Do not index
Do not index
What is a Limit?
No bookmaker will accept any size bet on a market. Bookmakers set market limits which restrict a bettor to an overall stake on the market as a whole or on the market at a certain price. Limits vary between bookmakers and markets but generally speaking the more confident a bookmaker feels that it has priced the line correctly the higher the limit and this dynamic is no different for Pinnacle’s limits.
Interestingly Pinnacle’s limit will progressively increase as the start of the match gets closer. Marco Blume the trading director of Pinnacle uses a premier league game as an example in an interview with StarSports to describe this, “A premier league game might open at £2,000 then go to £5,000 the day before game day and on game day it goes to £20,000 and an hour before it goes to £50,000.” What Marco’s telling us here is that Pinnacle gets progressively more confident in their pricing as the match approaches so they are willing to take an increasing amount of action as the price gets more and more efficient.
He goes on to describe Pinnacle’s closing line (- vig) as ‘the best estimate we have’ of the real probability so it makes sense the very highest limit on a market will usually be right before the match starts when they know the most about the match (lineups, weather, market opinion etc.) and the lowest limit will usually be on the opening line when they know the least about a match. This limit adjustment mechanism is a key part of Pinnacle’s risk management strategy as, according to Marco, it helps them “address uncertainty”.
So the limit is very important to Pinnacle but it’s also very important to us as bettors because we are using Pinnacle’s prices as a guide. We can gain insight into how confident Pinnacle are in the pricing of a market which is super useful information because that confidence level is going to dictate how much caution we need to apply when finding value bets using Pinnacle’s NVP. We are going to borrow a principle from finance (originally engineering) called the ‘margin of safety’ to help us adjust for lower limit, less efficient markets. More on that later.
What is Vig?
Bookmaking is a business and every business needs a profit margin. When it comes to bookmaking the profit margin is generated through the vig. The bookmaker will decide on the fair value and then reduce the odds to make sure they profit from the action.
Like limits vigs vary from market to market and they can also be used as a proxy for confidence. The higher the vig, the less confident Pinnacle are in the pricing, the lower the vig the more confident Pinnacle are in the pricing.
In 2017 Australian Sports Betting conducted an analysis of various bookmaker margins including Pinnacle’s and found Pinnacle to have the lowest average vig at 2.9% amongst the 19 bookmakers they analysed. This was not an extensive analysis and it is significantly outdated but at least it can give you a rough benchmark to calibrate in your mind what a high and low vig looks like on Pinnacle.
Use both the Vig and Limit as Proxies
We should look at both the limit and the vig on a market to assess the confidence of the price not just one or the other.
The more you bet, the more of a feel you will get for what a high/low limit and a high/low vig is for different sports, competitions, times until the match starts etc. Once we have a good idea of how confident the price is then we can apply an appropriate margin of safety to our betting at soft bookmakers.
Margin of Safety
We use Pinnacle’s NVP (No Vig Price) as our ‘line to beat’ in other words we think that Pinnacle’s price with the vig subtracted is a great estimate of what the efficient price is. The issue is, we know that that Pinnacle aren’t always perfect at pricing things especially early on in a market's formation. This is reflected through low limits and high vigs as I have already explained.
If you are like me and don’t want to exclude lower efficiency markets from your betting strategy because it will reduce your opportunity set too much then you need to figure out a way to use Pinnacle’s NVP in these markets to find +EV bets. The way you do this is very simple. You apply a margin of safety that is inversely proportional to the market efficiency. In other words, as the efficiency goes down the premium to Pinnacle’s NVP that you require to place a bet increases.
Summary
- The market limit is the amount of money that Pinnacle will accept from a bettor on a particular market at a particular price.
- The vig is the margin that Pinnacle apply to a market to secure a profit margin. Vig reduces payouts.
- If you analyse the limit and the vig in conjunction then you can get a good idea of how confident Pinnacle are in their price. The higher the limit the more confident, the higher the vig the less confident.
- Applying a margin of safety based on your judgement on their confidence will allow you to bet into all markets using dropping odds alerts and Pinnacle’s NVP.
Written by
