Chapter 35: Key Takeaways -- Futures and Season-Long Markets

1. Monte Carlo Simulation Is the Foundation of Win Total Modeling

A simple point estimate ("this team will win 50 games") is insufficient for evaluating win total futures. Monte Carlo simulation produces a full probability distribution by simulating thousands of complete seasons. This distribution directly answers the betting question: what is the probability the team finishes with more or fewer wins than the posted line? The simulation naturally handles schedule effects, home/away splits, back-to-back fatigue, and tiebreakers.

2. Rating Uncertainty Must Be Incorporated

Using a single point estimate for each team's rating underestimates the variance of win total distributions. Sampling ratings from their uncertainty distribution each simulation captures the possibility that teams are better or worse than your best guess. This produces wider, more realistic win distributions and prevents overconfident bets. Typical rating uncertainty adds 0.5 to 1.5 wins of additional standard deviation.

3. Pythagorean Regression Is the Most Powerful Preseason Adjustment

Teams that outperform their Pythagorean expectation (winning more than their point differential suggests) are largely benefiting from randomness in close games. This "luck" component regresses heavily toward zero. Projecting a team's next-season wins without regressing their Pythagorean overperformance leads to systematically biased forecasts. Regressing 80-90% of the luck component is the single most impactful adjustment in preseason projections.

4. Futures Markets Have Wide Margins but Are Less Efficient

Championship futures markets typically carry 15-30% total overround, far more than the 4-6% on game-by-game markets. However, the fewer sophisticated participants and the complexity of long-horizon modeling create larger pockets of inefficiency. The wide margin means edge must be substantial (3%+ above the vig) to be worthwhile, but such edges are more frequently available than on sharp game markets.

5. De-Vigging Method Matters for Multi-Outcome Markets

Proportional normalization, the simplest de-vigging approach, applies the same percentage reduction to all selections. This over-adjusts long-shot probabilities. The power method and the Shin method produce more realistic fair probabilities by distributing the vig unevenly, with favorites absorbing more and long shots less. For markets with many selections (championship futures), the choice of de-vigging method materially affects the estimated fair probability.

6. The Long-Shot Bias Creates Systematic Overpricing at the Tail

Teams with championship odds of +5000 or longer are systematically overpriced. Recreational bettors are attracted to the large potential payoffs, creating demand that allows books to embed higher margins. For quantitative bettors, this means long-shot championship futures are rarely positive-EV unless the model strongly disagrees with the market's assessment.

7. Hedging Is About Managing the Risk-Return Tradeoff, Not Eliminating Risk

Risk-free hedging guarantees a profit but sacrifices expected value. Kelly-optimal hedging balances profit locking with expected value preservation. The best strategy depends on the bettor's bankroll size, risk tolerance, and the current probability of the original bet winning. For most bettors, a partial hedge (50-75% of the risk-free amount) provides a practical balance.

8. Multi-Stage Hedging Through Playoff Rounds Is Superior to One-Shot Hedging

Waiting until the final round to hedge forces a large bet at potentially unfavorable odds. Hedging incrementally at each playoff round locks in profit stage by stage while maintaining upside if no hedge is needed. Backward induction through the playoff bracket determines the optimal hedge at each decision point.

9. Capital Lockup Creates Opportunity Cost That Affects Bet Sizing

Unlike game-by-game bets that resolve in hours, futures lock up capital for months. This opportunity cost must be factored into the Kelly criterion calculation. The practical result is that futures bets should be sized at 1/4 Kelly or less, accounting for both the edge uncertainty and the time value of locked-up capital.

10. Portfolio-Level Risk Management Is Essential

Futures bettors often hold multiple positions simultaneously. Positions on teams in the same conference are negatively correlated for championship futures (if one wins, others cannot). Win total bets on teams that play each other have complex correlation structures. A portfolio-aware approach with exposure limits (maximum total capital at risk, maximum single-team exposure, maximum per-conference exposure) prevents concentrated losses and ensures the portfolio survives worst-case scenarios.