Photo: Mark Hoffman, USA Today Sports

Gambling on the NFL is big business, especially after a 2018 Supreme Court decision striking down a federal ban on sports betting. Recent estimates suggest that as many as 46.6 million people will place a bet on the NFL this year, representing nearly one out of every five Americans of legal gambling age. As a result, there's been an explosion in sports betting content, most of which promises to make you a more profitable bettor. Given that backdrop, it can be hard to know who to trust.

Fortunately, you can trust me when I promise that I'm not going to make you a more profitable sports bettor. And neither will any of those other columns. It's essentially impossible for any written column to do so for a number of reasons I'll detail over the year. (I'm not saying it's impossible to be profitable in the long-term by betting on the NFL, just that it's impossible to get there thanks to a weekly picks column.)

This column's animating philosophy is not to make betting more profitable but to make betting more entertaining. And maybe along the way, we can make it a bit less unprofitable in the process, discussing how to find bets where the house's edge is smaller, how to manage your bankroll, and how to dramatically increase your return on investment in any family or office pick pools (because Dave in HR and Sarah in accounting are much softer marks than Caesar's and MGM).

If that sounds interesting to you, feel free to join me as we discuss the weekly Odds and Ends.

Checking In On the Unders

In Week 7, I noted that unders had been hugely profitable so far this season and discussed structural reasons why unders tend to outperform overs (though usually not by enough to beat the vig). I also said I'd track the performance of the unders going forward to see if we could be profitable merely by mass-betting them every week. (My hypothesis was that unders would win somewhere from 50-52% of the time going forward.)

Unders had yet another mediocre-but-not-terrible showing last week, going 7-8, which under our usual assumptions, would cost us 11% of what we bet (or $16.36 if we put $10 on every game). Suddenly with four weeks left to go we find ourselves right where I predicted we'd be: unders are now down to 58-54-3, which is a winning record (51.7%), but not enough to clear the vig.

Using our "place a fixed amount on every game" betting system, we'd be down 1.1% since we started (or $12.73 if we wagered $10 per game). Using our "start with a fixed bankroll and divide our remaining bankroll evenly between all games every week" betting system, we're down 28.6% (or $45.76, assuming we started with an equivalent $160 in Week 7).

Seeing the Future(s)

The season is nearing its end, and futures bets are starting to pay out (provided you bet the over, at least), so I wanted to take this week to talk about what they are, why they're not all that great for professional gamblers, and also why those same reasons make them pretty fun bets for recreational gamblers like ourselves.

To start with, a "futures" bet is just any wager that won't resolve in the near term. If you bet today on who will win the Super Bowl this year, that's a futures bet. If you make that same bet in February, it's just a regular bet.

The most common examples of futures bets in the NFL are season win totals, award winners, and the Super Bowl champion. Award-winners and Super Bowl champions are fairly straightforward, but since the field of potential winners is so much bigger early in the year (theoretically, all 32 teams have a shot) than late in the year (only two teams can still potentially win it by the time it arrives), you can get "longer" odds by betting it early.

For instance, the you likely could have gotten Houston Texans' Super Bowl future this offseason as high as +25,000. This means a winning bet of $100 will return $25,000 (plus the original $100 stake). These odds are substantially higher than even the longest-shot moneyline bets. (The largest spread of the season so far was Dallas -17.5 vs. the Giants in Week 10. If you wanted to pick the Giants to win that game outright, you could have gotten odds ranging from +1000 to +1100; this is more in line with the preseason odds you'd see from a Super Bowl front-runner.)

(Remember: "American odds" tell you your return on a hypothetical $100 bet. As a result, +25,000 doesn't mean "25,000-to-1", it means "250-to-1". Can this be a bit confusing, especially if you're an inexperienced bettor? Yeah. Is that by design? Also yeah. In addition, I have a feeling the odds were tied to a $100 bet to subtly encourage gamblers to bet larger sums. Many fundraisers that offer something nominally for free with a "suggested donation" do so because they believe people will give more than they otherwise might be inclined to do. Likewise, Vegas probably wants you to believe that all of your peers are out here wagering $100 per bet so you'll feel pressured to match.)

Why Serious Bettors (Often) Avoid Futures

The primary problem with futures bets is that whole "resolves in the future" thing; this is why high-volume gamblers don't tend to like them as much. If you commit money to a futures bet, that money will be tied up for months or potentially even longer. This increases the opportunity cost.

Over the last 30 years, the S&P has grown by an average of 8.1% a year, which is 0.649% a month. Over the last 20 years, that's 7.0% a year or 0.567% a month. Over the last 10 years, that's 8.6% a year or 0.691% a month. Obviously, on a month-by-month and year-by-year basis there's a ton of volatility; the market was up 26.9% in 2021, down 19.4% in 2022, and is back up 22.6% so far in 2023. But the long-run expectation is a gain of 7-8% a year or around 0.6% a month. That means if you tossed your $100 in the market instead of a futures bet, your expected payoff in six months would be $103.65. The opportunity cost of a 6-month futures bet is almost as large as a typical vig (standard -110 odds translate to a 4.54% vig.)

Because of this opportunity cost, for futures bets to be worth it, you need to find an edge that's not just enough to beat the vig in expectation, but enough to beat both the vig and the market. And the longer the timeline, the bigger that edge needs to be. If you were betting today on who would win MVP next year, your money would be tied up for thirteen months and the opportunity cost of not putting it in the market would be 8.1%.

The other problem with futures bets for serious bettors is that they resolve in the future. No, this isn't just restating the same problem all over again; if you remember from earlier in the year when we discussed optimal bet sizing (or "Kelly" betting), gamblers with an edge who bet optimally should be expected to make an average percentage return on every "cycle" of bets, leading to geometric growth (where your bankroll grows faster and faster over time).

When bets resolve in a week and give you your money back to allocate again, you can go through 16-20 "cycles" in a year, getting 16-20 periods of exponential growth. Small growth, for sure, but the point of exponential growth is that it compounds over time. If you have just a 1% edge and manage to compound it 20 times, you'll go through 200 "cycles" in 10 years of betting on the NFL and increase your bankroll by 632%. If you instead limited yourself to one "cycle" a year (say by tying all your money up in preseason futures bets), you'd only get ten "cycles" of compounding growth and your bankroll would increase by just 10.5% over the decade. That's... a pretty stark difference.

(This is, of course, contingent on you actually having a 1% edge; if you don't have an edge, betting weekly just ensures you go broke that much faster.)

This isn't to say that professional bettors never make futures bets. It just means they need a substantially larger edge before they'll commit money there. I've heard some bettors have had success with correlated futures bets (betting on two events where if either one occurs, it makes it more likely that the other occurred as well), for instance. But futures will never be the bulk of their betting strategy.

Why They're (Often) Great for Recreational Gamblers

Of course, all of these things that are liabilities for professional bettors can be viewed as assets for recreational gamblers such as ourselves. If you have an edge, futures bets will limit the amount of money you can win. If you don't have an edge, they'll likewise limit the amount of money you'll lose.

Futures bets can drag out the suspense (which is primarily where the fun is), doling out the tension and release in drips over weeks instead of in a flood over hours. This gives them a strong return on investment from an entertainment standpoint.

Also, because futures bets can get such long odds, they can easily tickle some of the same pleasure centers as the lottery, which is simultaneously the most popular form of gambling and also the least rewarding. You'll lose a lot less money in the long run betting it on 2,000-to-1 events than you will spending the same amount buying MegaMillions tickets.

One of the most famous bets of all time came in 2016 when Leicester City won the Premier League in soccer. No team out of the traditional soccer powers had won the league since 1993, and Leicester City had only joined the league the year before. As a result, they were given 5,000-to-1 odds (or +500,000 in more standard American terms), which meant tossing $10 on them before the season would have returned $50,000, and dropping $100 would have paid out a half-million dollars. It's not quite as lucrative as winning the lottery, but that's still a pretty massive return.

(As an aside: the fact that the lottery pays out even more than betting longshots is arguably a point against it; 70% of lottery winners wind up broke within seven years and many have their lives ruined by the sudden influx of money. A half-million dollars is a lot less likely to ruin your life than $232 million.)

Now, I want to reiterate: the overwhelming majority of 5000-to-1 bets are not going to win. You'll lose money betting futures just as easily as you will betting sides. But even the bets that don't win can still provide plenty of excitement along the way.

In 2017, Las Vegas was awarded an expansion franchise in the NHL. Excited to finally have a hockey team, many locals bet on it to win the Stanley Cup at +50,000 (or 500-to-1).

They were more betting on the team as a show of support than as a serious bet, but the Golden Knights broke all records for success by an expansion franchise and made it all the way to the finals, where they lost in five games. That +50,000 bet didn't ultimately pay out, but the excitement in the city became more and more palpable the further the team advanced as those life-changing payouts became easier and easier to imagine.

One Last Consideration: The Hedge

There's one other aspect of futures worth discussing: the possibility to "hedge" (or bet against your original bet) if the odds have moved significantly, guaranteeing you money from your original bet if it wins and also guaranteeing money from your hedge bets if it loses. Every hedge incurs the vig all over again, but they offer a chance for you to "cash out" any line movement in the form of guaranteed profits.

Let's return to the Texans and their +25,000 preseason Super Bowl odds. If you put $100 on the Texans, you stand to pocket $25,000 if they win the Super Bowl. They're still unlikely to win it all, but a stronger-than-expected start (they've already topped their preseason over/under for total wins) and a sensational performance from rookie C.J. Stroud have pushed their Super Bowl odds as high as +6000 now. You can at any point "borrow" from that potential $25,000 to place bets on the Texans not winning the Super Bowl. There are lots of ways to go about this, but I'll detail what's probably the simplest, conceptually.

Houston's odds of missing the playoffs currently sit around -140; you could put $500 on them to miss the playoffs, and if they do, you make about $357. Subtract the original $100 bet on Houston's Super Bowl futures, and that's a $257 profit for the year if Houston misses the playoffs. If Houston does make the playoffs, you lose that $500 but still stand to profit a potential $24,500 if the Texans win the Super Bowl.

Now, let's say that Houston's opponent in the wildcard round has a moneyline of -120. You can simply bet $1000 on Houston's opponent to win outright. If Houston wins, your original futures bet is still alive with a potential profit of $23,500 (the original $25,000 minus the $1500 cost to hedge). If Houston loses, you make $833, which comes out to $233 after you factor in the cost of your two losing bets.

If Houston's next opponent also has a -120 moneyline, you can bet $2200 on them; this gives you $1833 if Houston loses, which pays off the other three failed bets and gives you $233 in profit afterward. If Houston advances, their futures bet is still potentially worth $21,300. If Houston's conference championship opponent also has a -120 moneyline, you can bet $4900. A Houston loss nets you $4080, which pays off the previous bets with $280 to spare. A Houston win puts them in the Super Bowl with $17,120 in profit still at stake. If their final opponent also has a -120 moneyline, you can put $10,000 on them to win outright. A Houston loss pays $8333, which pays off all previous bets with $450 to spare. A Houston win pays out $25,000, which nets out to $7120 after the cost of all of your hedges.

The exact amount to bet varies depending on the odds you're getting and the minimum profit you want to guarantee, but a sequence like that should be set up so that if Houston is ever eliminated, you make enough to pay off all previous bets and pocket some profit, while if Houston wins the Super Bowl the total you spent on hedges remains smaller than the $25,000 you win. (This was an overly optimistic sequence because Houston's opponents will probably be getting worse odds than -120, which would prevent those exact bets from guaranteeing a profit. I explain the sequence this way because it's the easiest way to understand how hedges work from a mechanical standpoint, but really, the simplest way to hedge is to calculate how much to bet on every other team's Super Bowl futures to ensure an equal profit no matter who wins.)

The thing to keep in mind about hedging is the more the odds have moved, the greater the profit you guarantee yourself, so it's all a function of risk and reward. Because Houston has seen its odds rise from +25,000 to +6,000, you can lock in a profit today, but it'll be a relatively small one. If you let the bet ride until the playoffs start, Houston's odds will get much higher and you can lock in a bigger profit, but you run the risk of them missing the playoffs and you missing your window.

If they make the playoffs, you could place smaller bets on the other eleven teams in the field to lock in a smaller, guaranteed profit, or you could "let it ride" and keep hoping for the big payday. Plenty of options are available.

Are Futures Right For You?

As I said, most longshots lose; if you'd instead put that $100 on the Arizona Cardinals, that money's already up in smoke (Arizona's isn't technically eliminated, but their odds are down to +200,000; that $100 would go a lot further if you were betting them today). But for recreational bettors, this isn't a dealbreaker; all of our bets are more likely to lose money than not.

In terms of maximizing the amount of enjoyment we get per dollar staked, futures bets can be a powerful tool, offering long-term enjoyment with a minimal stake and plenty of opportunity to strategize on when to hedge or let it ride.

Lines I'm Seeing