Destroy the Books! *Double your Bankroll*

 

Didnt you forget something in your formula??  LIke the TIMES 100 part at the end???

Wow, great atherton. You can state the obvious; however, I said ROI, not ROI%. I think there's a difference... Either way, I know how to move the decimal 2 places, thanks.

I will continue to count ROI the way I do because it is a better indicator on how much I win compared to how much I bet.

Thanks for your contributions.

As far as ROI.. everyone is right. Google is your friend folks.. use it.

I originally thought ROI was simply the way the new guys are explaining.. if you start with 5K and currently have 7K, you have made a 40% Return On Investment. Then I saw DJ calculating it different here.. so I Googled the information.. spent about 20 minutes looking at things. Decided for this particular avenue to use DJ's version.

Google is your friend. You can find anything. It's more valuable than a $75,000 college education nowadays! 

I think there's a couple reasons why you usually see ROI reported as a percentage return on the initial investment.  It is easier to understand, and people simply want to know "How much will I make if I start with x amount of dollars?"  The second would be that it just looks more impressive.  Who wants to claim they have an ROI of 1.95% when you could say it's 37%?

I look at it like this.  Say I start with $1000 to bet with.  I make a $50 bet at even money and win.  Is my ROI 5% or 100%?  I say 100% because, really, the other $950 is just sitting around in an account and not actually helping me earn money.

I like the method DJ and kreatture use.  I find it a better indicator of a handicapper's ability to pick winners and manage their money.

The way you calculate your ROI doesn't make sense... because of the law of large numbers, your ROI will progressively trend to 0% as you continue to bet. This is because each time you make a bet, you increase the part of the equation that represents the sum of all bets.

Maybe an example will help.

Maybe an example will help.

i guess i understand how you're looking at it, but you didnt really "invest" 90K+

"Hey Dan...how did you do betting on sports last year?"

"Well i started out with a 10K bankroll and ended at 15K"

"Amazing!!  That's a 50% return on your money!!"

"Not really *sniffle*.....I actually made $500,000 in bets so my actual return on my investment was only 1%.  I did pretty shitty"

"Huh??"

"Wait...i'm wrong.  I actually made $600,000 in bets so i REALLY only made .83% return on my investment"

"Whatever you say"

Kinda seems like that formula makes the original bankroll pointless.  Why even post it?

Thats my point... 

The original bankroll amount is never posted in the daily records..

I was not familiar with how to calculate ROI the way DJ does his, so that is when I Googled it to see what I could find.
first, I read this.. Return On Investment .. and then I read this.. FYI On ROI .. and I still thought the basic way was the right way, until I came across ROI and the Investment Rainbow about half way down. The part on Leveraged Investments is interesting and thus why I also now do it the way DJ does. Maybe this is wrong? I don't know.. but according to everything I've read on ROI there is no one correct way to formulate the answer. There's a Basic Way, like these guys are all suggesting (which makes sense since this is undoubtedly the way college teaches things.. in the basic sense) and then there are much more complicated ways.. as there is with everything in life.

I guess that's why I left University.. I wanted to be the most efficient at everything I did, while all they wanted to teach was basic concept.

Cheers 

Not true that my ROI will always progressively get closer to 0%... If I win, it always goes up unless I bet an extreme amount to win almost nothing. I do see what you mean now though and you're right, but the way I do it is more applicable for sports betting (for me). The reason I calculate ROI the way I do is because it should theoretically directly correspond to my perceived edges when betting. If I think I have a 5% edge, then in the long run, I should make 5% betting that wager. A 10% edge should win 10%. Over the years, my capping has produced about a 5-10% edge over the books so I should return 5-10% on every dollar spent.

Just the way I look at it which works well with Kelly, although I don't strictly adhere to Kelly. I will do so in my next thread... if I ever get there. 

Fair enough. I guess my point is that sports betting is no different then if you were betting on commodities or the euro. You have returned 37% on your capital which puts you in the top 99% of all money managers. Your average ROI per bet isn't relevant to investors nor anyone that follows your picks, though I can understand that tracking this helps you.

The caveat is that you are playing with a small amount of money, and I suspect it is impossible to scale your system if you had millions to invest which is a big issue.

https://online.wsj.com/article/SB10001424052748703357104575044470192039574.html

Are you in the GTA?

If I had the funds, I could scale this operation 50x but nothing more without going to Vegas (where it could be scaled 1000x).

I've read that article before... I've always been interested in going to the M but last time I was in Vegas, my friends weren't willing to go so far off the strip.

I'm in Ottawa.

Now a question for you: you've been a member for almost 4 years and just started posting NOW to tell me that I calculate my ROI wrong? What gives?

In the past 4 years, I've never come across a thread that I believed I had anything to contribute too.

I simply was trying to point out that you are confusing 'average expectation per wager' with ROI. Your results are very impressive if you report them as per industry standard. And I only mention industry standard, because I've heard you mention that you 'invest' in sports.

I work on the street in alternative asset management. If you can produce excess risk-adjusted returns, you should focus your talents on a career in finance, rather then becoming a tout selling your picks for $200 ;)

I'm involved with something similar to this -- https://www.centaurgalileo.com/

ps. remember to take into account taxation issues in Vegas.

I think it's an error comparing sports results to typical results in your industry. There are far more impressive results out there than mine, even on this site. Even my thread that turned $1600 into $5000 was better than this one, which by your standards had an ROI of 312.5%!

This thread has been nothing but a thorn in my side for the past month, to hear 'impressive' associated with it just seems ludicrous.

That "managed sports fund" however, IS impressive. Do you know where/how they bet? How do they get around limits? Do they exploit inefficiencies amongst the various markets? I assume they look for hedging opportunities? I've looked at programs that snipe bets at certain prices and would love to use them but I can't find one for free/I'm such a small-timer that I can't pay for/make such a program. Maybe they even arb?

Anyways, thanks again.

It's mainly arbitrage. For example, local books in the GTA always over price the leafs in relation to the 'online market price' because they need to. The 'market price' isn't relevant to them... Their sole job is to balance their book which they do successfully.

So big time players who want to fade the leafs, have contacts in the GTA and they place their bets accordingly.

Point being, arbitrage software that looks at differences between online sports books is useless. Since this software is public and known, all inefficiencies in the market are quickly removed.

The other advantage of local bookies, is that they provide credit for no cost. Nowhere else in the world will you get free credit except in the underground bookie business. Professionals lever their Rolodex's and their access to credit to exploit significant pricing anomalies due to geographic supply/demand fundamentals.
 
regarding limits, in the equity markets, we have guys who are called block traders. Their goal is to acquire 1m shares of X without disrupting the market price. The same applies in the sports betting world which are called syndicates.

For example, let's say you wanted $10m on Oregon to win. The syndicates would synthesize sharp money by betting $2.5 million on Auburn. This would move the line in their favor, and they would then bet the $7.5m on Oregon on an advantageous price. They generally are focused on past betting patterns and psychology. They basically manipulate the lines in their favor using experience and historical data.

Woodbine in the GTA is an interested example. There is 100x more money bet on a woodbine race outside of the pool, yet all prices are determined by the closing price. They manipulate this market by canceling orders at the last minute which is an art in itself because management actively tries to stop this behaviour.

They'd basically pound a 7-1 horse down to 3-1, then at the last minute, cancel all of those bets. Like in the stock market, the public sees a horse being bet, and they follow along due to herding behaviour. (A 3-1 horse is seen as less risky than a 7-1 horse because the tote board is seen as being efficient.)

To conclude, you should not compare your results to others that have made 300+% returns. I would argue that they are assuming excessive risk and it's just a matter of time before they 'blow up'.

If you can make a 30% return on your money investing in sports in any given year, you will be a millionaire without question. However, a system that can return 20% with the max risk per wager of 2% is much more advantageous than a system with a 30% that regularly risks 8% of its capital.

Gross return is irrelevant. Return should always be discussed in relation to risk and the reason I commented on your thread is because the fact you bet 10% of your capital on one bet, which means that your returns must be discounted since your risk of ruining is by definition higher.

I would take much rather follow someone who can return 15% a year while risking no more than 2% on any given wager, then someone who can return 30% with 5% at risk per wager.

^^ Great information for aspiring sports investors ^^ Thanks for posting that, syke.

Back to our ROI debate, I'd have to say that my $5000 bankroll is more of a theoretical investment compared to a literal one as I actually don't necessarily invest it all (compared to giving your whole investment to a hedge fund up front). For example, I went up in this thread early on and safe a few days where I was betting a lot, I haven't dipped into the $5000 at all so how can you say that it has been invested? Basically, the first $4000 hasn't been touched/invested so I think this is why it is better to calculate ROI on total amount invested for sports betting as opposed to original investment. Let me know what you think.

FYI -- Read the book called Fortune's Formula.. You will really enjoy it.

It talks about the origins of the kelly criterion and how its principles started in information theory, were then applied to horse racing, then applied to card counting in blackjack and then finally adopted by wall street. Another good book is "A mathematician plays the stock market"

Remember, what you are doing is identical to what a money manager does on wall street. If you believe you can win in the long run, keep doing what you are doing-- post your picks publicly and allow us to track them. Your results will speak to your level of skill.

If you can return 30% in any given year, on average, for say 5 years, I will personally bankroll you as that is proof of your skill in my opinion. My sole fascination with 'sports investing' is that it's not correlated with other financial assets. There is a huge demand for any investment product that can provide returns that aren't affected by interest rates, CADUSD exchange rates, inflation etc..

Note that I am skeptical that you can return 30% a year on average, because I have seen the databases of certain sports books and I know that there are about 10% of 'gamblers' who turn a profit. And a certain percentage of these guys have unlimited capital, so they bet progressively which will likely lead to ruin.

Coincidentally, or not, in the mutual fund business, 90% of money managers under perform the index that they track. This is mainly due to the vig, commissions, management fees etc.

So in sports investing and stock investing, 10% of the population wins in the long run. Is it due to luck or skill? It's arguable and I've spent much time researching this-- another book, A random walk down Wall Street, seeks to explain this.

In regards to ROI, this is how I look at it--

If I had followed you from inception, I would've put $5000 into an account. This account is now worth $6500 or whatever. Your ROI is $1500.

If the stock market, if I put the same $5000 into an account and make only 1 trade that makes $1500, my account now has $6500 in it. The ROI is also $1500.

These are identical results and it doesn't matter to me how much capital you actually allocated. The only thing that matters is that if I had put $5k into an account and followed you, I would have a profit of $1500.

If you can take anything from my comments, it's that you should not compare your results to others on this forum. Compare your returns with professional money managers.

FYI - Warren Buffett's claim to fame is that in his hedge fund days, he returned 27% per year compounded. He is the second richest guy due simply to his ability to consistently grind out double digit returns.

If you returned 300% in any given year, by definition, you are assuming MUCH too much risk and in the long run, you will 'blow up'









The principles are identical.

But let's say you had your sportsbook account directly tied to your bank account. Following me, you would have never invested that $5000 completely but merely one or two thousand of it as I've never actually dipped more into the 5k than that. Therefore, I never fully invested 5k so how can you claim an ROI based on it? Ultimately, I understand what you are saying but for sports betting purpose, I find it's more applicable to determine what you are returning per dollar spent.

And where I made 312.5% (in under 4 months) I was only betting between 2%-8% like I am in this thread; so when you say that I assumed too much risk, should I be betting 2% per play? 2% total per day? 2% per week? What's the general rule of thumb on Wall Street of how much risk your clients are willing to risk on any given day?

I thought that this would be the fund manager's decision... and if it is, then that makes it my decision (as I'm my own manager of funds). If that's so, then I normally don't conform to general 'rules of thumb' and believe in myself equally relative to the risk I take. Basically, if you tell me the rule of thumb is no more than 5% of the fund per day because otherwise, I will blow up; I answer with 'bullshit, just watch me!'

P.S. I'll see you in 5 years

Also, I've read Fortune's Formula by William Poundstone though I do know of a few books using the Fortune Formula moniker so you may have been referencing a different one... Let me know.

I'll check out 'A mathematician plays the stock market' soon.

As for 'A random walk down Wall Street'; I too wonder if I've simply been lucky over the years. Even those 10% who can turn a consistent profit sports betting could be the tip of the parabola who are in fact just simply getting extremely lucky (as an equal but opposite parallel to those getting extremely unlucky), with the rest of the betting population falling somewhere in the middle getting juiced out. This one peaks my interest and I'll definitely put it on my 'To-Read' list.

Thanks again for your contributions, you're welcome to stop by anytime.

In 5 years you won't need his money..

Seriously tho.. good discussion today guys and syke thanks for the links you posted. I actually have seen the Galileo Sports Fund before and it is very interesting. It's what I've tried to base my Live Betting foundation upon, and when I'm able to just sit down quietly without outside distractions or personal attachment to the Event, it goes very well.

In the end, all the different Businesses and Investment Strategies mentioned today are all inter-related, yet very different from one another at the same time. A lot of methods can be crossed over, but some are better suited for each individual type of Investment.

Have a good night 

Yeah, it's Fortune's Formula by poundstone.

You are a smart man for questioning whether your success is luck or skill. In reality, it doesn't really matter and you should keep any thoughts to yourself as it's not good for your business, which is marketing your alleged, and thus far, successful record ;)

People will back those who win-- no one questions why someone wins, though they should... but that's another discussion in itself ;)

Let's drop the ROI discussion. We can agree that we disagree.

Regarding excessive risk, you are 100% correct. I have no right to say that you have assumed excessive risk-- It's purely an anecdotal observation based on the following..

You went 1-9, and seemed amazed that you went 1-9. This raises red flags.. You should EXPECT to go 1-9 X% of the time. 

You then uncharacteristically bet 10% of your bankroll, which is contrary to the perceived discipline that I have seen passively reading your posts.

You then try to rationalize your reason for betting 10% and mention a 'fix' and your family in Italy...

Basically, this seems obvious to me that you are on tilt, and you try to rationalize it by producing a story. This is common on the street-- if a hedge fund is under-performing near the end of the quarter, they assume excessive risk so that they can 'catch-up.' This is human nature, and I don't fault you on it. It just surprised me as you seemed like a pretty rational/mathematically-sound person.

This is why I decided to post for the first time in 4 years.

Please answer the following--

You bet 1%  - 8% on any given bet. Can you provide me the ROI, as defined by me, for each category of wager?

ie) 1% wagers = X% ROI. 2% wagers = Y% ROI ... 8% wagers = Z% ROI

Obviously you bet more when you have more conviction.. that begs the question, do your results confirm your levels of conviction? If so, why do you bother betting on 1% wagers which you have the least conviction on?

My experience in the hedge fund world suggests that there is a negative relationship between activity and results. Meaning, that the more bets/trades you make, the lower your returns on.

I'd suggest that you should invest in only those wagers you have the most conviction for, assuming your track record suggests that you do indeed have an accurate read on your conviction levels.

What's the general rule of thumb on Wall Street of how much risk your clients are willing to risk on any given day?

This is a PhD level finance question... look into VaR (Value at Risk). Last time I checked, Goldman Sachs has a 5% chance of losing/winning $100m in any given day. This is the risk metric that the street uses, though it's very flawed.

For example, the SP500 should lose 50% of its value once every 70 years or so, but it's done so twice in the last 11 years. The Black Swan is another good book that talks about fat tail event risk and the like..

Next time you are in toronto, we'll go for drinks at Woodbine and discuss such things.