tag:blogger.com,1999:blog-35364652.post6209849724100317718..comments2022-01-18T09:16:21.942-05:00Comments on Quantitative Trading: A novel capital booster: Sports ArbitrageErnie Chanhttp://www.blogger.com/profile/02747099358519893177noreply@blogger.comBlogger16125tag:blogger.com,1999:blog-35364652.post-68400245917927020422020-02-16T09:42:22.758-05:002020-02-16T09:42:22.758-05:00Hi Jonathon - I've never tried with the Excel ...Hi Jonathon - I've never tried with the Excel Solver so I'm not sure. I would recommend using the R package Rglpk ! Stephennoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-3461860595232076172020-02-14T14:12:06.431-05:002020-02-14T14:12:06.431-05:00Is this possible to do using Excel Solver function...Is this possible to do using Excel Solver function? I'm using the same equations/constraints as above but struggling to see why it won't converge. Jonathonhttps://www.blogger.com/profile/07307058545523640493noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-3306296555978813982020-01-23T07:38:23.952-05:002020-01-23T07:38:23.952-05:00I know how to solve a linear programming problem a...I know how to solve a linear programming problem and I understand how to construct the payoff matrix, but I don’t know how to get the objective function and the constraints given the payoff matrix above. So, my questions are: <br />- How can I find the objective function to maximize?<br />- Which would be the constraints in this situation?<br /><br />So, I tried this:<br /><br />I supposed I invest an amount of x1 on AH2(-0.25), x2 on X1 and x3 on 1, so x1+x2+x3=1. So in the three scenarios of the payoff matrix, I want to get a profit.<br />This is:<br />0.69x1-x2-x3 > 0 <br />-0.5x1+1.1x2-x3 > 0 <br />-x1+1.1x2+4.25x3 > 0 <br />x1+x2+x3 = 1<br />x1>0, x2>0, x3>0<br /><br />Are these constraints correct? Which would be the objective function?<br /><br />Thanks in advance,<br />Enric<br />Enricnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-80651622516925124672019-05-25T14:29:55.697-04:002019-05-25T14:29:55.697-04:00Sorry for the delay in responding William,
Good l...Sorry for the delay in responding William,<br /><br />Good luck with your web scraping app ! I think you have some good ideas regarding volatility and sentiment. Sorry I have no experience in investigating along those lines unfortunately. Mainly because when we read in the data 'industrially' for a set of bookmakers, it is computationally possible to find essentially ALL of the arbitrages that are available from minute to minute without the need to be guided by external signals. But when I say 'essentially all', I do tend to ignore arbitrages with 4 legs and over as they are not practical when one needs to manually execute all of the legs as simultaneously as possible on bookmaker websites.<br /><br />However, what you suggest might lead to trading ideas that can be implemented on exchanges. The strategies need not be actual arbitrage trades, but rather just statistical trading. <br /><br />Best Regards<br />Stephen Stephennoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-19914768123527997822019-05-08T00:23:35.536-04:002019-05-08T00:23:35.536-04:00Thanks for the response Stephen! No worries, I get...Thanks for the response Stephen! No worries, I get that your business depends on the optimization methods used, so any insight you offer is awesome :0<br /><br />I've built a small webscraping program (scrapes B365, Ladbrokes, unibet & sportsbet) to seek arbitrages in the NBA, Soccer leagues and baseball (based on the principles elaborated in your article) and I'm having lots of fun seeing the arb opportunities that pop up everywhere. Next step is to automate the arbitrage identification process, becaus now i have to do it manually and it hurts my brain to def. <br />Out of curiosity though, have you ever looked into correlations between sentiment/media activity spikes and their time dependent effects on market odds? For punting arbers, they usually seek these arb opportunities (e.g. Demarcus Cousins breaks another limb, so we expect the bookies to change their odds, but they change them at different times, thus arb opportunity), so perhaps as in some applications of volatility in finance, a wavelet transform of sentiment could be used as an indicator of volatility in the betting markets. High volatility would indicate more arbitrage opportunities. I'm still trying to find an appropriate statistic to validate this, but would love any suggestions/ideas if you know of any. William Stevensonnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-75811982269399856462019-04-24T11:01:05.822-04:002019-04-24T11:01:05.822-04:00Hi William,
The article is a little vague on the...Hi William, <br /><br />The article is a little vague on the details on purpose and I can't give you a detailed worked example unfortunately as we use a proprietary algorithm for speed and scale based on the 'simplex' method. However, if you look up examples of optimisation using the simplex method and create a payoff matrix as described in the article you will probably find it is not too tedious to solve for a single payoff matrix.<br /><br />Sorry I can't be more definitive.<br /><br />Best Regards<br />StephenStephennoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-76077636434113191822019-04-23T03:35:35.398-04:002019-04-23T03:35:35.398-04:00Thankyou for the informative post,
I'm attemp...Thankyou for the informative post,<br /><br />I'm attempting to recreate your results, and am having issues interpreting the structure of the optimization you used. Could you elaborate a bit more on the dynamic programming used to optimize the matrix?<br /><br />Kind Regards,<br />WillWilliam Stevensonnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-2579088341592973732018-03-18T11:22:59.957-04:002018-03-18T11:22:59.957-04:00Made a quick and dirty app to look for basic (3 wa...Made a quick and dirty app to look for basic (3 way football / soccer) arb opportunities!<br />https://sports-arb.herokuapp.com/robnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-19671357119327084382018-01-25T21:05:29.222-05:002018-01-25T21:05:29.222-05:00Dear Stephen, I was very interested to try this ou...Dear Stephen, I was very interested to try this out by playing small. I just realized in Singapore that it is illegal to place bet online. Unless the bet is place out from Singapore I guess, I have to let go off this opportunity. Thank you for the good read.<br />Regards Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-67604694474895994592018-01-11T16:59:58.805-05:002018-01-11T16:59:58.805-05:00Hello,
No not a stupid question. It's a linea...Hello,<br /><br />No not a stupid question. It's a linear programming optimisation. Most of the complexity is in setting up the constraints matrix. If you contact me directly I can give you more details.<br /><br />Rgds<br />stephen@rational.betStephennoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-41038734759405552012018-01-11T13:58:57.513-05:002018-01-11T13:58:57.513-05:00Hello,
sorry for asking maybe stupid question. I...Hello,<br /><br /> sorry for asking maybe stupid question. I am trying to figure out how you got percentage from odds for payoff matrix in second example.<br /> I was able to follow first example but it will be nice if you can provide more details.<br /><br />Thank youAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-16098043994692661202018-01-06T06:14:18.373-05:002018-01-06T06:14:18.373-05:00Thanks for your comments Donkey Face,
Your experi...Thanks for your comments Donkey Face,<br /><br />Your experience of using automatic bots on betting exchanges is not too surprising, but it does illustrate a key difference between the exchanges and the bookmakers and why the combination is important.<br /><br />The exchanges have api’s allowing automatic execution but they can suffer sometimes from poor liquidity. It can be difficult to find trades where each leg resides on a betting exchange and at the same time, all of the legs can accept a stake size large enough to make the trade worthwhile. Bookmakers on the other hand can generally accept much larger stake sizes ( several £k on the more popular markets) but the execution must be done manually online. Therefore, in general, there are more sizeable opportunities within the bookmaker landscape. Though it is important to use exchanges where possible for the reasons mentioned above in an earlier response. Stephennoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-25914654488164453282018-01-06T06:12:39.262-05:002018-01-06T06:12:39.262-05:00To clarify, my intention was not to imply that spo...To clarify, my intention was not to imply that sports arbitrage is something new, the novelty was meant to refer to the use of the sports asset class to help a new trader bootstrap his capital for use in other, more scalable asset markets. But perhaps I should have re-worded the title slightly …<br /><br />Although not well known, these arbitrage techniques have indeed been around for a long time - for good reason, they can be made to work for significant periods of time.<br /><br />You are right of course about the main problem and I point this out at the end of the article. Unfortunately it would require another chunky article to bring justice to the subject of risk mitigation of bookmaker limiting. Most bookmakers will indeed shut you down if you seem to have a system for ‘winning too much’ - regardless of whether you are using arbitrage. It used to be the case that bookmakers were especially worried about arbitrage because there existed many ‘self-arbitrage’ opportunities within the same bookmaker. Today though, it is rare to come across such a lack of sophistication. Today however, there are a growing number of ’arbitrage friendly’ bookmakers (Pinnacle the most prominent example) and of course the betting exchanges. <br /><br />If no thought or organisation is applied to account management then I would agree that your sports arbitrage career will be over quickly. It is not realistic to expect to never be limited by a bookmaker, but with careful use of arbitrage friendly bookmakers, exchanges and some other risk mitigation techniques, the method becomes viable for extended periods of time (long enough to bootstrap some decent seed capital as I am suggesting). Also, one must bear in mind that the bookmaker landscape is constantly shifting with new companies entering the market frequently.<br />Stephennoreply@blogger.comtag:blogger.com,1999:blog-35364652.post-12984544460413270232018-01-05T16:56:55.215-05:002018-01-05T16:56:55.215-05:00I also wrote a bot to do Asian Handicap arbitrages...I also wrote a bot to do Asian Handicap arbitrages on a sporta betting exchange a few years ago. When it got filled it only made a few pence. But most of the time it got legged out and lost more than a few pence.Donkey Facehttps://www.blogger.com/profile/14187188554831021544noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-21512721185998335312018-01-05T16:56:09.549-05:002018-01-05T16:56:09.549-05:00Interesting article. However, bookmakers ban peopl...Interesting article. However, bookmakers ban people who they suspect of doing arbitrage. Or they might randomly cancel the winning leg of an arbitrage, tell you it's a palpable error, and say it is in their terms and conditions to cancel bets at their whim.Donkey Facehttps://www.blogger.com/profile/14187188554831021544noreply@blogger.comtag:blogger.com,1999:blog-35364652.post-44127251168520980462018-01-05T16:51:58.933-05:002018-01-05T16:51:58.933-05:00A novel capital booster? Sorry, but is it the year...A novel capital booster? Sorry, but is it the year 1998?<br /><br />Arbitrage techniques like this have been tried not only from quants but also from lots of sport betting enthusiastics over the past two decades. Manually, automated, with any number of legs, different currencies - and so on.<br /><br />But the main problem remains. The bookies will simply shut you down at a certain point and even take your money for the most rediculous reasons. Mostly because the respective traders allegedly behaved "suspicious" or violated some terms of use.<br /><br />Yes, like the successful friend of a friend who made tens of thousands betting on EUR/USD morning breakouts everyone has heard of someone who knows somebody who has done this successfully. But operating in a unregulated market with amounts of money which are not worth pursuing in case the bookie shuts you down is not going to be worth it.Anonymousnoreply@blogger.com