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Dec 03

The Cost of a Handicapper

Posted by THEPOGG in Blog.

When I decided to handicap the NFL games and post weekly picks, it didn’t really dawn on me how different my approach would be to many other handicappers out there offering a similar service. You see I have been a long time professional advantage playing blackjack player, and with that comes an ingrained thought process that all wagers I make are not equal. They needed to be weighted, or given different values to insure optimal profit.

No handicapping service is ever going to be able to tell you which bet will win, their aim is simply to tell you which bets are more likely to win. There will be wins and losses along the way but if they do their job right they’ll win more bets than they lose.

With a standard handicapper system you’ll receive picks that the handicapper feels are likely to win. You then have three options as to what to do with the info;

  • Bet the same amount on every wager (flat betting) – flat betting all tips from a handicapper will ultimately grind out a profit as long as their win percentage stay above 52.5%. However 52.5% win rate would just be enough to break even (due to the vig charged on losing bets) so realistically you need a handicapper with a win rate of between 55-60% to make money (it should be noted at this point that it would be very unusual for a handicapper’s win percentage to exceed 60% for any sustained length of time). With a win rate of between 55-60% your profit margin would be between 5-16% of the total amount you wagered. For example, if you wagered $10000 over a season you would end the season up between $500-$1600. There may be some swings over the season, but as long as the handicapper’s win percentage reaches 55-60% at the end of the season you will be ahead. You would only lose money if the handicappers win percentage drop beneath 52.5% (discounting the fee charged for the picks). This method offers the lowest variance (chances of big wins or big losses).
  • Vary your bets randomly – varying your bets randomly across the handicapper’s picks has the effect of increasing the variance you will experience. Even with a win rate of 52.5% or more it is no longer possible to guarantee you’ll end the season up. You may be lucky and place more of your large wagers on winning game or you may end up placing more large wagers on losing game. While this system increases the variance what it does not do is alter the long term profitability of the system. The longer you do this the more likely it becomes that the times you got lucky with a big bet on a winning game will cancel out the times you got unlucky and ultimately your results will tend towards the same 5-16% profit margin. It may take several seasons to reach this figure – you could be both substantially about or below this range for periods – but mathematically that’s what your results will tend to.
  • Vary your bets based on which picks you think are stronger – this will have the same effect as option 2. If you really were good enough to establish which bets were stronger yourself you wouldn’t need the handicapper’s picks at all.

What none of the three options above take into account is that handicappers charge for their picks and often they charge quite a lot. Going back to the example in option one where we wagered $10000 over the season and won between $500-$1600, this profit isn’t looking so great when we take into account the handicappers fees which – depending on the handicapper and the package you take with them – can run into hundreds of dollars.

Your best route if you’re going to pay for tips from a standard handicapper is to bet the same amount on ever game, but before you even consider buying tips you need to know if you can afford to bet enough to make them profitable. The basic rule of thumb is that you need to know

a) how much you can afford to wager on average per game and

b) what the handicapper’s win percentage is.

If the handicapper’s win percentage stays at the same level here’s what you will win over a season

Win %

Win per $100 wagered

60%

$16

59%

$13.90

58%

$11.80

57%

$9.70

56%

$7.60

55%

$5.50

54%

$3.40

53%

$1.30

So if you know that the handicapper has a 55% win rate and you can afford to wager $100 per game, if each games tip costs you more than $5.50, you’re actually going to lose money in the long run. Moreover, if the same handicapper is only charging $3 per pick, you’re going to make $2.50 per game, but was that really worth the trouble? If you can afford to wager $1000 per game you’d expect to make $55/game and as such could afford to pay more for the tip.

The only way to increase your win – with the realistic assumption that you’re not going to find a handicapper who can consistently exceed a 60% win rate – is to increase the amount you wager on each of the picks, and for many of us the cash we have available to play with is limited and as such it’s unlikely we’d make money using a handicapper service.

But stop to think for a moment – do you really think the handicapper wagered the same amount on each game? Or were they wagering more when they were more confident of a win? If I have two picks for you today, one I estimate is 95% likely to win and the other I estimate to be 55% likely to win, which would you rather have? That’s a rhetorical question and an easy answer; the 95% pick is worth more to you because it’s more likely to win, but that extra value also means you should be able to wager more on this game safely, capitalising on the greater chance of it winning.

If we correlate our bets with the likelihood that they’ll win, placing bigger bets when we’re more likely to win and smaller bets when we’re less likely to win, it’s actually mathematically possible to vastly exceed the 16% maximum profit with a win percentage of less than 60%.

And that’s what we’re going to talk about in the next article.

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