Sports Betting Lessons: Stop Doing Parlays!!!
Parlays are super popular among sports bettors. However, the truth is they are sucker bets. This article will prove it and might save you thousands of dollars.
1. What is a Parlay Bet?
First, let me explain what a parlay bet is, just in case you don’t know it yet. A parlay is a single wager that combines two or more bets into one. In order to win your parlay, all of your bets must be winners.
Those types of bets are popular for one reason: you get a chance to win big money by risking only a small amount. For example, risking $100 on an 8-team parlay may reward you with over $17,000 in potential profit. Sounds exciting, right?
2. How to Calculate Expected Profit
This is a critical section if you wish to understand the rest of this article. And it represents basic math that is essential to your long-term success in the sports betting world.
When you make a bet, your expected profit is obtained as follows:
Expected Profit = (Potential Net Gain * Probability of Winning) – (Potential Loss * Probability of Losing)
Let’s do an example.
Suppose a guy offers you to bet on the outcome of dice roll. In other words, you must try to predict whether the dice will show 1, 2, 3, 4, 5 or 6. You clearly have one chance out of six to make the correct call, while having a 5/6 probability of losing.
The conditions are as follows:
- If you win, the guy will give you $8;
- If you lose, you must pay him $1.
Is this a good bet? Let’s see what your expected profit is on a single dice roll:
Expected Profit = ($8 * 1/6) – ($1 * 5/6) = +$0.50
Since the expected profit is positive, you should accept his proposition!
3. How to Interpret Expected Profit
This is where many people get confused. Pay close attention; you may not find it easy to grasp.
In the above example, you can expect to earn a $0.50 profit on each dice roll. Obviously, if you play the game just once, there is no way you can end up with a $0.50 profit exactly; you will either lose $1 or win $8.
The expected profit should be viewed as a long-term thing.
If you play the game a large number of times, you can expect to earn $0.50, on average, per dice roll.
For example, suppose the guy who made this proposition is willing to play the game 10,000 times with you. Your total profit after those 10,000 roll dices is expected to be fairly close to 10,000 * $0.50 = +$5,000.
Maybe you’ll end up winning $4,800 or $5,100, but it should be close to $5,000.
The larger the sample size, the more likely you are to have a total profit that’s close to its expected value.
4. Return On Investment
You will often hear the term “return on investment” or ROI in the sports betting world. It gives you a quick indication of how good/bad a bet is.
It can be obtained by using the formula below:
ROI = Expected Profit / Amount Wagered
Let’s calculate the ROI in the above example (the dice roll), shall we?
ROI = +$0.50 / $1 = +50%
In this experiment, we were putting $1 at risk since this is how much we were losing in the case of a missed prediction. That’s why I have entered $1 as the “Amount Wagered”.
The ROI indicates what percentage of the amount wagered you can expect to win/lose on the bet under study.
In the dice roll example, we are projected to make a profit equivalent to 50% of our betting amount. That’s huge!
This means that if, instead of putting $1 at risk, we were betting $20 then our expected net gain would become $20 * 50% = $10 per dice roll (instead of just $0.50).
5. What is the ROI of a Typical Single Sports Wager?
When betting against the spread, bettors will usually get -110 odds, or 1.909 in decimal format. This means that you must put $110 at risk in order to get a potential net gain of $100.
A huge number of people believe they can pick winners against the spread at more than a 50% rate. The reality is that they don’t.
Suppose you are an average sports bettor that wins 50% of its wagers against the spread. What is your ROI on a single bet? Let’s use the case where you are putting $11 at risk for a potential net gain of $10.
Expected Profit = ($10 * 50%) – ($11 * 50%) = -$0.50
ROI = -$0.50 / $11
ROI = -4.5%
In other words, you are going to lose, on average, 4.5% of your risk amount on each bet.
Again, that is easier to understand by taking a long-term view. Suppose you make one such wager every single day. How much can you expect to lose at the end of a full year?
Over 365 days, you are therefore going to bet a grand total of $11 * 365 days = $4,015.
Since your ROI is -4.5%, you can expect to finish the year with a loss of -4.5% * $4,015 = -$180.68.
6. What is the ROI of a Parlay Bet?
Keep in mind the -4.5% ROI we just saw on a typical single sports wager. As you are about to find out, things are going to get much uglier on parlay bets.
Throughout this section, we are going to pretend as if you are always betting teams with -110 odds (or 1.909 in decimal). That will make things easier to understand.
Let’s start with a 2-team parlay and let’s assume you are betting $10 (the amount chosen here is irrelevant and won’t change the ROI).
So, what is your potential return on such a bet?
The answer is: $10 * 1.909 * 1.909 = $36.44
Once the parlay bet is settled, your bankroll will either decrease by $10 or increase by $26.44 (i.e. $36.44 - $10).
Your probability of winning a 2-team parlay is 1 chance out of 4 (i.e. 22). Obviously, your probability of losing the wager is 3 out of 4.
Based on those figures,
Expected Profit = ($26.44 * ¼) – ($10 * ¾) = -$0.89
ROI = -$0.89 / $10
ROI = -8.9%
As you can see, your ROI is twice as worse as the one we obtained on single wagers (-4.5%).
This means you are going to lose money twice faster if you do 2-team parlays instead of single wagers.
And again, that’s just the tip of the iceberg. If you combine more than two teams on your parlays, it gets even worse.
The table below shows the ROI for different types of wagers; the calculations were made using the same logic as above.
I sincerely hope those numbers convince you to STOP DOING PARLAYS!!!
Let’s see what happens if you put $20 at risk every day for a full year. How much are you expected to lose at the end of the year, depending on the bet type you are making?
Those are incredibly convincing numbers.
The vital lesson: Don’t do parlays, buddy!
7. A Mistake Over Another Mistake (OUCH!)
Here is common question I see posted online on a weekly basis:
“I did an 8-team parlay and have won the first seven legs. Should I hedge my bet?”
In case you don’t know what hedging means, it involves placing a wager on the opposite side of your original bet.
So, let’s say your 8th bet on your 8-team parlay is on Team A who is about to face Team B. Hedging your parlay bet would involve betting Team B in order to secure a guaranteed profit.
The popular belief is that hedging is a good idea. IT IS NOT! Plain and simple.
I wrote another article that clearly shows why you should NOT hedge your parlay bets.
In summary, doing a parlay bet is a bad idea to start with. Then, many sports bettors make another bad decision by hedging their parlays. In the long run, those two things will ruin you. Plain and simple.
8. The Lone Situation Where a Parlay Bet is a Good Idea
There is only one specific occasion where I do parlays. Whenever I have an account whose bankroll has grown substantially enough to make me worry about being limited or banned by the sportsbook, I do a few parlays. That will make me look like a loser who simply got lucky.
Trust me, as soon as you make parlay bets, the bookie tags you as a “square bettor” or a “casual bettor”. These types of gamblers have a very high chance of losing money in the long run. In the eye of sportsbook managers, such bettors are no threat whatsoever to beat them.
9. A Piece of Advice Saving You Thousands of Dollars
Many people don’t realize how staying away from parlay bets would save them a ton of money.
As you saw earlier, a person doing 3-team parlays instead of single bets will lose money three times faster. Someone doing 8-team parlays will get into a hole seven times faster.
Do you realize how much parlays are sucker bets?
No matter how good or bad you are at picking winners, if you stick to single wagers you will save A LOT of cash.
This piece of advice is worth hundreds/thousands of dollars to many of you in the long run.
(University Statistics Professor & Sports Betting Expert)