# So, The Sports Betting Algorithm Did Something.

### By factoring in machine learning techniques, we were able to expand into an entirely new market and found something potentially revolutionary.

Our sports betting algorithm is off to a great start. From the start of the MLB season up to today, the performance stands at a 70% win rate for a 20% ROI.

This demonstrates the viability of the methodology used in our algorithm. But it also validates our prior idea that in the long-run, it will offer market-like returns, so ~ an annualized extra 7-10%. This is great considering it’s uncorrelated returns just from using math, but it isn’t **exciting**.

While the approach is viable long-term, the returns are just too slow. Returning 20% is great, but the goal isn’t to gain modest capital appreciation; it’s to make **multiples**.

So to do this, we called in some friends in the machine learning department.

If you’re new, I highly recommend starting here:

#### Regression is More Powerful Than You Think

So, we have a way of just determining which game will most likely be decided by statistical factors. We can consistently hit those estimates, but we only make significant profits in the long-run (>100 games). This means that we need to pair this bet up with another bet that we can hit at a similar probability. Combining these two bets together will allow us to meet the desired and optimal profit growth rate.

**Prop Bets**

Prop bets are the financial derivatives of the sports betting world. Instead of speculating on the price at a point of expiration, you can wager on things like the score at time t, or how many x a player gets for the entirety of the game.

There is even less academic research and supporting material on trading these derivatives, so we were on our own. To start, I wanted to narrow down the bets that could be consistently predicted through statistical features and not chance. For example, while a player’s home run data can signify skill, it is a relatively infrequent event that is prone to high-variance and chance, so we skip it.