One of the things that fascinates me about sports betting markets is how all the money is attracted as if by some mysterious force on to the favourite.
Now you might say that by definition this is inevitable – after all, this is why the favourite is indeed the favourite! – but I must clarify my question…. Specifically, why has so little money been placed, ahead of tonight’s Euro 2012 semi-final, in the form of lay bets on an Italian win, or indeed lay bets on the draw, whereas so much money has been backed on Germany winning?
For surely, the two are really the same thing expressed in a different way?
As I write (an hour before kick-off), over £6 million has been matched on the Germany versus Italy match odds market. Of which about 80% has been staked on Germany to win, 10% on Italy and 10% on the draw.
The unmatched monies are split in roughly the same proportion. Clearly most of the interest is in the possibility of German victory.
As a result, the odds on Germany are moving painfully slowly this evening. Which means the market isn’t much fun if you’re a trader.
If I were now to trade a German win, it’s very unlikely that I would be able to secure more than one or two ticks of profit. Markets that are this liquid in fact become, paradoxically, illiquid to traders. There is so much unmatched money the prices never move, thereby restricting our ability to make a profit (unless, I suppose, we’re prepared to stake absolutely enormous sums).
Now, as suggested above, an obvious solution to this problem is not to bet on Germany at all, but rather to lay both Italy and the draw. The prices for both these outcomes are moving much more freely, and my bets on them would therefore be effectively leveraged to a greater degree.
Given that this is such an obvious strategy, why do so few people do it?
The only answer I can find is that people simply love backing favourites. And they do so simply because other people do it.
There is something inherently more comfortable about backing a favourite to win, than laying an outsider to lose. And I propose that it is something to do with the herd instinct.
I asked a good (non-punting) friend of mine this afternoon who he would bet on if I gave him a free bet of £20 on the Germany versus Italy match.
Big surprise – he said he would put it on Germany to win.
When I pointed out that Italy have never lost to Germany in a competitive match, and indeed have a 100% success rate against them, with 7 wins out of 7, he was unmoved.
When I added that Italy come into this game having just performed superbly against England – in contrast to Germany who conceded twice to unfancied Greece! – his position did not change.
His main reason?
Germany are the favourites, and therefore the natural team to bet on. They are the magnet for the gold in his pocket, as everyone else is doing it, and it doesn’t feel quite so foolish to be wrong when the whole herd is of the same mind.
To contemplate a bet on Italy – even a lay bet – would be to operate outside the herd.
And betting on favourites is all about joining the consensus.
My advice for tonight’s game?
- If you want to trade a German win beforehand, do so via backs and lays on Italy and the draw – as you will get significantly more leverage for your investment.
- As to the match outcome, I have no fixed idea. But I have backed the draw, as I expect it to remain tight in the first half, as above all, no one wants to lose. Then I will aim to trade out by laying after 30 minutes or so. Though if the match is surprisingly open, I may trade out before this.
Enjoy the game.