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In order to be successful with the dropping odds strategy we need to have an efficient (accurate) price. This efficient price is the price we know that we need to beat in order to have a value bet.
The way we calculate this ‘efficient price’ is by subtracting the built in vig from Pinnacle’s price. We call this the No Vig Price.
Why Pinnacle?
Why do we use Pinnacle’s price’s in this calculation? Why not use another bookmaker like Bet365 or BetMGM?
Well the truth is Pinnacle are far better at pricing sports betting markets than other bookmakers. This means their no vig price is going to be more efficient than other bookmakers.
Pricing markets better than other bookmakers isn’t enough though because at the end of the day we are relying on them to be right about their probability calculations not just relatively better. So if Bet365 have priced a market horribly and Pinnacle have priced the same market slightly less horribly that doesn’t help us because Pinnacle’s no vig price is going to inefficient so beating it doesn’t guarantee a positive expected value bet (value bet).
Survival is Proof of Pricing Efficiency
So we need Pinnacle to be efficient and the fact that we use their no vig price as our benchmark of efficiency shows that we believe they are. How can we be so confident?
Our confidence is derived from the fact that Pinnacle have been operating a winner’s welcome business model since 1998. This business model basically guarantees to winning bettors that they will be allowed to continue betting on their no matter how much they win.
This means if Pinnacle offer inefficient prices then they will likely lose money from the winning (sharp) bettors who are able to bet on their site thanks to the winner’s welcome policy.
The fact that Pinnacle hasn’t gone out of business is a strong indication in our minds that they are at the very least extremely strong at pricing markets. On top of their bold policy they only add a very small amount of margin to their lines giving them very little room for error. I re-iterate if Pinnacle were messing up a lot they wouldn’t have survived until today.
Data is Proof of Efficiency
If Pinnacle weren’t extremely efficient then our users wouldn’t be making any money by beating Pinnacle’s no vig price that we are calculating and serving up with every dropping odds alert.
We’ve had our data analysed by the industry leading independent reviewer SBC who verified thousands of real bets by our users and after the extensive review they inducted us into the SBC Hall of Fame.
Yesterday is not Tomorrow
One of the most repeated phrases in finance is ‘past results do not guarantee future performance’. The same is true for Pinnacle. We cannot guarantee that Pinnacle will remain efficient. We are however extremely impressed with their long track record and while it can’t guarantee a strong future track record it is still a good indicator that that they have the all the in house experience and systems they need to be efficient moving forward.
Furthermore their Trading Director Marco Blume is a man with an acute understanding of the importance of pricing efficiency as it relates to the success of their business model and from publicly available interviews he doesn’t appear to be showing any signs of complacency.
We will however continue to monitor developments in the bookmaker and exchange market to make sure that we are ready to react to changes that may affect Pinnacle’s ability to price markets efficiently.
Margin of Safety
Pinnacle are almost perfect but not quite. This means we need to leave some room for error. We call this the margin of safety.
We don’t just bet when the price being offered by the soft is higher than theit no vig price it has to be meaningfully higher. How much higher depends on how efficient we estimate Pinnacle’s price to be.
The way we estimate Pinnacle’s efficiency is by looking at two variables. Pinnacle’s vig and limit. A high vig indicates Pinnacle are not confident that their current price is efficient and if Pinnacle aren’t confident then we aren’t! So when their vig is high make sure your premium to their no vig price is high. A low limit also indicates that they aren’t confident in their pricing so if their limit is low then make sure your premium to no vig price is high.
We recommend you use these two proxies in conjunction to decide whether there is a great enough premium being offered.
Summary
- We need an efficient price in order to know when we are being offered a value bet
- We use Pinnacle’s no vig price as our efficient price because they have proven themselves to be extremely strong at pricing sports betting markets over the past 26 years
- There is no guarantee they will continue to be efficient but their track record is a strong indicator they are well positioned to be
- Pinnacle aren’t perfect so we need to bet with a margin of safety which is proportional to ours estimated efficiency of the line
- We use Pinnacle’s vig and limit to estimate the efficiency of a line
