Advanced Moneyline Strategy: Bayesian Edge & Portfolio Optimization

Level up your moneyline approach with Bayesian updating, correlated constructs and portfolio-level risk controls.

1. Bayesian Probability Updating

• Prior Distribution: initialize P(win) from historical power ratings.
• Bayes' Theorem: update your edge as

  P(θ|data) ∝ P(data|θ)P(θ)
  

• Posterior P: recalc edge before placing or hedging.

2. Correlated Parlays & Synthetic Trees

• Correlation Adjustment: measure covariance between events (e.g. same-game parlays).
• Arbitrage Trees: structure multi-leg constructs to lock profit by offsetting correlated positions.
• Exposure Caps: limit stake per correlation bucket to avoid catastrophic single-game losses.

3. Volatility & Variance Tracking

• Sharpe Optimization: maximize

  (E[R] - Rf) / σ
  

  where σ is standard deviation of returns.
• Dynamic Sizing: shrink stakes when realized volatility exceeds model assumptions.
• Drawdown Alerts: trigger stake resets if rolling drawdown > threshold.

4. Dynamic Hedging & Cash-Out Algorithms

• Hedge Thresholds: define EV and delta triggers for partial cash-out to lock P&L.
• Execution Rules: auto-place hedge bets when line shifts by ≥X points or odds by ≥Y%.
• Net Exposure Management: keep overall delta near zero across all books.

5. Portfolio-Level Allocation

• Multi-Sport Diversification: allocate bankroll across independent leagues.
• Kelly Portfolio: extend single-market Kelly to vector form

  f* = Σ^(-1)(μ-r)
  

• Periodic Rebalancing: adjust allocations to maintain risk budgets and equity targets.