Asian Handicaps – what are they, why are they popular, and how have they changed the football betting landscape?

What are they?

Handicaps turn football matches into a coin-flip.

There are two Asian line markets;
Asian Handicap is the Goal Supremacy market, Home team over the Away team.
Over Under is the handicap market for the Total number of Goals scored in the game.

The bookmaker’s job is to stick the handicap in the middle. In other words, if a game was played an infinite number of times, the bookmaker is defining the point at which he thinks there would be an even split of results falling either side.

Note this is subtly different from the bookmaker saying what the Average Supremacy or Total Goals would be. Asian Handicaps are concerned with median, rather than mean.

Handicap markets are offered for Half Time as well as Full Time scores, and for Corners also.

Lots of bookmakers offer Asian Handicap betting now, but the main players in the market are probably SBO, IBC and Pinnacle.

Why are they popular?

Asian handicaps are popular because they simplify the business of betting on a football game.

A handicap removes the Draw from the equation, giving two outcomes to choose from, rather than three.

They offer betting at odds close to Evens. There is is a general cultural preference in Asia (same in USA) for betting at roughly a ‘double or quits’ price.

This is different to the UK, where Horse Racing has historically been the preferred sports betting medium. By its nature it regularly offers a wide range of prices, from odds-on favourites, to the long priced outsiders.

Asian Handicaps are generally offered at lower bookmaker margins than other markets.

It can also be easier to quantify by how much the fav is favoured by the bookmaker. If Man City are -2.5 goal favourites, it is a fairly easy concept to grasp that the bookmaker thinks about half the time they will win by at least 3 goals. This can be more intuitive than processing the information that they are 1.16 on the 1X2 market.

And an Over Under quote of 3.5 at 2.01 can make more intuitive sense (once you become familiar with the lines) than seeing Over 2.5 at 1.41.

The handicap allows the bettor to bet on a hot favourite that they really fancy at around Evens – albeit giving up a hefty handicap. Or if they fancy an outsider to do well, but they aren’t confident enough to back them to actually win the game, they can get the handicap on their side and win the bet so long as the outsider avoids a heavy defeat.

The Difference Between Professional Investors and Amateur Punters

There are three protagonists in the wholesale football market; Bookmakers, Professionals and Retail Punters.

The main difference in philosophy between Professionals and Retail Punters is that the Pros understand that it actually doesn’t matter what you bet on. All that matters is the price that you get.

Retail Punters who bet on football matches generally don’t have any method to determine what a fair price is, and bet instead on an instinct for what they think will happen. They bet on football teams that they like, have a good gut instinct for, or perhaps they have seen some stats that they think are favourable.

Pros don’t ‘fancy’ things to win. They take a view that a price is either ‘value’ (bigger than it should be) or it isn’t. If it is value they back it. If it isn’t they don’t.

A Pro’s betting decision making process is actually much simpler than that of most amateurs, who tend to get sidetracked into speculating on what they think will happen. Pros know that is impossible to predict what is going to happen, and instead focus solely on probability.

The Wholesale Football Betting Market

The emergence of Asian Handicap betting with online bookmakers like SBO, IBC and Pinnacle effectively represents the creation of a Wholesale market for football betting.

Like in a bond or stock market, as a potential investor you have a simple proposition presented to you. If the price is lower than you think it should be for the bond/share/team then you should buy/back it.

If the price is too low, then sell/lay it (a ‘lay’ bet here refers to backing the Away team).

If you think the price is about right then you should do nothing.

Wholesale bookmaking means ‘selling’ (attracting betting turnover) in enormous bulk, at low margins.

This is a totally different business model than those of the traditional bookmakers, like those in the UK whose businesses developed in betting shops. Betting shops have have a ‘high margin, low turnover’ retail model.

Retail and Wholesale bookmaking are very different practices. In retail bookmaking the pricing is often relatively weak, because it doesn’t need to be that strong. Almost all punters lack a grip on the concept of ‘value investing’, so will always lose in the long run unless the bookmaker’s pricing is spectacularly poor.

On the other hand wholesale bookmaking model requires very strong pricing. To Retail Bookmakers, Pro punters are the enemy, and they will all eventually find their betting accounts restricted or closed.

In the wholesale Asian Handicap market though, an unlikely and mutually beneficial relationship has developed between the Professionals and the Bookmakers. They have effectively come together to relieve the Retail Punter masses of their money.

Both the Pros and Bookmakers make money. The relationship between them is complimentary because they are both in pursuit of ‘True Price’.

The pursuit of ‘True Price’

Bookmakers and Pros are seeking the True Price on the outcomes of games. True Price is the holy grail of betting.

True Price means defining how often something would happen, if the event were to be repeated an infinite number of times under exactly the same conditions.

Such perfect laboratory conditions will never exist in the real world, so nobody can ever know what a True Price is for certain. It’s elusive and intangible – it can never be precisely defined. Every effort at defining it is an estimation, a guess. But for Bookmakers and Professionals, making these estimations of True Price is an obsession, and they employ a host of techniques to help them do it.

For Bookmakers, the value of finding True Prices in Asian Handicaps is that after adding a bit of margin, theoretically they can take bets on both sides and make a profit on all the bets they take, equal to the margin that they have added.

For professionals the value of accurately defining their best guess of True Price is that they can simply overlay their price with the bookmakers. If the Bookmaker’s price is bigger then they have found ‘value’ and will bet.

Asian Handicaps are ideal for this kind of Bookmaker odds-setting, and for Pros implementing value investing professional gambling methods.

Wholesale bookmakers employ compiler/traders to set opening Asian lines, and they make their best effort at defining True Price. But by far the biggest influence on their pricing is the intelligence they receive from their Pro punters.

If a Pro bets at one of their prices, that is telling the Bookmaker that the Pro thinks the price is too big. So the Bookmaker makes it smaller. Through many iterations of this Bayesian process the bookmaker refines his prices towards a reliable estimation of True Price.

This process is so efficient that by kick-off time in a high profile football match, the prices offered by the big wholesale Bookmakers will be as close to True Price as you will ever find in the world of sports betting. These closing lines have benefitted from the wisdom of crowds, and the principles of Bayesian statistical thinking. As a punter you need to be incredibly good to beat them. Virtually no Retail Punters would be good enough to win betting at closing line prices.

The big wholesale  Bookmakers have so many retail punters (there are literally tens of millions of football-mad Asians with a strong propensity to bet) that they will always make up the majority of turnover, despite betting in smaller stake sizes than the Pros.

Everybody’s happy

The dominant Pros in Asian Handicap are Betting Syndicates. These are True Price seeking operations, who employ quantitative analysis and modelling, plus various research and information gathering techniques in their quest for True Prices on football games.

Pinnacle release a lot of ‘bet share’ data, where they publish the ratios of bets on different outcomes. Quite often their market will have moved in the opposite direction to the majority of the bets they have taken. This is because they value much higher the opinions of a small number of Pros than all their Retail Punters put together.

The wholesale football Asian Handicap market is a rare case where everybody is happy. The Pros make a handsome profit (at low margin) which they can spend on buying English Championship football clubs.

Bookmakers are happy because they make a small, but consistent margin from their hordes of retail punters, more than offsetting the losses they take from the Pros.

Retail Punters are happy because they get to bet at small margins, and can bet in large stake sizes if they want, without having accounts closed or restricted. 99% of them lose over a long term, but because the margins are low they don’t lose much. And they will enjoy good periods of weeks, months and maybe even years of making a profit before their results revert to the mean.

Any other Wholesale Markets?

Is this wholesale model repeated for other sports? Well, something similar exists on UK horse racing at Betfair. Their betting exchange model means the pricing (and its pursuit of True Price) is entirely driven by market forces. But the net result is similar – the prices on big horse races at ‘the off’ are about as hard to beat as the closing lines on big football games.

The betting markets for Tennis are very strong. And if the United States was to legalise sports betting a similarly strong wholesale market for their major sports (in particular NFL) would emerge.

But at the moment a unique set of conditions apply to football. There is massive interest in the sport, and in betting on it from an enormous population centre in Asia, most of whom can bet legally into Asian Handicap markets via the Internet.

Football has almost all the information relevant to how teams are likely to play, freely available in the public domain. This is unlike horse racing where horses’ connections can regularly have significantly more information than the general public (Pinnacle are excellent bookmakers, but couldn’t make wholesale horse racing markets pay for this reason).

A Football match lasts for a period of time that makes it attractive for in-play betting, and its scoring system lends itself well to the application of handicaps.

The Coin Flip Principle

Professional football bettors are not looking to predict the outcomes of football matches. That is a common misconception. They understand that a handicap market on a football market is essentially a coin-flip. There’s no way of predicting for sure which way the coin is going to land.

The Bookmaker hopes that he’s got the coin perfectly weighted, but it’s possible the coin may be weighted very slightly to favour one team or the other. What the Pro is looking for is an imperfection in the weighting of the coin. He’s looking for that small inefficiency in the pricing of the teams that he can exploit.

If a bet loses, it doesn’t mean that he was wrong. He wasn’t predicting that the coin would land a certain way. He was simply saying that he thought it was slightly more likely to land one way than the other. Even the very best Asian Handicap Pros will lose with at least 40% of the bets that they place. And they will all have long runs of consecutive losers along the way.

The coins that wholesale Bookmakers flip are pretty evenly weighted. You have to be really good to spot the opportunities to exploit the imperfections.

Luck doesn’t come into it. And it’s got nothing to do with making predictions.

A version of this article originally appeared on Odds-Invest.com. I write betting related articles for them in addition to my day job there.

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