely to concede a goal, our profit would inevitable be a lot smaller than in Arsenal’s situation.

Examining the case of 1-1, by backing PAO $100 at 5.20 and laying $217 at 2.40 we would have won $117 while in Arsenal’s game by backing $100 at 2.70 and laying $169 at 1.60 we would have won $69. Again, the difference between the final profit emerge from the starting betting odds, before the actual drop of the odds. It is a lot more possible a team whose odds are 2.70 to score than a team of 5.20 betting odds.

Following the same steps in the 1-2 case, PAO would show a profit of $65 and Arsenal would win us $33.

What is the final conclusion of the analysis above? Should we trade teams with short betting odds or with big ones? Maybe we should start by laying a team when the team’s odds are short and back them when their odds are big? Most betfair traders or bettors follow this tactic. Do they do that because of their personal analysis?

I highly doubt that. The main reason is by submitting a LAY bet at short odds seems to be risking a little to win big. It is the same that happens when we place a BACK bet at long odds chasing that big win. What we do in fact is risking little money with high risk and with high respectively reward.

So, what do you suggest we do? Laying long odds with small risk and small reward but getting ready to take a big loss at one time? Of course not is the short answer. What we should really do is asking ourselves WHY we expect those profits and whether it is actually WORTH it to risk big (or not).

The answer is given by mathematics. In the examples above we saw that the starting odds are affecting our trading hugely. When the games were at 1-0, PAO was being backed at 5.2 and Arsenal at 2.70. In order for us to back a certain team at that specific point, we must have examined another parameter that we miss by now. That parameter is none other than the probability one of those teams to score so that the score line to become 1-1.

In Aris’s game moving from 5.2 to 2.40 was in fact a bet of $100 at 2.17 betting odds (=$117 win). In Arsenal’s game moving from 2.70 to 1.60 was a bet of $100 at 1.69 odds (=$69 profit). In the first scenario we needed a win probability of %46 and %59.2 in the second one to at least break even in the long run. How can we calculate that probability and find out if it was bigger than that which would mean profitable trading in the long run for us?

A good indicator is to see what the odds are of “Next goal” betting market. If PAO was backed at lower than 2.17, then we should trade, just like we should do if Arsenal was backed lower than 1.69. In case the odds were longer, then the betting market tells us that the probability PAO or Arsenal to score the next goal was less than 46% and 59.2% respectively and we should avoid the trading.

Now, some of you may have got into some fancy ideas and discover another trading possibility available in Betfair. That possibility is… trading the trade! In a few words, if we know that in a possible score change the odds would move in that way (so that we would have calculated the aforementioned odds, 2.17 and 1.69),we could trade those specific odds with the “Next Goal’s” odds, in case they were different!

I will return to this issue in a following article.

Returning to our original question on how we could calculate the probability so that we would examine if the trading was in favor, we could choose a probability we accepted as a fair probability, we could use a mathematical model or from our personal experience. Whatever way we would have chosen, it would be in the right direction. In other words, although both examples of PAO and Arsenal had exactly the same odds movement and charts, our trading would have been based on the probability a team to score and not on the actual odds! If we keep thinking in term of probabilities, we will always be a step ahead of the… competition!

Trading - Betfair Trading