Betting on Draws as a Value Investment

Who wants to bet on a goalless match? Who likes to root for a boring 0-0?

Betting on Draws is not exciting for bettors.

They want something to happen. They like to bet on winners.

Amateur Bettors

Most of them are recreational bettors who love to pick winners.

They want to share the success with their friends and even better if the winner the team they support is the winner.

It is also a matter of ego to say: I was right!

It is not about betting on the winner only as a favourite. Even the high odds on the underdog are attractive because of the big reward.

These are all choices far from the logic of a value bet to make a profit.

Amateurs bettors first bet with emotion and then justify the choice with logic.

Bookmakers know this very well.

When bettors wager a lot on winning teams, the bookmaker shortens the odds to attract money on the draw. However, bettors continue to bet on winning teams to support the choice they made earlier and regardless of the drop in odds.

The more people do the same thing, the less it is worth, and the more it is worth the different thing is: betting on draws.

Great news!

Now that the odds are above fair price, they are good enough for a value investment.

Well, it does not end there.

You can bet on draws and make a profit thanks to the behaviour of another type of bettor.

Big Spenders

Have you ever heard of them?

They are bettors with a large bankroll who bet so much money to move the odds line in their favour.

They place large bets on the worthless odds of a team to cause a big price drop and, consequently, an increase in the price of the opposing team.
At the right time, the Big Spenders will place a value bet on the opponent’s juicy odds that will make a long-term profit despite the early losing bets. 

As a result, the bookmaker will move the line because of the big money on the winners by increasing the draw odds. Again, it will adjust the odds to get a balanced action on all sides, as the bookmaker aims to remain profitable by making money from transactions, no matter who wins the bet.

Bookmakers

While line movements create the opportunity to find value bets on overpriced odds of draws, these are not the only situations where bookmakers allow you to make a profit by betting on draws.

Other opportunities to value bet on draws can arise when the bookmaker makes public the odds for each outcome.

Although the bookies use sophisticated algorithms for calculating the fair odds of draws, accurate estimation is still difficult for a few reasons: the rarity of the event, a weakness in their formulas (e.g. Poisson distribution), or a considered thought of not offering fair odds with the opening line.

So many opportunities to profit from draws!

The wise bettor has no choice but to identify them, and that is just what I did.

I designed value betting strategies to take advantage of high-yielding draws.

Betting on Draws like Investing in Derivatives

You can get an edge on the betting market just like you do on the financial market.

Value betting on draws is a great opportunity to get that edge.

Just like a derivative, which derives its price from an underlying asset (e. g. stocks, bonds, commodities), similarly, draws have their underlying asset in the performance of the football teams.

At a given time, a football match produces a score from which you can make a profit, just as you can get a payoff of a stock that depends on its behaviour at a certain time; with the advantage that the betting market is independent of prevailing political and economic conditions.

This way, your bankroll will not be exposed to sudden and huge losses as it happens in a stock market crash.

Thus, you can see that the sports betting market is recession-proof as well as uncorrelated to global finance events.

This is why football draws, as a one-of-a-kind alternative asset class, can provide an attractive long term solution to generating positive returns.

In his 2008 letter to Berkshire Hathaway shareholders, Warren Buffett wrote:

Beware the investment activity that produces applause; the great moves are usually greeted by yawns.

Great moves like bets on draws that are usually greeted by yawns.