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Not-Entirely-Awful NFL Futures Bets

In the 1990s, there was a hedge fund called Long Term Capital Management that almost brought down the world economy. LTCM made enormous bets on very arcane things such as the spread between two kinds of bonds. Their whole reason-for-being was that they would find small inefficiencies in prices and borrow like crazy to take advantage of those brief opportunities. Other hedge funds did similar things, but these guys thought that they were smarter than everyone else. And, to some extent, they may have even been right. But they were also a little contradictory. What made this hedge fund interesting was not just that it employed two Noble Prize-winning economists, but two who made their name arguing that markets for financial assets were efficient. If their research was right, the inefficiencies on which they were betting should not have existed in the first place.

Now, these guys are way smarter than me, but you may have noticed that I recently wrote about how the NFL betting market appears to be pretty efficient. If that’s right, there shouldn’t be any chances to make profitable NFL bets. If the prices are right, all I’m doing is paying the commission every time I make a bet. Like the guys at LTCM, however, I think I’m smart enough to find bets that are mispriced and that offer some opportunity to make money. I’m probably overconfident and wrong about that, but it’s too much fun to try. And if I fail, which the LTCM guys spectacularly did when some of their billion dollar bets went wrong, at least the implications will not send shock waves to central bankers in Peru.

Bets I Sort of Liked But Decided Not to Pull the Trigger On

There were a series of bets on season win totals that I liked but decided did not quite make sense in the end. Some of the reasons were hard-headedly analytical and others were more visceral. Most notably, I couldn’t commit actual dollars to betting on Ryan Fitzpatrick, even though I came pretty close.

Our quarterback is who?

Our quarterback is who?

Bet I Didn’t Quite Make #1: Over on the Houston Texans (7.5 wins, -145 MGM)

The Texans opened at Cantor at 8.5 (-110), a price that seemed pretty unappealing for a bet I was thinking about making since the end of the season. I like Bill O’Brien, and Houston should have a frightening pass rush next year. I like the Texans as a rebound team and they have the easiest schedule in football this year. The price has also come down substantially. I like the idea of winning on 8 with them a fair bit. Don’t they feel like a team that could go 10-6 under a new coach and be in playoff contention?

Two things held me back. One was the drama with Andre Johnson and the much bigger one was not feeling totally great putting legal tender on the Harvard QB. I think he’s serviceable, though, and could see the Texans winning a bunch of relatively low-scoring games this year.

Bet I Didn’t Quite Make #2: Over on the Minnesota Vikings (5.5 wins, -165 MGM; 6.5 wins, +145 Cantor)

I’m with the crowd who wants to put much more weight on Teddy Bridgewater’s college career than on his pro-day failures. He was falling some before the pro day, anyway, but the Vikings still got the guy who was going to be the #1 pick in the draft in October at the bottom of round 1. So they got a guy who was accurate in college and shows NFL-ready abilities to read a defense and make good decisions. Guys who have those assets and questionable arm strength seem to generally do just fine (e.g. Chad Pennington). So he could easily be a flameout (his pro day tape was strange to watch), but I like the odds on Bridgewater being at least a competent NFL quarterback, which would be sufficient to make the Vikings a good bet, I think.

Interesting is whether it’s better to take the lower MGM win total and lay the juice or take the higher Cantor number and get the juice. I didn’t make a decision on that one, but was leaning towards taking the Cantor bet on this.

Bet I Didn’t Quite Make #3: Over on the Oakland Raiders (5 wins, -120 Cantor)

I don’t love this team or their long-term outlook. I bet against them in 2011 (lost) and 2012 (won). But the price seems low for a team that signed a bunch of competent NFL players. If Matt Schaub is decent, it seems that they’re likely to win five games. They get the NFC West, however. Maybe it was the accumulation of negative beliefs about the Raiders in previous years, but I couldn’t quite drop my Hamiltons on this one. I think I like this one the most of all the bets I almost made, though.

Andrew almost decided to go with Washington

Andrew almost decided to go with Washington.

Bet I Didn’t Quite Make #4: Over on the New England Patriots (10.5 wins, -160 William Hill)

It makes me a bit uncomfortable betting on my team, but I would have dropped some share of the retirement fund on the Pats at the opening Cantor line (10, -125). I kind of like it even at 10.5 with some juice on the over. The AFC East is a bad division and the Pats’ schedule overall is the ninth-easiest in football according to Vegas. But laying $160 to win $100 seemed like a bit too much. And I can never know if I’m being totally rational when it comes to the Pats. So I decided this was a stay-away. Still, I found one bet on the Pats a while back that was too good to pass up (see below).

Bet I Didn’t Quite Make #5: Over on the Washington Redskins (7 wins, -145 Cantor)

I’m a believer in RGIII in his second year after the big injury and in Washington having a new coach who’s probably better than the current version of ultimate leader Mike Shanahan. They play in a mediocre division, too. I’m fairly bullish on the team this year. I’m also pretty bearish on the Cowboys (despite their QB being almost criminally underrated), but I didn’t feel quite strongly enough to pull the trigger on either.

Bets I Actually Did Perhaps Pull the Trigger On

As with the Patriots, I’m not totally rational when it comes to football. Or football betting. So I’m a little worried about jinxing the bets I actually did probably bet on by mentioning them here. I’m going to take the plunge, anyway, but feel free to send some positive karma my way to counteract the likely jinxing that comes with talking about bets when you make them.

One interesting thing that I did this year was bet more on division prices and Super Bowl odds than I have in the past. I usually prefer the season win totals because you know you’re getting a relatively fair price since they take action on either side of the bet. This year, though, I found some bets on the divisions and the Super Bowl that I like a fair bit.

Bet I Actually Did Perhaps Pull the Trigger On #1

New England Patriots to win Super Bowl XLIX, 15/1

These odds were not available in brick-and-mortar casinos, as far as I know, but I found it elsewhere shortly after the last Super Bowl. Even then, it seemed pretty likely that the Pats were at least a 7% proposition to win SB XLIX. And I feel much better about it now that New England should have Darrelle Revis covering Demaryius Thomas in an AFC Championship game rematch rather than Alfonzo Dennard.

Bet I Actually Did Perhaps Pull the Trigger On #2

Jacksonville Jaguars to win AFC South, 30/1 (William Hill)

I will probably lose this bet and it’s still perhaps my favorite bet of the bunch. It sounds like Chad Henne will start the early parts of the season, at least. He’s been pretty bad in Jacksonville, so far, but he was sort of passable in Miami before that. Maybe he could be OK with some better talent around him, and maybe he’ll get a little more help this year. I’m not a big Blake Bortles believer, either, but I could be wrong about him should he get to play earlier than expected.

All of this sounds like very faint praise for the Jaguars. And I’m on board with them being the least likely team to win the AFC South. But all I need for this bet to be a winner is for Jacksonville to have a 4% chance of winning the division. And I think they have at least a 5% and maybe a higher chance of winning the worst division in the NFL.

Bet I Actually Did Perhaps Pull the Trigger On #3

Green Bay Packers to win NFC North, 10/13 (Cantor)

I’m least confident that this is a good value of all the bets I probably made. Still, there are lots of reasons to like Green Bay to win their division. The Packers managed to win the NFC North in 2013 without Aaron Rodgers for half the season and there’s eventually going to be a year when the Packers don’t come close to leading the league in Football Outsiders’ adjusted games lost to injury. Even if they are more susceptible to injuries on average, it’s not like they’re 50% to finish in the bottom five in the league as they have the last two years. They may be more likely to keep Rodgers healthy with Bryan Bulaga coming back this year and maybe even getting some contributions from Derek Sherrod after missing all of 2012 and much of 2013. And if they can keep Rodgers healthy, it’s hard to think the Packers won’t win the NFC North.

Madden cover curses don't scare Andrew

Madden cover curses don't scare Andrew.

Bet I Actually Did Perhaps Pull the Trigger On #4

Seattle Seahawks to win NFC West, 13/10 (Cantor)

The Seahawks have been the best team in the NFL for the last two years. Unlike their main competition, the Seahawks are one of the youngest teams in the NFL. Their defense will be scary again next year, and Russell Wilson is an emerging star at QB. There’s probably not a ton of insight in extolling the Seahawks’ virtues, but there are some reasons to be concerned about the 49ers that made me choose this bet. First, the Niners are old. Justin Smith can’t play the same role he did two years ago (although Jim Harbaugh is maybe a little Popovich-ey in giving him some snaps off), for example. Aldon Smith may be something of a time bomb. I worry that while the 49ers might have the best coach in football, he’s also a super-intense guy who may be most effective in his initial years than he is once his intensity starts to grate on some. So I like the Seahawks to win the NFC West this year again considerably more than the 49ers. I’m a little worried about the Rams being a threat with all the talent they’ve accumulated in the last few years, though.

Bet I Actually Did Perhaps Pull the Trigger On #5

Atlanta Falcons to win over 8 games, -150 (William Hill)

The Falcons have been a fascinating team to watch in recent years. Run by a disciple of the forever trading-back Bill Belichick, the Falcons traded up to get Julio Jones in 2011. They were also rumored to be trying to trade up this year to get Jadeveon Clowney, although the trade didn’t go through. In general, they seem to have embraced the pursuit of difference-making stars at the potential cost of thinness in other places on the roster. That strategy backfired when injuries hit last season, but it’s a high-variance strategy that left them with a high draft position when things went bad, a situation that enabled them to perhaps get their left tackle of the future. Jake Matthews could be a huge help to an already very efficient Matt Ryan. The Falcons QB has been a top 10 QB by DVOA for the last four years. He was much better than you think he was last year while playing for long stretches without Julio Jones and a fully healthy Roddy White. Even with the loss of Tony Gonzalez, I think Ryan’s supporting cast will be better this year. The schedule isn’t easy, but I like my chances, particularly with getting to push on eight wins.

Bet I Actually Did Perhaps Pull the Trigger On #6

Arizona Cardinals to win under 7.5 games, +150 (Cantor)

Last year, I bet on the Cardinals to win over 5.5 games and got +130 odds on it. I liked that bet a lot, particularly because they got the AFC South to offset their hard NFC West slate. They ended up going 4-0 against the worst division in football and got to ten wins. This year, the Cardinals have the toughest schedule in football. They were also the oldest team in football last year. On the other side, they’ll have a real left tackle this year in the newly-signed Jared Veldheer and they should have Jonathan Cooper back for at least a good chunk of this season after missing his rookie campaign last year. Still, I feel pretty strongly that this is a good bet at this price. I need there to be at least a 40% chance the Cards win seven games or fewer for this bet to be profitable. While Carson Palmer is a huge upgrade over the historically bad QB play the Cards got in 2012, I think there’s a good chance he’s not going to be good enough for the Cardinals to overcome the trend for teams that have unusually hard schedules. I liked this bet enough to make it my biggest futures bet of the season.

The Almost-Bet and Probably-Actual-Bet Table

Almost all of us have a tendency to think we’re better than average at most things. One famous study found that 93% of drivers rated themselves as better than the median. I’m susceptible to that bias, too, so I’m pretty skeptical that I know anything more than other people when it comes to football. But I think maybe there are cases where the market may mess things up in predictable ways and that idea is behind my favorite bets here. I think people have an image of the Jaguars as an unsalvageable mess for now and so they get undervalued at 30/1. Even more so, I think people put too much weight on how good the Cardinals looked for parts of last year (particularly against Seattle) and so have bet the Cardinals way above their initial number from Cantor, high enough that they’re overvalued.

Of course, I’m quite likely to be way off. For easy pickins once the season starts, here are my bets and almost bets, where I include the share of my total bankroll for each wager.1

 TeamBetOddsShare of Total $ Bet
Almost BetsTexansOver 7.5 wins-1450%
VikingsOver 6.5 wins+1450%
RaidersOver 5 wins-1200%
PatriotsOver 10.5 wins-1600%
RedskinsOver 7 wins-1450%
Actual BetsPatriotsWin SB XLIX15/111%
JaguarsWin AFC South30/111%
PackersWin NFC North10/1311%
SeahawksWin NFC West13/1011%
FalconsOver 8 wins-15019%
CardinalsUnder 7.5 wins+15037%
  1. I didn’t even get to mention my almost bet on the Bills’ under. Kiko Alonso’s injury happened while I was in Vegas and I was a little intrigued by the Bills’ under beforehand, anyway. The sportsbook was closed when I found out, unfortunately, although maybe it’s tempting the karma gods to bet on torn ACLs, anyway. []
  • Arif Hasan

    How did you get +145 on Vikings over 5.5?

    I was going to move on the Vikings, but at Bovada, the over is -150 at 6 wins. Blech.

    • Arif Hasan

      Aaaaaand I missed your table.


  • Dan

    Your link to your post “The Smarter (Sigh) Football Betting Market” reminded me of a question I meant to ask, to all, generally.

    At what point does “payout” force a change of spread? (Please also correct my vocabulary.)

    For example, over 7.5 is -150. Can it stay at 7.5 forever and go past -1000, or would the book switch that to 8 to “reset” what I’m calling the payout? As in, it gets to over 7.5 -350 but resets at over 8 -110.

    Is there (please say there is) a mathematical equation defining this relationship? (Lmgtfy also earns internet points. Maybe more.)

    Andrew, great work again; love having you on board.

  • Thanks for the kind words, Dan. I’ve also been curious about what gets the number to move. I gtfyed that now and have looked a little in the past, but I haven’t figured it out. It may vary by casino. I know that I’ve rarely seen things get to -200. I don’t remember seeing a number beyond -220 for the win totals, but it still could have happened. Maybe someone else will have more insight and that equation.

    You did get me thinking through some of the math, though, and here are my math-y thoughts. One thing to note is that a line that got all the way to -200 should reset to something higher than -110 when the number moves. A team that was at 7.5 (-200) would be a fair bet on the over is there was a 2/3 chance of 8+ wins. If I was moving the line, I’d move it to something like 8 (-140). If we put a 20% chance on exactly 8 wins, the fair line on the over for 8 is -140, assuming I’ve got the math right:
    7.5 (-200): EV of $100 bet = (2/3)*$50 + (1/3)*(-$100) = 0
    8 (-140): EV of $100 bet = (2/3-.20)*$71.43 + (1/3)*(-$100) =0

    So I think we might expect -200 lines to move to in the neighborhood of maybe -140. If we thought the Jets were valued just a little lower at William Hill (6.5 -200) than at Cantor (7 -135), for example, this would make sense. The moves will tend to be bigger for teams with very low or high win totals since those targets are more likely than teams in the middle who have a bigger range of possible outcomes. See the Raiders at the different sportsbooks in yesterday’s post, for example. Lines closer to -150 will need to move less than the extreme lines when the win total moves, too.

  • Ajit

    Just a few added bits. EMH has been known to have some contradictions that have been well documented. It’s actually well known and the puzzel has been trying to come up with a unified theory that explains it. Still, their methods aren’t really a direct contradiction to EHM’s (mostly) subtle interpretations.

    Anyways, one of the big takeways from LTCM was the improper evaluation of extreme tail events. The irony of course is, right up to this current crisis, hedge funds continued to underestimate the occurrence of extreme tail events.

    Finally, were this an econ blog or finance article, or maybe even the new york times, that bailout reference would’ve caused a flurry of angry posts. I personally feel like LTCM could have been allowed to fail. The big commercial banks…a bit more complicated.

    • Yup, exactly. Many people kept putting zero probability on events because they hadn’t happened during the timeframe of their data. And those impossible events happened. Things can go bad in a hurry when you bet on a bunch of things you think are impossible at 1/500 odds (Jaguars winning SB XLIX by 15+ pts?) and they start happening.

      And I tend to agree on LTCM being allowed to fail, but a bunch of people way smarter than me thought it was necessary. So I’m not sure, although simply requiring capital behind bets would have been enough. By the way, a great book on LTCM (and maybe my favorite finance book) is Roger Loewenstein’s “When Genius Failed.”

      • Ajit

        Well, just to add…it’s less an issue of ignoring the data and more a limitation of how you incorporate these fat tailed events into your model. Remember, modeling requires distributional assumptions. In addition, we just don’t have a very accurate understanding of how uncertainty works. Some of it gets very technical, but I wonder if football spreads follow the same pattern.

        • I’m no expert on finance, but ignoring the fat tails is a big part of it. Some of the finance guys up through the crisis seem to have been assuming normal distributions (no fat tails). I think LTCM was fully aware of the inadequacy of using a bell curve to model things. A big part of their issues came later on when they ventured away from betting on things like mispriced bond spreads (different vintages of VW’s bonds, for example) and into stuff they didn’t know. They were also leveraged at more than 100-1, I think, which was probably the single biggest problem.

          So awesome to have this kind of exchange via the NFL! Would be surprised if football spreads ignored fat tails, but that’s a longer discussion and I could easily be wrong.

          • Ajit

            Right. But my point was, just trying to add fat tails to your distributional assumptions is really really hard. The holy grail of finance is to try and construct the most detailed model in order to get a final error term that behaves approximately “normal” I can’t say whether the finance guys believed they had achieved that or just pretend like they had. Since the hardcore finance guys also screwed up, I tend to believe it was just a big mistake.

            I actually would be interested to see if football betting spreads behave that way as well. One issue seems to be that there’s no real secondary market that I’m aware of. Let’s say we see the Patriots annihilate a really good team at home and play a poor team next week. We might expect that the blowout would send the spreads sky high on Monday and likely come down due to tempering of the market. Ideally, we would take the + side monday and then sell this back on thursday at some profit. IDK if such an option exists right now.

      • Ajit

        And I just realized I am addressing an associate professor in economics. Sorry for assuming you were layman 😛

  • Thank you for sharing your thoughts. I truly appreciate your efforts
    and I will be waiting for your next write ups thank you once again.