Bankroll Management: Kelly Criterion

Q: How much should I bet on each game?

The Kelly Criterion is a key concept for the successful player. The formula shows you exactly how much you should bet, based on your total bankroll size, probability of winning, and payout of the bet.

For simple bets with two outcomes, one involving losing the entire amount bet, and the other involving winning the bet amount multiplied by the payoff odds, the Kelly bet is:

where:

  • f* is the fraction of the current bankroll to wager, i.e. how much to bet;
  • b is the net odds received on the wager (“b to 1″); that is, you could win $b (on top of getting back your $1 wagered) for a $1 bet
  • p is the probability of winning;
  • q is the probability of losing, which is 1 − p.

To Simplify: Check out this Kelly Criterion Calculator if you don’t want to whip out the pencil and paper: http://www.albionresearch.com/kelly/

It’s important to note that formula above is for a single independent event. That formula needs to be adjusted if you have multiple bets in play at the same time. Since we routinely have MLB games occurring at the same time, here is another simultaneous event Kelly Criterion Calculator we use: http://www.sportsbookreview.com/betting-tools/kelly-calculator/

Key Concept: With the Kelly criterion – because you are always betting a fraction of your bankroll rather than a set figure – it is theoretically impossible to ever go bankrupt. You will also be maximizing your return by increasing your bet size as your total bankroll increases.

Specific BaseWinner Numbers
After extensive back testing, we estimate our numbers as follows:

MLB UNDERS
BaseWinner MLB UNDER Win Percentage: 55.6%
Average Odds: -110 (1 to 1.1)
Kelly Criterion Optimal Bet Size: 6.76%

However, since many times multiple under plays will take place at the same time, we need to use the simultaneous event Kelly calculator.
2 simultaneous games: 6.3%
3 simultaneous games: 5.87%
4 simultaneous games: 5.47%

Official 2015 BaseWinner UNDER Bet Size: 5%

MLB SIDES
MLB SIDES Win Percentage: 47%
Average Odds: +116 (1.16 to 1)
Kelly Criterion Optimal Bet Size: 1.7%

However, since many times multiple under plays will take place at the same time, we need to use the simultaneous event Kelly calculator.
2 simultaneous games: 1.67%
3 simultaneous games: 1.64%
4 simultaneous games: 1.61%

Official 2015 BaseWinner SIDE Bet Size: 1.5%

$10,000 Bankroll Example

We will start with a hypothetical $10,000 bankroll. Using these numbers, the first UNDER plays will be $500, and each side will be $150.

Let’s say we have 3 plays on the first day:
5% ($500) Mets UNDER (W)
5% ($500) A’s UNDER (W)
1.5% ($150) CHC +120 (L)

Total for the day: +850
New Bankroll total: $10,850

Going into the next day, the new bet sizes would be:
UNDER: $542.5
SIDE: $162.75

If you start with a $1,000 bankroll, you would start with this bet sizing:
Unders (5%): $50
Sides (1.5%): $15

Sports Betting Tips from Bryan Leonard: Best Handicapping Books to Read? 

Direct from Las Vegas, WagerTalk TV host Marco D’Angelo (@MarcoInVegas) and Bryan Leonard (@BLeonardSports) go over some of the best sports handicapping books to read.

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