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Sep 7, 2018
Sep 7, 2018

The simple handicap method part two: Finding value

Why simplicity can be the key to success

Looking beyond the number to find the value

The simple handicap method part two: Finding value

In his first article for Pinnacle, Adam Chernoff explained what the simple handicap method is and how it can help those betting on the NFL. Now, he has provided more detail on how this method can be used to identify inaccuracies in the betting market. Read on to find out more.

The basics of the simple handicap method

In my previous article I described the importance of breaking down wagers to the most basic form. Before reading part two below, I recommend going back and reading my first article if you have not already. It is important to keep the basic principles of part one in mind while reading the following.

Why simplicity can be the key to success

My hometown in Saskatchewan, Canada has a population of 2,300 people. It is a conservative farming community a few hours east of the Paris of the prairies. Residents rely on tried and true methods passed down from generations to make a living. One resident of town owns a large used vehicle lot along the southern outskirts. Rows and rows of old, rusty pickup trucks and tractor-trailers greet everyone entering the town. The placement could not be any worse.

Growing up, I would play golf each day during the summer. The instant school finished, friends and I would carry our clubs to the course and play as many holes as we could before sunset. We would take a shortcut through the old vehicle lot and start on the sixth hole to avoid the twilight rush off the first tee. For the better part of sixteen years, I cursed the vehicle lot each summer day when I walked through it.

“Who would ever buy any of this junk, what a dump and waste of space!”

I returned to my hometown in my mid-twenties after a few years working in the Dominican Republic. After a round of golf, I went to one of the few local restaurants. Sitting in the booth next to me was the owner of the old vehicle lot. We caught up briefly with some pleasantries.

“Still buying and selling everything in sight?” I asked.

“I know nothing else.” He replied back.

I turned back to my meal after more small talk.

At the same split second, something clicked, and I had a light-bulb moment. For the first time in my life, I understood the upside of the vehicle lot and the business the man runs. Three years working in the Dominican Republic for a bookmaking operation taught me a lot about buying low and selling high. This is precisely what the man did his entire life.

I leaned over the booth to look back at him and asked,

“You have dozens of the same vehicles in your lot, why do you buy the same one over and over again?”

He smirked,

“It is all about the price. If I get a good price at the auction or from the seller, I know there will be demand, and I will always turn a profit.”

“No kidding…” I replied and again went back to eating my meal.

It took me twenty-two years to make a connection between real life and sports betting. I was so used to walking through the lot of old vehicles every day that I never stopped to think about the other side of the equation. I never realised that each heap of metal and car parts represented value and upside on a strategic position planned out well in advance.

This story is the premise behind step two of the simple handicap method.

Looking beyond the number to find the value

Just because an NFL team is listed at an inflated price, does not mean the team presents value to wager on. It is critical to look for betting opportunities with upside that also have an inflated price.

There is a reason the old vehicle lot is filled with used Ford F-150's and Dodge Ram's instead of GMC Sierra's and Isuzu Hombre's. If the owner were only buying for the best price, from every auction, he would come home with whatever the best deal was – regardless of make or model.

Those who have the willpower and discipline to be consistent will end up like the elderly owner of the old vehicle lot, secure financially and living comfortably on the sharp side of life.

Purchasing a commodity in an open market because it is a good price can be a detrimental strategy if there is no focus on the chance of turning a profit. The same is true in NFL betting.

If betting the team with the most inflated point spread each week was correlated to long-term success, all bettors could easily be lifelong winners. Both professional and recreational bettors commonly hunt for inflated prices in the market. The difference is that professionals tend to only do so with teams that have upside while recreational players will settle for taking the biggest number.

For the better part of five decades, the owner of the vehicle lot identified an opportunity in his market (vehicles with demand) and narrowed down an accurate market price (average purchase value). He continuously pulled the trigger (bid at auctions) when he could buy a vehicle for less than that price.

Step one of the simple handicap method will determine opportunities in the market (teams with upside), and the mindset in step two will narrow down an accurate market price (and afterward identify inflated prices). These two steps combined will lead to consistently identifying teams with upside at inflated prices to bet at prices better than true market value – a long term profitable proposition.

There will be many weeks when step one identifies many potential teams with upside and step two shows all are underpriced in turn ruling out each one. This is common and should be expected. The challenge is not wavering and staying consistent with the methodology long term. Those who have the willpower and discipline to be consistent will end up like the elderly owner of the old vehicle lot, secure financially and living comfortably on the sharp side of life.

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