Posting a Fixed Odds Bet

The 2018 PGA Tour Championship is being held next week and I’m pretty excited to watch who wins the tournament, but also who wins the FedEx Cup $10 million bonus check! In this post I’ll describe how I created my own odds for this tournament and posted them on CoinRoster just like a bookie.

Since the winner of the Tour Championship is a widely followed bet, its a bit easier for me to determine fair odds. I can use an odds website such as Odds Checker to find out what the odds might be and I can also use my favorite sportsbook and base my own odds on theirs.

After reviewing the odds posted elsewhere, I create a quick spreadsheet to do some math. I make a list of 18 players with their associated decimal odds, and then in another column I convert their decimal odds into percentage odds. Now I can sum the percentage odds to see the total implied odds in percentage terms. It turns out, the 18 players I listed have a combined 94%  implied chance. CoinRoster only allows me to post a maximum of 20 outcomes, so since there are 30 players competing in the tournament, I must also post odds for “Any Other Player” which will payoff if any other player not on my list of players wins the tournament.

To calculate what odds I should apply to the Any Other Player option, I can simply take the difference between 100% and the sum of the percentage odds for all the players I’m posting odds for. This comes out to 6% (100 – 94).  The decimal version of 6% odds is 16.66 (1/0.06). But if I post odds of 16.66 for the Any Other Player option, it will leave no potential profit for me, so I decide to offer odds of 10 for Any Other Player. These odds imply a 10% chance that Any Other Player wins the tournament.

I add Any Other Player at 10 on my spreadsheet of odds. Now I will sum all my odds (all players plus Any Other Player option) to see a total of 104%. This means that with the odds I’m posting, I’m building in a theoretical 4% spread for myself.

Click Here to download the spreadsheet I made displaying my odds calculations

Posting the odds as described above will not guarantee a 4% profit for me though. 4% guaranteed will only happen if the money bet on each outcome I’m listing is made in exact proportion to the odds being offered. For example, to guarantee the 4% implied spread, I would need bettors to place 10% of their money on the 10 to 1 odds, and 5% of their money bet on the 20 to 1 odds. Any other configuration of money bet will result in me taking the risk that the outcome with the most money bet becomes the winning outcome, in which case I will may loose money overall. This is the principal risk to the market maker. So the goal of a good odds maker should be to post odds that get action on both sides (or all sides) of a bet, so the risk is distributed in a way related to the underlying chances, thereby spreading the risk and getting close to the theoretical 4% edge.

Now that I have a list of my odds in excel, I’m now going to post those odds on CoinRoster and decide how much risk I’d like to take.

The first thing I do on CoinRoster is log into my account and click on the Create Contest link from the main menu. This brings me to the create contest page where I first need to choose a contest type. I’m choosing “MISC” as my contest type since this is the free form contest where anything can be posted. I type in the title and description of my bet, and then choose a registration deadline of 7am on the Thursday the tournament begins and a settlement deadline of Monday night following the tournament close. The registration deadline is the time after which no more bets are allowed, and the settlement deadline is the time when this bet will be settled and winning bets will be paid off. I choose Monday night for a settlement deadline in order to compensate for weather delays that would result in a Monday finish.

 

 

After filling out the details of the create contest form, I’m going check the “fixed odds” box and then paste each player name and their associated odds from my spreadsheet into the create contest form. Then I choose the maximum amount I’d like to risk, which is 0.1 bitcoins, and the minimum wager amount which is 1 satoshi. From the “settlement type” option, I’m going to choose crowd settled and I’m going to make this a public contest.

Once I click the Create Contest button, the contest will be created and the amount I’m risking (0.1 bitcoins) will be taken from my account. If it turns out that I don’t get enough action to require my full 0.1 bitcoins, the difference will be returned to me at the settlement deadline, but in the meantime the entire risk is being held by CoinRoster.

 

 

The bet is also not yet live, once I click the create contest button, a message is displayed telling me that the contest needs to be approved by an admin. Once this is done, my contest is live and can be viewed by any user and bets can be placed. Click here to view this contest.

A few things to note about the odds I have posted. At the time of writing, it seems sports books are offering 15 to 1 odds that Tiger Woods will win this tournament. However, I would love to see Tiger win again, so I’m offering 25 to 1 odds on Tiger, better than any other sports book, to encourage users to bet on him. Kind of a little hedge bet for myself. Feel free to take advantage of these great Tiger Odds.

Also, CoinRoster offers free bitcoins to new users, check their homepage before signing up to take advantage of their latest offer. Using their freeplay is a great way to play for free and hopefully win some bitcoins!

Convert option price to odds

This post is about converting the price of an option to an odds format. The same methods also apply if you want to convert stock option prices to an odds format, or any other option price into any odds format including decimal odds, fractional odds, and moneyline (american) odds. A fun application is also found below (including some free bitcoins for you).

For this example, I’ll use a bitcoin option price from Deribit and convert that option price into decimal odds.

The first thing is to choose an option on Deribit to use for our example. At the time of writing, I’m picking the September 28th, 2018, $8500 calls currently trading at 0.008 ($51.25) with an implied volatility of 95% and the underlying trading trading at $6243. This means we will use an out of the money call with 18 days and 9 hours till expiration. Its also worth noting that the contracts on Deribit are european cash settled options.

Now that I’ve chosen an option to use, cnxt I’ll is convert the price of my chosen option into a binary price format. Binary options are “all or none” prices quoted between 0 and 1. Binary options are associated with many over the counter unregulated “gambling” type sites (that are usually a rip off) but its best to forget about binary trading sites and think about binary option prices for what they are; just another price format.

Converting the price of an option on Deribit to a binary number means plugging in the option’s details into a Black-Scholes model, I do this on excel, and here is a link to my spreadsheet.

I plug my chosen option’s time till expiration expressed as a fraction of the year. This changes 18 days and 9 hours to 19.375 days / 365 days = 0.0530821917808219 years. My risk free rate is 1.35%. The implied volatility of this option is 95% and there are no dividends/interest/cashflow associated with it. The underlying price is $6243 and the strike price is $8500.

Drumroll please… after plugging in the variables, the excel spreadsheet calculates the price of this binary call option as 0.064 or 6.24/100. This tells us a few things. We know this call option is out of the money, and we know the implied volatility of this option is high, so it makes sense that this option will have a low chance of being called. So its price of 0.054 makes sense. Based on the option’s binary price, we can infer that this option has maybe a 6.4% chance of being called in the money.

The toughest part of this method is calculating the binary option price (which we just did), the easy part is converting this binary price into an odds format we prefer to use. I like using decimal odds, so next I divide 1 by the binary option price. So a binary option of 0.064 = 1/0.064 = 15.46 decimal odds. A binary option of 0.064 can also be expressed in decimal odds format as 15.46.

If we were to post a betting market on whether the price of bitcoin will be higher than $8500 in 18 days and 9 hours, we might offer decimal odds of 15. For every dollar wagered on whether the price of bitcoin will be higher than $8500 in 19 days 9 hours, we might be willing to pay 15 back if so.

For fun, I created a fixed odds bet at CoinRoster expressing the option quoted above in decimal odds for readers of this blog to bet on. Click here to view these odds at CoinRoster. You can also get 0.00007 bitcoins for free when you sign-up for CoinRoster using promo code parimutuelfreeplay1. Good luck!