The Six MLB Win Totals Vegas Has Mispriced for 2014

mlb win totals

mlb win totalsIn looking to find a tradable edge through betting on baseball games, the first step I decided to take was coughing up the $40 for a subscription to Baseball Prospectus. I then took their projections for the number of wins each team would have in 2014 and compared those projections to the over/under options available at Sportsbook.com.

While MOST of the projections where very close to the over/under bets, there were a few teams on each end of the spectrum where the opinions differed quite a bit. Setting the threshold for a significant difference at 3 games left me with 6 teams that Baseball Prospectus projects will be good bets against the over/under number Vegas has set for them.

The Fundamental Difference of Opinion

The key thing that we have to remember is that the sportsbooks have no stake in whether any team performs better or worse than the over/under number that is set for them. Much like the NYSE or the NASDAQ, the sportsbooks are simply setting a market that aims to take equal bets on both sides. Therefore, the over/under numbers are driven by emotions like fear and greed, not necessarily by how the underlying team projects to perform. Sound familiar?

On the other hand, the stat junkies at Baseball Prospectus don’t particularly care how many Yankees fans think their number is too low. They are in the business of projecting the results of the 2014 regular season as accurately as possible. The more accurate their results on a year-to-year basis, the more likely their subscribers are to keep paying them.

As you can see, there is a fundamental difference in motivation behind where Sportsbook.com and Baseball Prospectus are getting their numbers. This difference is what we are going to look to exploit in the 2014 baseball season.

The Six Teams to Watch

Here is a quick rundown of all of the MLB teams and their projected win totals vs. their over/under lines sorted by the difference between the two numbers:

mlbwintotals2014

Like I discussed at the beginning, setting the threshold for a significant difference at three games gives us six teams to target for the 2014 season. The four teams with a negative difference are likely to underperform their Vegas line, while the two teams that have positive differences are likely to outperform their Vegas lines.

The Pittsburgh Pirates

As you can see, my very own Pittsburgh Pirates are sporting the biggest difference of any team by quite a large margin. Baseball Prospectus is projecting them to win 78 games while Vegas thinks the will win 84. This might be hard for my fellow Pirates fans to stomach, but there is no room in this fund for rooting interests.

What I believe is happening with a difference of that magnitude is that Vegas is placing too much weight on the tremendous run that the Pirates had last year that resulted in a playoff berth. However, they are not placing enough emphasis on the players that were lost in the offseason and how unlikely many of the players are to repeat the career years they put in last season.

The Yankees, Braves, & Cardinals

The other three teams that are projected to produce significantly lower win totals than their Vegas lines are the New York Yankees, Atlanta Braves, and St. Louis Cardinals. The logical explanation here is that these teams represent large fan bases that are likely to show “irrational exuberance.”

If you have any friends that are Yankees fans, you know that they EXPECT to win 100 games every season and they BELIEVE that Derek Jeter’s corpse could hit .310 with 15 homers. That type of optimism is what pushes the Vegas lines for teams like the Yankees, Braves, and Cardinals higher.

The Los Angeles Dodgers

The Dodgers are an interesting option, because both Vegas and Baseball Prospectus agree that they are going to be the best team in baseball. They simply differ on what exactly that means.

Baseball Prospectus projects the Dodgers to be really good and spend most of their time beating up on a pretty bad NL West. This will lead to almost 100 wins. However, when the over/under line starts to creep up into the 90s, many betters will take the under just because there are so many things that could go wrong to prevent that many wins.

The Chicago Cubs

The Cubs represent an over bet on a bad team. Both Vegas and Baseball Prospectus think the Cubbies will be pretty awful, but Baseball Prospectus has them winning 3 more games than the over/under. Once again, it is likely that this line is being pushed down by all of the gamblers betting against “those lousy cubs.”

How To Bet These Teams

The problem that I still have with taking any of these bets is that we won’t know the results until sometime in September. We will have to tie up our capital for six straight months before we get a result. During that time, any number of freak injuries could ruin our chances of winning and we would have no way to get out. If this were a stock market trade, we could simply sell out the position, but we won’t have that option here.

Another issue is that there is a cost to playing the game. Most of these bets are currently listed at (-115). That means that for every $100 want to win, we will have to bet $115. Of course, if the teams we bet on do not perform as we expect we simply lose all of our money. We also need to keep in mind that any injury, trade, or minor league call-up could have a dramatic impact on these projections.

Because the odds are so uncertain, my instinct is to build an equal weight portfolio taking a position on each of these teams. Lets start with a hypothetical portfolio of $12,000 and place the following 6 bets:

  • Pirates – Under 84 (-115)
  • Yankees – Under 86.5 (-115)
  • Braves – Under 87.5 (-115)
  • Cardinals – Under 91 (-125)
  • Cubs – Over 69 (-115)
  • Dodgers – Over 93.5 (-115)

At the end of the 2014 season, each of our six bets will either be work $3739.13 or $0. (The Dodgers bet will actually only be worth $1600 because of the pricing, but for the purposes of this hypothetical we will assume all bets pay the same.)

Here is what the total portfolio value will look like based on how many bets we win:

  • 0 Wins – $0 – 100% Loss
  • 1 Win – $3,739.13 – 69% Loss
  • 2 Wins – $7,478.26 – 38% Loss
  • 3 Wins – $11,217.39 – 7% Loss
  • 4 Wins – $14,956.52 – 25% Profit
  • 5 Wins – $18,695.65 – 56% Profit
  • 6 Wins – $22,434.78 – 87% Profit

I believe that there is a very strong chance that at least four of these bets end up as winners. That would result in a 25% profit, which is the annualized equivalent of a 50% return. That is serious money for watching some baseball games. At the same time, there is a ton of thing that could go wrong and the risk of ruin here is also very large.

What this entire approach boils down to is that there is a great deal of uncertainty surrounding what the odds of winning an individual bet actually are. How likely are baseball teams to stick to their projections over the course of an entire season?

I’m not confident enough to put any real money behind this strategy this season, but I will definitely be pulling out this post at the end of September to see how we would have done.

Shopping Around

One last point that I should make is that it would also be in our best interest to shop around with different sportsbooks. If we were betting serious money on this idea, we would want to get over/under figures and betting costs from different sportsbooks to make sure we were getting the best odds available.

A simple example of this is that we could get an extra half game benefit for our bets on the Pirates, Cardinals, and Cubs if we placed the bet with LVH Sportsbook instead of Sportbook.com. However, Sportsbook.com has the Yankees at one full game higher than LVH Sportsbook, so we would want to keep that bet right where it is.