Spread betting is designed to be a winning proposition -- for the sportsbooks. Let's see if we can crack the code and tip the odds in our favor.
In my past three columns, I've laid out my basic strategy for NFL betting: only take the bets that provide positive expected value, or +EV bets. So far, the games I've identified in the past three weeks have paid out handsomely, and if you've followed my formula, you should be sitting on a decent profit going into Week 9. Let's see if we can keep the streak going!
This week, we'll talk about applying the +EV strategy to spread betting.
Twitter user @Eagles_SAB asked: Trying to figure out the EV formula. What about spreads? For another day.
Spreads can be tricky, because my formula calls for the use of one all-important number: your true odds of winning, or "win probability." Recall that the formula for EV is (win probability * payout) - loss probability. There are plenty of prediction models out there that attempt to show the probability of any team winning the game straight-up, but I have yet to find one that can accurately predict your odds of winning a specific spread bet.
For instance, FiveThirtyEight gives the Kansas City Chiefs a win probability of 84 percent over the Cleveland Browns, but the spread at 5Dimes right now is 9.5 points. It's one thing to say the Chiefs have 84 percent win probability overall, but that doesn't tell us how much they're expected to win by, or how likely it is that they'll cover that 9.5 point spread.
To get us closer to understanding the probability of covering the spread, we'll have to look at historical spread data to see how things usually play out. That's not a perfect measurement, but it at least gets us in the stadium. Historically, over the past several decades the favorites have covered the spread (up to nine points) 48 percent of the time, which means that underdogs have won 52 percent of the time.
That large sample size has held true so far this season. As of this writing, favorites have covered 47.46 percent of the time, and underdogs are sitting at 52.54 percent.
Knowing that underdog bets (against the spread) win roughly 52 percent of the time puts in a position to calculate the EV. Typically, the payout on both sides of the points is -110, or 91 percent, so our formula looks like this:
(0.52 * 0.91) - 0.48 = -0.007
That's a negative expected value, and as you can imagine, it only gets worse if you bet the favorite at 48 percent win probability with a 91 percent payout. Right on the surface, then, we can say that spread betting is generally a losing bet in the long run. That doesn't mean that spread betting is never profitable, however, it just means we have to determine what kind of payout would put a bet into the +EV column.
So here's another extremely valuable formula to add to your toolbox, a formula for calculating what our payout needs to be in order to be profitable:
(win probability-0.04)/loss probability)*100)
Betting against the spread at a 52 percent win probability gives us (0.52-0.04)/0.48)*100, which equates to 100. If that number was above 100 we would make it a negative (e.g., a value of 114 would mean we're looking for a line of -114) because our win probability is above 50 percent, but as you know, there is no such thing as a -100 line, so we're looking for a +100 line. (If you're wondering, the subtraction of 0.04 in that formula is to adjust for the juice.)
Conclusion: betting against the spread can indeed be profitable if we can find a line that is at least +100. Sites such as 5Dimes, will frequently let you set your own point spread to get a better line. For instance, the Tampa Bay Buccaneers are set at +7.5 for -135 (a negative expected value), but they can be taken for +6.5 at +105 for an expected value of almost 7 percent.
If betting against the spread is a winning bet 52 percent of the time, we just need to make sure our payouts keep us in the +EV column in order to stay profitable.
Before we wrap it up for another week, here's a potentially valuable three-team parlay for this week: the Chiefs (-370), Panthers (-300), and Patriots (-275) combine for a win probability of 51 percent with a payout of 131 percent, for a +EV value of 18 percent.
Good luck on the weekend, and as always, send me any questions or comments on Twitter @HooksPicks!