Finding an Edge in Minor Sports
To the uninitiated the mechanics of the stock market can seem somewhat of a mystery. The rise and fall of share prices can be difficult to pre-empt as market reaction normally occurs a full week before good or bad news is released, yet once the information hits the headlines, it creates barely a ripple. For an average investor waiting to act until after good news is released is a quick route to the poor house. Many times, I’ve sat on my hands and watched a stock rise or fall during the day, and later thought “if only I bought it before the price shot up, or shorted before it tanked!”
While this can seem difficult to achieve without a crystal ball or privileged information, you can get a jump on sports or financial markets and turn that edge into profit. Instead of waiting for public reports (from SEC filings to midweek injury reports), you can often gain information just by closely monitoring price movements.
For a good recent stock illustration of this principle, look no further than the recent crash of Northfield Laboratories. The company was testing a human-blood substitute, with a critical progress report expected on December 19 after the close of markets. That afternoon the “line” on the stock dropped from over 14 to 11. Nearly 30% of its shares had been “sold short” – an investor’s way of betting the stock will crash. With those two signs, most people correctly assumed the report would be bad. The “betting pattern” on this stock revealed the failure long before the public announcement. The stock dropped over 50% the day after its failed test results were disclosed, rewarding those who understood the move and bet against Northfield.
To apply this theory to sports, consider this scenario: Payton Manning (listed as questionable) is sitting in the locker room on Sunday morning with worried head-coach, Tony Dungy. “How does your tweaked thumb feel?” Dungy asks. His star quarterback frowns, and replies, “Not good. I have no touch on the ball, so I’ll probably give it one more week to heal.” The scene changes to you sitting at home in front of your computer, scratching your head and wondering why line on the Colts moved from -3 -104 to -3 +111 at Pinnacle Sportsbook?
A few of the other larger-limit sportsbooks have already reacted by moving their lines significantly, but not everyone. Regardless of whether you know Manning’s injury status, the line moves at the big books tell all you need to know. Mannings’ participation was questionable, the line is moving swiftly against Indy, so the market thinks the Colts are less likely to win QED – the negative prognosis on Manning’s injury is spreading to Sportsbooks. Anytime you see a 10+ cent move, you can get the best of it by “chasing the steam” – in this case, fading the Colts at slower-moving small sportsbooks. These books obviously hate it when players beat them to the punch, and may even throw you out, but not before nicely padding your bankroll.
In stocks and sports, information is money. While you can gain indirect information from watching price moves, nothing in sports betting is as profitable as gaining first-hand injury information. Without hiding in the locker room or knowing the personal trainers, you aren’t going to outguess NFL injury announcements. Set you sights a little lower and change the focus to smaller sports. Start reading University and regional newspapers covering smaller schools that have Div I-A and I-AA programs, covered by sportsbooks.
Many times, key player or coaching information – dynamite for smart players – goes unnoticed past kickoff. These smaller events do not attract syndicate action, leaving them ripe for more casual players. If it sounds like we’re repeating Ourselves, it’s because the point is crucial for smaller players. If you bet $1000 or less per Game, you will profit handsomely by focusing outside of professional sports. The lines for these events do not react quickly, if at all, to player injuries, weather or coaching announcements.
If you are a smaller player looking to move up, pick a single minor sport and hone in on it. Try Ivy League football, Albanian Soccer, Greek basketball, or any event that is not covered on the front page of ESPN or USA Today’s sports section that has valuable information available with a bit of digging. For two weeks, try to spend 15 minutes a day researching that one area. With this little time spent, you’ll likely find some nice opportunities.