Chapter 14 · Worked solutions
Chapter 14 workings: Follow the Smart Money, Mind the Clock
Chapter fourteen worked: fair prices from Pinnacle, edges against the best soft prices, an arbitrage split on £100, and why a drift alone is not a bet.
Pinnacle's 1.98, 3.60, 4.20 is the sharp reference; evens, 11/4 and 18/5 are the best high-street prices.
The exercises
Fair prices and a 4 per cent threshold
Strip Pinnacle's margin with the M/n shortcut and say which soft price clears a 4 per cent edge.
Booksum
102.09 per cent, so each outcome gives up 0.70 points.
Fair prices and edges
Soft decimal over fair decimal, minus one, in the table.
Decision
Only the away price clears 4 per cent; the draw has value but too little.
| Result | Pinnacle | Fair | Best soft | Decimal | Edge |
|---|---|---|---|---|---|
| Home | 1.98 | 2.008 | evens | 2.00 | −0.4% |
| Draw | 3.60 | 3.693 | 11/4 | 3.75 | +1.6% |
| Away | 4.20 | 4.327 | 18/5 | 4.60 | +6.3% |
The answer
Fair 2.008, 3.693, 4.327; only the away 18/5 clears the bar, at +6.3 per cent.
The soft prices as one book
Show the three best soft prices form an arbitrage, split £100, and give one reason to pass.
Booksum
1/2.00 + 1/3.75 + 1/4.60 = 98.41 per cent, under 100.
Stakes
Each stake is £100 × (1 ÷ price) ÷ booksum; each returns the same.
Why pass
Arbing soft firms gets accounts restricted for very little, and the away leg on its own is the better bet.
| Leg | Price | Stake | Return |
|---|---|---|---|
| Home | evens | £50.81 | £101.62 |
| Draw | 11/4 | £27.10 | £101.62 |
| Away | 18/5 | £22.09 | £101.62 |
The answer
Every outcome returns £101.62, a locked £1.62; most value bettors would rather keep the account and take the away price alone.
The draw drifts from 11/4 to 15/4
You had the draw at 29 per cent before team news; it drifts to 15/4. Is the drift a reason to bet?
On the old number
0.29 × 4.75 − 1 = +38p per £1.
The real question
The market moved on information you have not priced. Update the 29 per cent for the team news first; bet only if the new number still beats 15/4.
The answer
No. Re-estimate with the news; the drift is a prompt, not a reason.
Related on this site
These are the workings. The argument for them, and the exercises themselves, are in chapter 14 of the book, Follow the Smart Money, Mind the Clock.
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