Betting on the Super Bowl—Wall Street style
Wall Street guys will bet on anything for fun. It's in our DNA. When I was in grade school, my friend and I used to bet our allowance money on the football arcade came Tecmo Bowl. I played street craps at recess. I have bet on everything from if a junior trader could eat 30 different items out of a vending machine in 30 minutes to sports such as Olympic curling.
Wall Street guys are very competitive and we don't like to lose at anything. We use every trading tactic we know to gain an advantage from mapping point spreads and hedging our bets when necessary.
I have Wall Street friends who spend hours upon hours in their free time developing models to predict wagers on games where they think they have an "edge." Sports like Ivy League college basketball games, NBA over/unders and baseball.
I have a friend who exclusively bets on Ivy League basketball. He played in the league in college and believes that gives him an edge. He looks at things like exam schedules and weather affecting travel time between games (since Ivy League games are played Friday and Saturday nights). He is already salivating at the offer of $1 BILLION dollars that Warren Buffett and Dan Gilbert of Quicken Loans have promised to anyone who can enter a perfect March Madness bracket. The true odds of properly predicting the winner of all 63 games are 1 in 128 billion after adjusting for the seeds of the teams, according to a DePaul University statistics professor.
So, getting a perfect bracket is as likely as winning the lottery but kudos to Buffett and Gilbert for throwing the gauntlet. I certainly am going to try and be one of the 10 million entries. Imagine the outrage if a Wall Street guy won the billion dollars? I would love to be at that "Wolf of Wall Street" celebration. Maybe hire Dennis Kozlowski (remember the former Tyco CEO?) as the party planner since he is out of jail and probably looking for a job. The only way to make the Wall Street winner more unlikeable, would be to invite Justin Bieber to perform and the winner announce to the world, "I am a billionaire and a Belieber." Screaming this over and over into the camera while both wearing T-shirts that say, "I am richer than you" and matching hats that Pharrell wore to the Grammys.
At my last Wall Street job, I worked with a gentleman named Joe Peta. Joe was a statistics major and left his Wall Street job to exclusively bet on baseball. He used his Wall Street background to create a model for betting on baseball and he did it without steroids or any performance-enhancing drugs. He used his statistics background to become the Billy Beane of baseball betting. His "Moneyball" analysis generated a 41-percent return in 2011.
Seriously, we will bet on anything — and that's not a bad thing. Anyone who says they have never gambled on anything in their life is a liar. Gambling is what our country was founded on. Christopher Columbus took a risk and discovered the New World. You gamble in every day life. When you ask out a girl, take a new job, eat street meat — it's all taking a risk.
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I strongly believe that someone who has an interest in gambling (especially while they are in college) can be a gauge of whether someone has the chops to be a good trader. I am not saying trading on Wall Street is gambling but the thought process and analysis is very similar.
During the Winter Olympics, CNBC shows curling. Before the very first curling match of the games, I made all of my junior traders make me a spread on the outcome of the game. I gave them three minutes to research whatever they wanted to. I know nothing about curling. I still don't. My first thought was why are those guys sweeping the ice?
The traders all had to set lines without seeing each others work. The first match, there was a great variance in the spreads of the curling matches. The second, much less. By the third or fourth game, everyone pretty much had the same spread. They seemed to learn the consensus spread quickly which showed me they were all thinking the right way.
It is estimated that $8 billion dollars was wagered on last year's Super Bowl. However, that is just on the point spreads. I have a friend that bets $1,000 on the coin toss every year and every year after the coin toss he tells the same joke, "Ok guys. I won. See you later."
There is also a ton of money wagered on box pools. In my heyday, I used to be part of one that was $5,000 a box. The payout was $50k for the first-quarter winner, $100K for the halftime winner, $100K for the third-quarter winner and $250K for the final score.
To be clear, it doesn't have to be an official sporting event to catch our interest. We will bet on anything.
One time, I set up a game where I had one of my junior traders go against a managing director in a Chicken McNugget-eating contest. This game had a lot of interest from the other traders so I knew had to set a good line because I knew there would be a lot wagered on this. The contestants had 30 minutes to eat as many McNuggets as they could. I set the line at junior trader favored by 29.5 McNuggets, meaning he had to eat 30 more to win. I set an over/under of 94.5 McNuggets as the total. The final tally was junior trader 62, managing director 33. I ended up losing a little bit of money because I didn't have a way to fully hedge my exposure. I felt great, though, because the spread I set was within half a McNugget on both lines. I clearly felt better than the guy who ate 62 McNuggets in 30 minutes. I remember him saying he didn't eat for the next 24 hours!
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As for this year's Super Bowl, there are a few prop bets I like. First is total punts in the game by both teams. I love under 9.5. Last week, there were 10 total punts in both games combined. In ten playoff games so far this year, only two have had over 9.5 punts and the average has been 6.7 per game.
Another one I like is total field goals made in game. I like over 3.5. Both teams have excellent kickers. Matt Prater and Steven Hauschka have combined to make 69 of 73 field goals this year. Both are used to kicking outdoors. Denver had some trouble in the red zone last week and Seattle has had trouble all year. They combined for 7 field goals last week. In a game expected to be close, I like over 3.5.
As for the game, this is how I see it: The line is currently Denver favored by 2 and an over/under of 47. 69 percent of the public's bets have been on Denver so far which is a huge red flag. Seattle leads the league in takeaways. Really bad weather favors Seattle but I don't think weather is a big factor since both play their home games in cold weather outdoor stadiums. All this favors Seattle.
However in Denver's favor, this is essentially a home game for Denver. I estimate that 75-80 percent of the fans in the stadium will be rooting for Denver. That could affect a few calls. The new NFL rules don't allow you to touch receivers anymore and that strongly favors Denver's passing game. Eli won his last Super Bowl in Peyton's home stadium and I think Peyton returns the favor. My prediction: Denver 27, Seattle 20.
Finally, there are a few prop bets I am still I am looking for action on. First, I want the over on how many tweets from liberals blaming the traffic to the Meadowlands on Chris Christie's closing lanes on the George Washington Bridge. I think the Huffington Post has already sent a few. Second, I want to bet on Flea of the Red Hot Chili Peppers having a wardrobe malfunction during the halftime show. Finally, should Seattle win, I want the under on the number of hours it takes for Kim Jong Un to invite Richard Sherman to North Korea for a visit.
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— By Raj Mahal
Raj Mahal (that's his stage name) is a former Bank of America trader-turned-comedian. Click here to watch him perform stand-up on CNBC's "Power Lunch." Follow him on Twitter @RajMahalTweets.