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Date Posted: 18:20:03 10/04/18 Thu
Thank you for your thoughtful, detailed response. I am very intrigued by your observation that win probabilities are underestimated as spreads increase. That is the kind of thing which, if substantiated, can be exploited.
I think that, in general, if you can find investing or betting markets where certain assets or bets have investors or bettors with different risk/reward instincts or goals, arbitrage opportunities are sometime available.
These opportunities are not that frequent, but when they exist, they tend to recurring.
I am going really think about this because I think you may be right, but I'm still unsure.
Slightly related sidebar: In my opinion, sometimes there is a disconnect between the betting spread and the over/under.
For example, last Friday night, Princeton and Columbia opened at Tigers -11, then expanded to Tigers -13 by kickoff. Meanwhile, the over/under opened at 60 and stayed there.
To me, the opportunity was betting Princeton -13 and taking the under. Specifically, I bet two units on Princeton and one unit on the under. So I was really expressing the strong view that if Princeton could not cover the 13, it would not be due to a scoring shootout in which Columbia starting its second string quarterback and without its best player Wainright would get into a scorefest and put up huge numbers. That worst case scenario would lead to my losing both legs of the bet.
So I was really betting one unit (Princeton does not cover, but the total is an Under) to win either one unit (Princeton covers, but the total is an Over) or three units (Princeton covers and the total is an Under).
At halftime, the score was 30-10 and it looked like Princeton would cover and the total would be an Over. Fortunately, Surace began substituting liberally midway through the third quarter as well as taking the air out of the Princeton offense.
I got very lucky when, by the fourth quarter, Princeton played to run out the clock. Both legs of the bet paid off when Princeton covered 45-10, coming in with the Under.
I think your observation about the win probabilities being understated as the spread increases is very, very intriguing. If the discrepancy is large enough, we should be able to arbitrage between the spread and the money line. Thank you for the thought-provoking observation.
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