The First Four Weeks of the Baseball Fund

trading baseball

trading baseballAccording to my fantasy team’s pace tracker, we are now 12.8% through the 2014 season. Let’s take a look at what we have learned about the Baseball Fund thus far.

Everything I Know Is Wrong

Well…that’s not necessarily true. But one thing sure was wrong. Just this morning I discovered that my spreadsheet was using the wrong formula to calculate the Vegas odds for each of the moneyline underdogs.

I thought it was strange that the spreadsheet almost never found any value in underdogs. One of my favorite aspects of Trading Bases was when Joe pointed out that there can be value in betting on a team that the spreadsheet doesn’t project to win.

I had yet to find one of those situations, and that seemed strange. As I was thinking about this and looking through a daily bet card, I noticed that the Vegas odds for each game implied that both teams were favored to win. While I originally attributed this to the betting juice, it began to seem like more than that.

The proper formula for converting an underdog (plus) moneyline into a winning percentage is 100/(the line +100). My formula was using the formula for converting a favorite (minus) moneyline into a winning percentage for both teams in each matchup. Whoops.

This doesn’t change much for most of the games the fund bet on. To this point, the fund has bet almost exclusively on favorites, and those calculations were all correct. The question is, how much did we leave on the table by not taking good bets on underdogs?

We will find out from this point forward….

The Cliff Lee Experience

One of my favorite stories from the first four weeks of the season came during Cliff Lee’s third start of the year for the Phillies. The spreadsheet compared the Phillies lineup at home to the Braves lineup on the road and with Cliff Lee starting, the Phillies became the biggest bet of the year at 1.5% of the fund.

When I text my buddy to tell him about the first Level 4 bet of the season, he pointed out that Lee’s first two starts were really bad and the Braves had been swinging some very hot bats. This got me worried that my spreadsheet won’t be able to react fast enough to a changing baseball climate.

What actually happened shocked proved us both wrong. Lee went out and pitched a great game….then the Phillies lost 1-0. As the popular saying goes, You Can’t Predict Baseball….which is why risk management and position sizing are so important.

The Fund’s Performance

After the Red Sox lost to the Orioles yesterday morning, the Baseball Fund went to 67-50-1 and just slightly negative for the year. I have no idea where the one tie comes from.

One of the biggest problems with the fund thus far has been that it trades similar to a mean reversion strategy. It makes a small profit on most days, and then will lose 2% on a bad day. These disaster days have continued to wipe out the steady progress.

Part of the difficulty of betting exclusively on favorites has been that I need to win multiple games in order to make up for one loss. Hopefully, by now correctly incorporating underdogs, the payout structure will become more balanced.