A Sports Book Grows on Wall Street

No doubt we have all either heard or spoken about the similarities of the Las Vegas and Wall Street. Both are places gamblers have been known to dwell. Both can make or break careers, marriages, dreams, hopes, ambitions and lives. For decades on end, both have had their own slice of the world's speculative pie. Vegas has had the sports book and Wall Street has had the prop book. Though computers and information have diversified away some of these monies to different venues, "Wally and Veggie" are still the two dominant players in the game.

If we can have an index which pits apples against oranges . Why can't we fuse The Street and The Strip into one vertically integrated wet dream?

I have probably made this causation by correlation argument many times before amid sluggish bar crawl, but it wasn't until a more detail-infested monkey brought up some concrete comparisons that I began to see clearly.

Therefore, if you guys like this post, go and toss some silver bananas in the direction of of our very own, happypantsmcgee. He's the data miner on this expedition for fool's gold...

SIMILARITIES BETWEEN THE SPORTS BOOK AND MARKETS
(note: we will be using the NFL as our comparitive guinea pig)

"Efficent Market Hypothesis": Up to the nanosecond information about key player injuries, how many pain pills they popped last night and how many choke holds it took them to calm down their trophy wives this week...but...only the coaches/managers/GMs really ride the inside track. Alas, the analyst head-bangs his monitor while the BSD/MD/Fund Manager simply calls his fellow market movers for the uncut raw.

"Commissions on Trades": The juice, the vig or the viggors you pay to your favorite shylock. Bet $100 on the G-Men, see Eli have a "Oops! forgot I'm not Peyton" episode and you lose $110. "Bid/Ask Bounce" anyone? Spreads are tight everywhere today.

"Volatility/White Noise": That unpredictable factor. Your star DE goes to smoke a joint after the first series in the tunnel, gets the munchies, forgets to go back into the huddle, winds up in Row 47, Isle 15 rooting against you. On our end, the FDA decides that your company's cure for cancer may harm the civil rights of tarantulas. Stock goes to 0, you go to B-school and career-change swan dive into the valley of HR management.

"Penny Stocks/Pink Sheets": Only for the sophisticated degenerate gambler, who absolutely, positively does not have a problem and has it all under control. Perhaps you slide your wager over to the "Next Eurozone Country to Require Bailout" pool...maybe "Roach Wrestling" or in Wall Street terms use the ever popular "something that cost $0.01 will double faster in value than Google ever could" theory.

"Earnings Season": Only for the inside man. Team have already made the playoffs, sitting starters allows for real deal market manipulation the type of arbitrage we dream about. Enron earnings call anyone?

Nice, ain't it. Just in case you think it is not a reality... look here .

What's their software called?

That's right...Midas.

Hard.

Core.

 
Kools:
This is a good comparison except the only long term winners (except major outliers) in sports betting are the casinos/bookies taking the bets.

That's just a generality. We don't have enough information on winners and loser because it's illegal and people don't report their winnings. I wouldn't be surprised if a few people made there living off of sport betting.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."
 
Gekko21:
Kools:
This is a good comparison except the only long term winners (except major outliers) in sports betting are the casinos/bookies taking the bets.

That's just a generality. We don't have enough information on winners and loser because it's illegal and people don't report their winnings. I wouldn't be surprised if a few people made there living off of sport betting.

I personally know of 2 guys that paid their way through school (not tuition but everything else) through almost exclusively betting on sports. These guys were fucking nuts. Think of the show the League times about 10,000.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

I've doubled up my initial Sportsbook account, even though we're talking very small amounts here. I think it'd be sweet if someone could figure out how to set up a sports-betting hedge fund (legally).

Love the post, but there is one difference between the 2- In sports your winnings/losses are defined by the odds given and are pretty much limited to those odds. In stocks, you can enter a position and win or lose any quantity/percentage of your investment.

Ex: If you bet 10 on the Lions to win this week, you either lose 10 or gain, say, 15. No middle grounds. If you buy a stock for 10, you can lose anywhere from 0-10, and gain anything from 0-infinity. Much more uncertainty.

 
Best Response
ibintx:
I've doubled up my initial Sportsbook account, even though we're talking very small amounts here. I think it'd be sweet if someone could figure out how to set up a sports-betting hedge fund (legally).

Love the post, but there is one difference between the 2- In sports your winnings/losses are defined by the odds given and are pretty much limited to those odds. In stocks, you can enter a position and win or lose any quantity/percentage of your investment.

Ex: If you bet 10 on the Lions to win this week, you either lose 10 or gain, say, 15. No middle grounds. If you buy a stock for 10, you can lose anywhere from 0-10, and gain anything from 0-infinity. Much more uncertainty.

I would agree with you if it weren't for being able to set up parlay bets. You can add those odds on the Lions to the odds of x number other events and get exponentially higher returns, though at increased risk. Even though the possible returns wouldn't be infinite, I would argue that, in reality, neither are the returns on stocks within the same time period as a bet placed on a sporting event.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

Reading this reminded me of the Hollywood Stock Exchange. It's the same premise as the original post only applied to celebrities, movies, and television. They (the HSX operators) are pretty serious about their pop culture trading too as they run a mix of different "financial instruments" attached to "underlying assets." A pretty fun idea if you enjoy cinema and US Weekly.

In 1976, James Hunt broke the sound barrier through Eau Rouge only to retire before the event finished... following the race he had sex with three Belgian nurses at the clubhouse near La Source.
 

Another idea in the same vein for the IB world to cash into would be the incorporation and public IPO of professional athletes.

As young prospect you might consider an up-front payment of your projected earnings by giving up say 49% ownership of your future earnings. Athlete/agent could still decide the direction of the athlete's career because of the majority ownership - so trade decisions/endorsements plans as well as training schedules,lifestyle choices etc would remain outside of investors clutches.

Likewise, established athletes can lock in future earning today by doing something similar. With PR disasters and sudden injuries a serious threat to future earnings, it makes sense for a star athlete to cash in now by selling off some of his own "stock' to hedge his exposure to himself---- its the standard adage of letting someone else make some money potentially, but also take on the risk.

The only thing is ensuring that motivation stays high. Athletes would likely have to maintain a majority control to stay motivated, which is key as the investors money isn't being spent on capital, but is merely just a payment to participate in the profitability of the athlete's earning potential.

I feel like this would be a sound idea, especially if athletes who were given the right of first buy-back.... that would give a boost to motivation.

 
sleeplessinlondon:
As young prospect you might consider an up-front payment of your projected earnings by giving up say 49% ownership of your future earnings. Athlete/agent could still decide the direction of the athlete's career because of the majority ownership - so trade decisions/endorsements plans as well as training schedules,lifestyle choices etc would remain outside of investors clutches. .

College players get suspended for multiple games just for selling their jersey, let alone selling their souls, so this would be limited to players already at the pro level in which case they wouldn't be nearly as hard up for the money so I doubt this would be viable in a lot of cases.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 
sleeplessinlondon:
Another idea in the same vein for the IB world to cash into would be the incorporation and public IPO of professional athletes.

As young prospect you might consider an up-front payment of your projected earnings by giving up say 49% ownership of your future earnings. Athlete/agent could still decide the direction of the athlete's career because of the majority ownership - so trade decisions/endorsements plans as well as training schedules,lifestyle choices etc would remain outside of investors clutches.

Likewise, established athletes can lock in future earning today by doing something similar. With PR disasters and sudden injuries a serious threat to future earnings, it makes sense for a star athlete to cash in now by selling off some of his own "stock' to hedge his exposure to himself---- its the standard adage of letting someone else make some money potentially, but also take on the risk.

The only thing is ensuring that motivation stays high. Athletes would likely have to maintain a majority control to stay motivated, which is key as the investors money isn't being spent on capital, but is merely just a payment to participate in the profitability of the athlete's earning potential.

I feel like this would be a sound idea, especially if athletes who were given the right of first buy-back.... that would give a boost to motivation.

This sounds like Viaticals in reverse.

 

Happy pants-Youre right, but I was getting at the variablity of returns more than the infinite-ness of it. With sports, it's all or nothing. You lose it all or win according to your odds. Yes, you can get riskier, but a parlay is still lose 10 or win, say 100. No in between. With stocks, you can buy a risky stock, and it may lose all 10, or gain that 100, but it can also break even, gain 10, 20, 200, etc. I'm not trying to argue anything, just pointing out a difference.

Midas-can you explain what you mean?

 
ibintx:
Happy pants-Youre right, but I was getting at the variablity of returns more than the infinite-ness of it. With sports, it's all or nothing. You lose it all or win according to your odds. Yes, you can get riskier, but a parlay is still lose 10 or win, say 100. No in between. With stocks, you can buy a risky stock, and it may lose all 10, or gain that 100, but it can also break even, gain 10, 20, 200, etc. I'm not trying to argue anything, just pointing out a difference.

Midas-can you explain what you mean?

The binary nature of sports-betting is simply a problem with the market mechanics. With many sites, odds are dynamic and change by the minute. There is nothing to stop a more sophisticated bookie to allowed a secondary market for bets as the odds change. Much like and option can gain value even if it isnt in the money yet, sports betters who lock in good odds early could simply dump the position onto a secondary market once they odds have moved in the other direction. Its really just a matter of liquidity and market efficiency witch provides the additional risk in sports better vs say the option market(leverage aside) ...not anything particular about the fundamental way bets are priced or how the odds might change.

 

Back in 1993, me and seven of my broker buddies decided to break Vegas in sports betting. We were all huge football hounds, so we threw $100 each into a pot ($800 total) and we agreed that we would get together each week and pick the one game of the weekend (college or pro) that seemed the most out of whack spread-wise and we'd bet it.

The plan was to take each week's winnings and roll them over to the following week. By the end of the season, if we went 16-0, the pot would be over $5 million and each guy's share would be around $650,000. We placed the first bet with a bookie and won. The following week we placed the second bet with the same bookie and won, and then we decided to take the action to Calienté, a sports book in Mexico. We won for the next three weeks, and the number was getting too large for even Calienté. We decided if we won week 6, we'd take our show on the road to Vegas for the rest of the season.

There was really only one game in week 6 that made any sense to me. A couple of the other guys mentioned a couple other games, but only one game that week really stood out and looked like a sure thing. It was Notre Dame vs. Pitt, and Notre Dame was giving up 42 fucking points going into the game. Obviously we bet on Pitt, who was up by 6 fucking touchdowns before the opening kick-off.

We all gathered in our favorite sports bar to watch the game, and most of us were pretty nervous because there was a lot of money on the line and we were really looking forward to tearing it up in Vegas the next weekend. Pitt came out and looked way better than they should have. At the end of the first half, the score was still 0-0 and we were all ready to blow each other for how smart we were.

You probably know how this story ends, but I'm going to put you through it anyway. Notre Dame came out of the locker room looking like the '76 Steelers, and Pitt came out like a last-place Pop Warner team. Long story short, Notre Dame throws up 44 points in the 3rd and 4th quarters to win the game 44-0.

Fuck.

If you had reminded any of us at that point that we were really only out a hundred bucks each, there would have been a homicide. It's hard to describe how nauseous I felt watching the second half of that game and seeing our money disappear with every touchdown the Irish scored unimpeded. Because of that game, I've never had the courage to attempt a 16-game roll since then.

Once you get past week 3 or 4, a loss just becomes gut-wrenching, and I never want to put myself through it again.

 
Edmundo Braverman:
The plan was to take each week's winnings and roll them over to the following week. By the end of the season, if we went 16-0, the pot would be over $5 million and each guy's share would be around $650,000.

How did you arrive at $5 million? I calculated a 16 bet run and came up with $23 million.

My assumptions: - 10% Vig - All winnings bet the following week - Previous Week's Winnings = This week's bet - formula: Previous Week's Winnings + (.9 x Previous Week's Winnings)

start 800 after week 1 1,520 2 2,888 3 5,487 4 10,426 5 19,809 6 37,637 7 71,510 8 135,869 9 258,150 10 490,485 11 931,922 12 1,770,652 13 3,364,239 14 6,392,053 15 12,144,902 16 23,075,313

My buddies and I do something like this every year, but only for 4-5 game sets and we sometimes take a week off if nothing jumps out at us. I think next season we'll run a separate bet through the entire season too and see how that goes.

 

Quasi quisquam aut error voluptatem ut. Rerum similique nihil qui voluptate. Nostrum repudiandae consequuntur dolore necessitatibus. Atque fugiat ex sit dicta dolorem eos. Autem architecto optio et dolorem sit consequuntur.

Assumenda quo doloribus fuga. Velit eum culpa qui molestiae vero ea dolor. Et quia nulla est nobis deleniti. Quia facilis repellendus officiis est et.

Eum impedit placeat facilis et sapiente. Unde doloribus iure id nihil dolore. Qui sapiente et quam dolorem sed ea. Tenetur placeat delectus vitae quo vel alias qui.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
dosk17's picture
dosk17
98.9
6
CompBanker's picture
CompBanker
98.9
7
kanon's picture
kanon
98.9
8
GameTheory's picture
GameTheory
98.9
9
DrApeman's picture
DrApeman
98.9
10
Jamoldo's picture
Jamoldo
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”