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Teddy Covers' Las Vegas Wiseguy Report: Understanding the MLB Betting Markets Part II

04.04.2016     10:17 AM     Teddy Covers     Printer Friendly

Submitted by Teddy Covers blog entry.
In Part I of this article last week, I illustrated how the quants have come to dominate the MLB betting marketplace over the course of the last few seasons, completely changing the value equation moving forward.  Advanced metric starting pitching stats have become the primary basis for all baseball moneylines, leaving a market that devalues every other aspect of the game.  That leaves opportunities for alternative strategies to succeed here in 2016 and beyond.

I used several examples last week to demonstrate my point about the modern markets.  The following example is probably the best of the bunch, using the strikeouts per nine innings advanced metric stat (K/9).

In 2005, the top eight pitchers in strikeouts per nine innings were Mark Prior, Jake Peavy, Johan Santana, Brett Myers, Pedro Martinez, John Lackey, AJ Burnett and Jason Schmidt.  Six of the eight starters produced a profit for their supporters, and if you bet on the leaders in the K/9 stat for the full season you returned more than +21 units of profit from your investment.  Strikeouts per nine innings was not fully and effectively incorporated into the betting markets.

Fast forward to 2015, a decade later.  Last year, the top eight pitchers in strikeouts per nine innings were Chris Sale, Clayton Kershaw, Max Scherzer, Chris Archer, Carlos Carrasco, Corey Kluber, Francisco Liriano and Tyson Ross.  Only one of those eight aces – Liriano – produced a profit for his supporters.  If you bet on the eight best pitchers in baseball in this key advanced metric stat, you lost more than -39 units of profit.  As this example clearly shows, strikeouts per nine innings has gone from an undervalued commodity in the betting markets to an overvalued commodity over the course of the last decade.

So, with the markets obsessing and overreacting to the advanced metric stats, what can bettors use to find an edge?  Let’s start with finding quality soft tossers; the crafty guys who don’t rely on blinding speed and who don’t get betting market respect as a result.   Last year, starters like Chris Young, Yovani Gallardo, Colby Lewis, Marco Estrada, Mike Pelfrey Alfredo Simon and Dan Haren – pitchers that the advanced metric markets hate, all with low K/9 ratios – were all solid moneymakers for their supporters.  The likes of steady veterans like Edison Volquez and Ian Kennedy don’t get bettors excited, but they’re effective major league starters, offering real value in the modern markets.

Starting pitching matchups are only one piece of the formula for beating baseball in 2016.  The most profitable non-playoff team to support last year was the 83 win Minnesota Twins.  To put Minnesota’s season (and starting pitching) into perspective, the 83 win Twins finished +20 units last year; #4 in baseball.  The 83 win Nationals cost their supporters almost 19 units, #25 in the big leagues. 

Two teams with the exact same record had a nearly 40 unit return-on-investment differential!  The 92 win division champ Dodgers cost their backers more than 11 units over the course of the season.  When a team with sub-par starting pitching can find ways to win, they’ll return a boatload of profit because the markets won’t respect what they are doing.

That’s exactly what happened with Minnesota last year, when the projected bottom feeder Twins turned into a .500 level squad.  The profit party started early.  Minnesota went 1-6 in their first seven games, outscored  45-16 in the process.  Minnesota then proceeded to go 29-13 between then and June 1st.  They cashed plus price underdog tickets in 25 of those 29 wins, and were never priced higher than -120 in any game during that entire run!  The markets fixated on starting pitching.  The Twins didn’t have any advanced metric aces, but their starters did fine, their bullpen stepped up and their lineup was clicking on all cylinders.

Which brings me to the way to beat baseball circa 2016.  I’ve got four primary metrics that I’m focusing on.  First, I’m looking for effective starting pitchers who are not respected in the markets due to low K/9 rates as described above.  Second, I’m looking to bet on teams with strong bullpens and fade teams with weaker pens that can’t hold leads.  Third, productive lineups are thoroughly disrespected while light hitting lineups are not thoroughly devalued.  And lastly, streaks are worth riding – both hot and cold – like that 29-13 Twins run last year as well as dozens of others throughout the course of the season.

When it comes to lineups, the markets really do essentially ignore them!  The Rangers, Blue Jays and Royals all won their divisions in the AL last year.  All three ranked among the top quartile of MLB teams in profitability.  And each of those teams scored more runs than anyone else in their division.  Arizona was the highest scoring team in the NL West, and despite their sub .500 record, they produced more profits than any other team in that division.  I don’t think that those runs scored vs. profit ratios were an accident. 

Now it’s time to focus on  what may be the most devalued area of all – bullpen stats.  Pittsburgh, KC and St Louis had the top three bullpen ERA’s last year – a decidedly ‘square’ stat -- with the Cubs also in the top quartile.  Those teams finished #2, 3, 5 & 6 in profitability for the full season, all bet-on teams who were major moneymakers. 

On the other end of the spectrum, the bottom six bullpen ERA’s in baseball belonged to Colorado, Atlanta, Oakland, Detroit, Boston and Seattle.  Those teams finished -13 units, -16 units, -29 units, -10 units, -6 units and -20 units respectively; a combined -94 units between them.  Identifying good bullpens and bad bullpens in April gives bettors an enormous edge, because there’s no question that the markets are undervaluing the correlation between bullpens and profits.

Lastly, I’ll write a few words about streaks; not always an easy thing to measure or to take advantage of.  As someone who has always used totals as a major part of my MLB betting repertoire, I’ve been following MLB streaks for more than a decade.  Basically, I look to bet on hot lineups, expecting them to continue to hit until proven otherwise.  Cold lineups continue to struggle until proven otherwise.  Hot bullpens are slamming the door shut.  Struggling bullpens are leaving the door wide open.  Instead of focusing solely on winning and losing streaks, I prefer to focus on lineup and bullpen streaks – the markets and the media both tend to lag behind, whereas winning and losing streaks are widely reported and they attract at least some betting market attention.

Best of luck betting baseball this year!

Tags: MLB Teddy Covers

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Visitor Comments:

04/04/2016 10:40 AM
Thanks so much for the "wiseguy" reports. Informative and fun to read!

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