A Great Way To Bet Sports

The GameMaster's Secrets A Great Way To Bet Sports - Part 1

Until now, most sports betting has been done through what basically amounts to a custom-made contract between the bettor and the bookie. You have a hunch about the Rams vs. Bears game, contact your favorite bookie and they quote you a "price", usually on a take-it-or-leave-it basis. If you don't like the "price" (the spread) your only choice is to shop around and hope you can find a better deal. If you decide to accept your bookie's price, you also get to pay $110 for a $100 bet, with that extra $10 being the "vig". Of course, should you win, you'll get your $110 back, along with the loser's $100 (be it the bookie who lost or another customer) and the bookie will make $10 on the entire transaction. I have never begrudged the bookie his or her vig, but I have never bet sports because I always thought the vig was simply too high.

One of the things we're trying to do is show you how to get around that vig by taking advantage of situations where the bookies may have set an incorrect "price" on a particular game. While I expect we'll be pretty successful at it, the fact remains that the vig is still something you must overcome in order to make a profit at sports betting. What if I could show you how to make a $100 bet and pay only $1.60 in vig, as opposed to $10? Even though you'd be paying the $1.60 win or lose, you have to admit it's still quite a discount.

Back when I had a "real" job, I was a registered stockbroker, but I specialized in futures contracts; you know, pork bellies, corn, soybeans and stuff like that. I won't bore you with a lot of details, but what has always made commodity futures a viable economic tool is the concept of a "fungible" contract. Rather than a customized contract for 4000 bushels of corn from farmer Brown in Iowa and a contract for 3000 bushels of corn from farmer Jones in Kansas, the contracts were standardized so that all of them were the same. Because one contract was just like the other, they could be traded; just like any one share of Microsoft common stock is exactly like any other so they can be traded, too.

But a share of Microsoft represents something real, something tangible. That may not be the case with corn that is still growing in a field in Iowa, so how was a purchaser to be sure he'd eventually get his corn? And what if the purchaser changed his mind and no longer wanted the corn? It wouldn't be very fair to the seller if the buyer suddenly changed his mind, now would it? That was where the "clearing house" concept came in. To keep all contracts viable, the clearinghouse is the ultimate buyer to each seller and the ultimate seller to each buyer. In other words, the contracts were guaranteed by the clearinghouse, not by the individuals who had made the contract. It's basically what a bookie does: he brings together the winner and the loser (before the fact, of course) and guarantees that the winner gets paid. The difference is that today's bookie doesn't offer tradable (fungible) contracts. Bet your $100 on the Rams at the bookie's price and that's it until the game is over, even if Kurt Warner breaks his pinkie on the first snap of the game.

So Warner's out of the game and now your $110 on the Rams minus 14 points doesn't look like such a great bet any more. Well, don't go crying to the bookie, because he probably has a guy from Chicago on the other side of the transaction that feels pretty good right now and his bet must be honored. Yours is not a fungible contract, so you're stuck and all you can do is hope that the backup quarterback can get the job done. Certainly you weren't expecting to get the entire $110 back, but it sure would be nice to cut your loss somewhat, wouldn't it? Now, it's possible.

The reason why I went through a lengthy explanation of fungible contracts is to help you understand just how a new way to bet sports on the Internet works. It's all happening at a place called "TradeSports.com", which you can find at www.tradesports.com/ Incorporated in Ireland, TradeSports.com is basically a futures or stock exchange that specializes in sports bets. This is not a bookmaking firm, because they only bring the "buyer" and the "seller" together and then function in the clearinghouse role to assure that the contracts (bets) are paid off. No prices (lines or spreads) are set by Tradesports.com/, because the participants who are buying and selling contracts set them in an "open auction" type of format.

Like many great ideas, this one is almost elegant in its simplicity. The basic trading unit is a wager of $10, which is quoted as 100. Because no wager is certain until it's over, any bet will sell at a discount. When the event you're betting on is over, the contract will settle at $10 for the winner and $0 for the loser. They are traded in $.10 increments, so the scale is 0 to100. The price you pay as a buyer or receive as a seller is what determines your odds. The commission is 4 cents per contract when you get in and 4 cents when you get out, or, as we used to say, 8 cents for a "round trip".

So let's say you want to get a bet down on the Yankees winning the World Series this year. When this was being written, the price of a $10 payoff for the bet was $2.50. In other words, you'd have to gamble $2.50 to win ten bucks that the New York Yankees will win the World Series. If you're right, that'll work out to a return of $7.50 for every $2.50 you bet or 3 to 1 odds. If you wanted to bet $100 on the Yankees, you'd buy 40 contracts and would pay $1.60 in commissions. If the Yankees win the series, your contracts will expire at $10 each or $400 in total value, minus another $1.60 in commissions. The total bet is $100 and the "vig" is $3.20, not $10 like you'd pay with a regular bookie.

The beauty of this system is that your contract may rise in value early in the season if the Yankees start strong, so you might be able to do a quick "turn" and sell at, say, $5.00 before the All Star break. Remember that TradeSports.com isn't making the market in these bets; other bettors like you are, so as the volume here increases (and I assure you it will) the market will become more "efficient" and the current price of a bet will reflect the collective opinion of a lot of bettors. If, on June 15th the Yankees now look like an even-money favorite to win the series, the price of your $2.50 bet will be at $5.00 because that's even-money: bet $5 to win $5. You can then sell your contracts (or just some of them), get your $$$ back and move on to something new.

The possibilities with this type of sports bet are almost limitless, so in the coming months I'll be writing about some of my ideas for hedging bets, arbitrage and other techniques that I used to use during my Wall Street days. Until then, I urge you to visit TradeSports.com where you'll find very clear and easy-to-understand explanations of how it all works.

I'll see you here next time.

The GameMaster's Secrets A Great Way To Bet Sports - Part 1

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