Table of Contents
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Welcome back to another edition of The Steam Report!
In this edition we dive into what you guys love most; strategy. I hope you enjoy reading it as much as I enjoyed writing it.
Today, we'll look at:
📈 How a London Hedge Fund Director Yields 6% on Betfair Exchange
This, and more, in just 5 minutes to read.
- Dylan
POP QUIZ:
Q: Which U.S. state saw its residents lose over $40 million betting on the Super Bowl, prompting concern from a state senator?
📈 How a London Hedge Fund Director Yields 6% on Betfair Exchange
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A London-based investment director has developed a systematic approach to exchange betting that's produced a 6% yield on turnover since June 2023 as a part time gig. His strategy? Using publicly available bookmaker odds to identify mispriced opportunities on Betfair Exchange.
Rather than building complex prediction models, his approach leverages the collective wisdom of bookmakers. "I use publicly available odds to calculate the probabilities of certain events happening, using weighted averages and removing vigorish with the Power Method," he explains.
The Process
His methodology involves several key steps:
1. Aggregate odds from both sharp and 'better' soft bookmakers using a proprietary weighting system
2. Remove bookmaker margin using the Power Method to calculate true probabilities
3. Add his own commission to create target odds
4. Place exchange orders using 15-20% Kelly staking
"It's a balancing act between not getting picked off, charging too much vig, and ensuring appropriate bet sizing for the market," he notes. "A £5,000 bet might be completely fine for a Premier League football match but not for an ATP 250 tennis match."
Risk Management
He uses Pinnacle Odds Dropper (POD) primarily as a risk management tool. "If I have a bet live on an exchange, I'll set up alerts around that market to ensure that if Pinnacle moves their line, I have time to cancel my exchange bets and not get picked off."
The Strategy's Edge
The approach has proven particularly effective when properly calibrated to market liquidity. "If I put bets way off market, it's going to look like huge value, but it will never actually be matched," he explains. Instead, he focuses on finding the sweet spot where his odds are competitive enough to get matched while maintaining positive expected value.
The Finance Advantage
"Mostly around risk management," he explains when asked how his financial background has helped with sports betting. "In both realms I am trying to solve for a scenario where my upside is maximised for an acceptable amount of downside/risk. While a lot of the experiences are not directly transferrable, there are a lot of similarities and overlaps - for example, being good in Microsoft Excel helps for both scenarios!"
His hedge fund background analyzing distressed debt mirrors his current approach in some ways - finding value in mispriced opportunities through systematic analysis and careful position sizing.
Looking Ahead/Advice
For those looking to employ a similar strategy, the London-based director emphasizes the importance of emotional discipline and proper testing. "Do lots of trial and error, the drawdowns and bad variance can be painful so make sure you are comfortable playing with your notional bank," he advises. "Don't get too emotional about it, just trust the process and ride out the downswings. If you are beating CLV consistently you will be profitable long term."
His own focus for 2025 centers on scaling the strategy's success. "I am confident that on average I am getting +CLV in the order of 4-6%," he notes. "Increasing turnover is going to be key if this is going to ever be anything more than a bit of a random side hustle." Currently generating a 6% return on £1 million in turnover since June 2023, the potential for growth is clear - provided he can solve the challenge of increasing volume while maintaining his edge.
His biggest concern moving forward isn't market efficiency or competition - it's potential restrictions on odds scraping, which could limit access to the market data his strategy relies on.
If you want to learn more about the strategy I recommend reading this academic paper by Lisandro Kaunitz, Shenjun Zhong andJavier Kreiner: Beating the bookies with their own numbers - and how the online sports betting market is rigged
Telegram Poll of the Week
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TRIVIA ANSWER:
New York. Senator Joseph P. Addabbo Jr. expressed concern over the high profits derived from consumer losses, especially from popular Same-Game Parlays.
That's it for today, we'll be back again next Friday with more juicy advantage betting content.
In the meantime why not throw it back to one of our most popular reports: TSR#06 which explores how a Chinese value bettor is making tens of thousands (USD) per month on crypto books in one of the most challenging betting environments in the world.
See you next time!
That's it for today on The Steam Report ♨️!
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dylan@Pinnacleoddsdropper.com
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Author: dylan@pinnacleoddsdropper.com
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Written by
Co-founder of Pinnacle Odds Dropper and creator of The Steam Report which is a weekly advantage betting newsletter
