Futures betting is exactly what it sounds like—placing bets on events or outcomes that will happen in the future, usually at the end of a season or tournament. Examples include the NBA Finals champion, the outright winner in a golf tournament, MVP awards, Rookie of the Year awards, and season-long scoring bets like over or under passing yards. Some people will call these "sucker bets," but careful analysis can reveal sneaky good value. Let's explore how to approach futures betting.
The Challenge of Pricing Futures
Imagine you’re a sportsbook setting up a futures market for the college basketball season and the eventual national champion. It turns out to be a pretty complex task. You start with a few clear favorites, followed by upper-tier schools, middle-tier schools, and long shots. With so many teams, accurately judging their potential is challenging. So it's easy to misclassify teams, especially before the season starts.
Unexpected performances can throw off even the best predictions. Take San Diego State in the 2019-2020 season, for instance. They started as a 250-1 long shot, but they had a hot start and ended up as a 2 seed in the tournament. Adjusting odds daily with high accuracy for these kinds of scenarios is tough. A sportsbook would need to adjust SDSU's odds AND the odds of other teams while maintaining balanced action. It's just not possible to do it perfectly.
Navigating High Hold in Futures Markets
Sportsbooks account for vulnerabilities in futures markets by having high holds, typically around 20% or more (See discussion on vig and hold in the Basics Course). While a 20% hold is significant, it’s not evenly distributed. Some bets may have a -40% expected value, while others might have a +15% expected value.
Some sportsbooks offer futures in a Yes/No format, like Alabama to win the national championship at Yes +250, No -300. This allows for more accurate pricing and a lower hold (3.44% for +250/-300), much better than the standard 20%.
Key Factors in Futures Betting
Trade deadlines should be considered. Teams gearing up for a rebuild or making moves to win in a given season provide valuable information. Recognizing these shifts and the team's plan for the rest of the season before sportsbooks or other bettors can give you an edge.
Hot starts like the one SDSU had in the 2019-2020 season, as well as slumps are hard for the sportsbook to account for quickly. If you're closely following a sport, you can very well recognize these things before the odds change significantly. I won't spoil everything here, but you can think about some other things that might affect a season or a tournament but won't be immediately accounted for.
Top-Down Methods for Pricing Futures
One common method to price futures bets is the answer key strategy, where you reference a sharp book’s odds and compare them to a square book’s odds, and bet when there's a big enough mismatch. This might work fine for large markets like the NFL, but I would caution using this strategy. Typically, there's no "market maker", meaning there's no such thing as a sharp book in most futures markets. Thankfully, there's a way around that, which we'll talk about in the following example.
Let’s walk through a practical example of pricing a future using the answer key strategy, but this time, we're not comparing against another book's futures market. This time, we'll compare current futures prices against projected moneylines/lookaheads, a more refined market. For this example, we'll use the 2024 college football national championship just before the playoff started. The best prices available for the contenders were:
Alabama +250
Michigan +200
Texas +275
Washington +700
By line shopping, the hold was down to about 1%. To price the future for Alabama winning the title, we calculate the probability of them winning each game using available moneylines and lookahead lines.
For Alabama, the probabilities were:
Beating Michigan: 42.81%
Beating Washington: 66.62%
Beating Texas: 58.45%
Since Alabama could face either Texas or Washington in the final, we assign weights based on the probability of each team winning:
Probability of playing Texas after a win = Probability of Texas beating Washington: 60%
Probability of playing Washington after a win = Probability of Washington beating Texas: 40%
The weighted probability of winning the second game: (0.6×0.5845)+(0.4×0.6662)=0.6172
So, Alabama's probability of winning the title: 0.4281×0.6172=26.42%
This is the same as +279 in American odds, not good enough to bet at +250. This also means Alabama NOT winning the championship should be priced at -279. There was a bet on Alabama NOT winning available at -250, so that was placed instead.
Recap
Futures bets are placed on events or outcomes occurring in the future, typically at the end of a season or tournament. These bets are challenging for sportsbooks to price, leading to potential mistakes which they try to make up for with high holds. However, the hold isn’t evenly distributed, and there are ways to identify undervalued teams. Whether you focus on hot streaks, trade deadline behavior, price futures relative to other lines, or use other strategies, there’s value to be found in futures betting. Learn how to take advantage of that value in the Advanced Course.
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