05-24-2006, 11:47 PM
Edit: this could also go under games, but the original topic was started here, and most of the stuff before the guide are relevant to this area. If anyone knows any good webhosts that are ad free please let me know. If anyone wants to help me do html please let me know.
EDIT2: This converts poorly from word, and the pictures dont convert at all. Sorry
Well an update. As promised, I had written alot of stuff when I was offline for 4 weeks. I ideally want to get my own server, to host all of this, and organize it in a non-chaotic and EASY to read format, because right now its all pretty brutal to read I am painfully aware. Here is the draft of a decent chunk of my food club guide.
Its not the finished article, adn the best stuff comes later, but tis a start. And after getting no less than 10 forum messages on this in the last month, I figured Id post some of it now, rather than wait potentially a month to publish all of it. For those that dont know, I am a gold trophy holder in food club, along with having sever silver and bronze spots, and when playing actively am consistently in the top 50 in spite of not trying for big scores. Lifetime I am up over 3.3 million in the food club, and that in and of itself ought to be enough to establish my legitimacy at this game.
Feedback is welcomed of course, as I want to make this an enjoyable and pleasant read.
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Get Rich or Die Trying
sirhatter's guide to gambling in the food club
Chapter 1: Introduction
Chapter 2: Finding the Arbitrage
Chapter 3: Capitalizing on the Arbitrage
Chapter 4: Multi Race Bet Strategies and Parlays
Chapter 5: Trophy Chasing, and Betting on Sub-Optimal Races
Chapter 6: Conclusions, and Takeaways for the "real world"
Introduction
So this is the first game guide I have written that is aimed for a mass audience in a long time, and that is for good reason. My writing skills when I first started writing guides were not as polished as they could have been, and most importantly, I didn't really have anything to add.
As most people who are familiar with my work know, my area of specialty is in the battledome, where I have earned a degree of respect for my tactical prowess from a wide variety of established neopians, especially in two player battles.
What I did to make neopoints was hardly unique, and I hardly had a monopoly on the knowledge that made me rich. I restocked, I took advantage of the neo stock market, I took one time opportunities as they came, and I invested in items, and for obvious reasons didn't publicise my investments. So I stuck to writing about the battledome, and let others post their secrets on how to get rich.
As time progressed though, I left a very fast connection and very fast computers for my home computer, which at the time was a pentium 2 with 300 mhz and 96mb of RAM. Needless to say that wasn?t very fast. The restocking method of making neopoints was gone. The one time opportunities, such as towering an item when they initially release it at a very low price, are hard to come by when you have a real job, and cannot get online often. More importantly my interest / addiction / obsession / (insert word of your choosing here) waned, as I became more content with my status. Of course, while I wasn't on as much, I still had a big spending habit on training my pet, and weapons don't typically get cheaper.
As a result, while playing most of the flash games, and restocking were out, I was forced to find a way to replace some of that income, beyond the mall I had joined. The result was my dominance of food club. I have shared this secret in some form or another with about maybe a dozen people. Some have had luck with it, some have not. In either case, this is the one game outside of the battledome where I feel strongly I DO have a unique insight into the workings of the game, and am legitimately better at the game than 99% of the people who play. I have long held fears of publishing this out of fear that it could be used by people for the wrong reasons, namely to cheat through use of multiple accounts, but realistically since this is a game that rewards longetivity, making multiple accounts wont help much, and besides, there are better ways to cheat with multiple accounts (the stock market for example).
As for my credentials, I have a gold trophy in the food club, but anyone lucky, and/or willing to play for 7 days straight at the end of the month then log on at 01:00 NST can get a gold trophy.
The results I have earned though, cannot be attributed to just luck. It has been over a year of fine tuning a system that worked nearly from its invention, and has only gotten stronger from there.
Bet History
Bets Placed Bet Total Win Total Difference
2206 5613000 NP 8960000 NP 3347000
All told, for every 10000 neopoints i have wagered. I have earned back my original stake plus an extra 5960 neopoints in return. For the last 4 months, that number has stayed steadily around 6000, and it would take me losing 900 CONSECUTIVE maximum bets in order for me to break even again. Simply put, I am a winner at this game. There may be bigger winners than me, but not too many, and almost none with my specific system, that I am now laying out for you the reader.
The best part of this game, is that it's income will grow with you, while the time commitment never will. The longer you play, the more you can earn from it. I seldom promise much to my readers, but unless Neopets totally revamps the game, this will be a big winner for you, just as it has been for me. I may someday walk away from this game. Someday there may be no more neopia. Either way, this guide will also give you the reader lessons beyond this game and hopefully my impact will live on. This is a long read, but hopefully its worth your time, and serves it?s purpose.
Has that got your appetite up to make some neopoints?
Then read on. The fun is about to begin.
Finding the Arbitrage
What's Arbitrage? We shall get there. First, take a little trip to Krawk Island. Here is where the greatest gambling game in all of Neopia is played, with a host of other gambling games. Food Club is towards the right. Once you get there, there will be an intimidating array of percentages and advice. You go to place a bet, and you see confusing lists all posting different odds, that apparently can fluctuate throughout the day here and there! It's like a stock market for eating and pirates, but everything seems mad! What to do?
If you click on the rules, it gives you the following suggestions for betting strategies:
Betting Strategies: When you are placing bets, you need to remember that there are many different things to take into consideration. If you are simply using their win/loss record, you are bound to lose a lot of NeoPoints. First thing to do is to take a look at each pirate in the match. You should do some comparisons between their strength (stamina) and their weights. Also, more importantly, look at the foods that could possibly be served for the match. If you place a bet on a strong pirate, but he happens to be allergic to many of the foods that could be served for his match, you are almost guaranteed to lose! To research the possible food courses for a match, simply click on the Next Round link and choose which match you want to look up.
What I can promise you is this: If you follow the site's advice, you will spend a ton of time on the game, and lose money, or maybe break even. That won't do you any good. How do I know this? Once upon a time, I tried following all of these strategies, and I was a losing bettor. I even made a graph here:
Pretty cool looking right? Well it didn?t make me any money, and wasted my time back in 2003. Today it serves as a reminder to not follow the advice listed in the rules.
Follow my advice.
There are two fundamental ways you can beat food club. One is by finding an inequality in the assessed market. What does this mean? Well, if Koshanda the Konqueror has listed odds of 6 to 1, but you think Koshanda's odds are really closer to 4-1, you could bet on that pirate and show profit over the long run. For the best way to do this, which involves some of TNT's advice, I highly recommend the userlookup of garmfay. One of his petpages will have the answers for you. While I have never talked to garmfay, he is one of the very few people I do not know in this game that I manage to hold in high regard. His work is simply superb, and you can tell he is generous with his time and selfless. With that said, his way is very time consuming, though I'd think it has to be effective.
You aren't here though to do things his way. You are here to do them mine. And to a degree mine will have overlap with his you will find out. Instead of finding inequalities, you just have to find an arbitrage, and bet on it. What's an arbitrage you ask again? It's still a great question. We're getting closer to the answer.
Let's take a sample race.
Koshanda the Konqueror: 2 to 1
Zepoby the Zany: 4:1
Sirhatter the Skinny: 5:1
Fusionstorm the Full: 10:1
Garmfay's method would involve trying to figure out which of these pirates were undervalued, and a good bet for their money. My method? I'd take one look at this race, I'd fail to see an arbitrage, and I'd move on. I'd take a look at the next race, and let's just say I find an arbitrage there. Lets show the pirates:
Guatemole the Great: 2 to 1
Grephun the Grinner: 6 to 1
Mollymooster the Mighty: 10 to 1
Silvak the Strong: 12 to 1
Now there's an arbitrage!
What?s the difference between the two races? Great question. I'll list a third case with THE IDEAL ARBITRAGE, and maybe you can figure it out on your own.
Kemito Kid: 2 to 1
Lyteric the Lofty: 13 to 1
Gongachoek the Choker: 13 to 1
Togsterthe2nd: 13 to 1
Well? Do you see it now? This last race, one pirate has great odds, and the others have terrible odds. However... Great odds don't pay as well, so what?s the big deal?
I'll go over that with you right now. Neopets, as part of the rules they put in, capped the odds. I'll try and explain it with a sports analogy, but one that surely anyone can follow. Lets say you, two of your friends and Tiger Woods were to tee off for 18 holes of golf. Who would be favored? Unless if you happen to be on the PGA tour, the odds would look like this:
Tiger Woods: 1.001 to 1
You: 5000 to 1
Friend A: 3000 to 1
Friend B: 11000 to 1
Presumably, there's a chance that lightning strikes Tiger down on hole 7, or you hit a shot so poorly that it bounces off a tree and knocks him out, or a phone rings and Nike wants to give him another 50 million, but it needs him ASAP. Otherwise Tiger is winning, and the gambling public would have to face these odds to bet on.
How would Neopets make these odds? Here's how
Tiger: 2 to 1
You: 13 to 1
Friend A: 13 to 1
Friend B: 13 to 1
Who are you betting on now? I thought so too.
These capped odds are the basis for all of the 3 million I have made from this game. Why is this such a good situation? Well, not only is Tiger, or going back to our Pet analogy, Kemito, more likely to win than half of the time, there is an actual way to GUARANTEE profit. Food Club has a progressive betting system, meaning the longer you play the more you can bet. To make things simple on me, lets say you have an account that is nearing 2 years old. The most you can bet is 1500. You can't make an identical bet, but you can bet multiple times on the same race, and even on the same pirate if you parlay that pirate with someone else. So lets go back to the Kemito Arbitrage situation:
Kemito Kid: 2 to 1
Lyteric the Lofty: 13 to 1
Gongachoek the Choker: 13 to 1
Togsterthe2nd: 13 to 1
You could bet 1300 on kemito (not even a full 1500)
You could then bet 200 on EACH of the other 3 pirates.
What would the results be?
Well, either kemito wins 1300 at 2 to 1 odds, earning you 2600. OR, a longshot wins. You bet 200 on each of the longshots at 13 to 1, earning you 2600. Either way, you have spent exactly 1900 to make those 4 bets. You have 700 profit no matter what. Pretty cool right? Well, not really. 700 neopoints is easy to earn, and its more fun to do it playing games. Plus, there's no suspense and no skill. And you didn't come here to earn 700 neopoints.
The arbitrage though... Thats the key. Going back to the race that also had an arbitrage:
Guatemole the Great: 2 to 1
Grephun the Grinner: 6 to 1
Mollymooster the Mighty: 10 to 1
Silvak the Strong: 12 to 1
You could find an arbitrage here too. Bet 1500 on Guatemole, 500 on Grephun, 300 on Mollymooster, and 250 on Silvak. Overall you spent 2550, and will guarantee yourself 3000 neopoints. It isn't as big of an arbitrage, but it is most definitely there.
As it turns out, the real world seldom sees such arbitrages. I use that term because it is the term the financial services industry uses, which is a fancy word for riskless profit in an otherwise risky industry. These arbitrages in relative terms are huge. A real world arbitrage might involve less then 9 pennies on a $100 transaction, and that would be seen as a big arbitrage, because if it is repeatable, it could make the one who finds that arbitrage a millionaire. Every year PhD's and MBA's search the commodites and futures market for this sort of riskless profitable paradise. Most never find one. The sports world will never offer one. They will instead offer you the reverse. If we go all the way back to the first race, you cannot find a situation that guarantees profit, but you can find one that guarantees a loss. If you bet on "the line" in a sports event, you are getting 1.9 to 1 odds, no matter which side of the line you choose, meaning if you bet 1000 neopoints on each side of the line, you would earn 1900 neopoints on your 2000 neopoint investment. That is a loser. Similarly, if you go to the horse races, or anything like that, you can do the math yourself, you will see there are no arbitrages out there.
So how do you do the math in a quick way?
Let my handy dandy calculator help you here:
Take this chart, and either memorize it, or write it down or print it if you are not facile with math already
2-1 50%
3-1 33%
4-1 25%
5-1 20%
6-1 16%
7-1 14%
8-1 12%
9-1 11%
10-1 10%
11-1 9%
12-1 8%
13-1 7%
Take the 4 races, add up the percentages. If they add up to less than 100, there is an arbitrage there. If it adds up to 100 or more, there is not an arbitrage.
Why is this so important? Why find these arbitrages if the only obvious profit is peanuts?
The next chapter has your answers...
Chapter 3: Capitalizing on the Arbitrage:
Before we go further, I will pass along a gambling lesson of some sort, that I actually first learned in some sort of classroom setting, then read a book where Doyle Brunson explained the analogy a little differently, and I still have a different spin on it. The story goes like this. You wake up tomorrow, to find a very well dressed man in a sharp white suit at your bed. He is carrying a suitcase full of money and is clearly a billionaire. At some point in your dreams the night before you dreamt of becoming rich. This man can make you rich, he claims, and as the answer to your dream, he opens up a suitcase full of money. There is, of course a catch. This man has a rather odd obsession with flipping coins. He is not a con-man, but is a gambler. To prove this to you, he wants to make you an offer. He asks you who your most trusted person in the world. You say its your grandmother. He finds your grandmother and teleports her to you. He then instructs you to find a quarter, any quarter will do. You pull one out of your pocket from the jeans you wore. He makes you the following offer. You hand the quarter to your grandmother. She flips it. You can call the flip in the air. For the sake of simplicity let?s say you always call heads, perhaps you like George Washington or something. If the coin comes up heads, you shall win $10 dollars. The catch? If it comes up tails, you must pay the man a dollar. Now, you may not be rich, but surely that bet is too good not to be true. The man even lets you make that bet 5 times. Heads comes up twice. You win 20 dollars, and then lose 3 from the time it comes up tails. Still you?re up 17 dollars. The man in the white suit, informs you though, that he wasn?t here to help you buy lunch for the next couple of days, but to make you legitimately rich. He wants to up the offer to paying you $1,000 dollars if tails comes up, with the promise of $10,000 if heads comes up. It?s the same fantastic offer, same ratio, but now you start to worry. You have saved that $1,000, and had a real purpose for it. The thousand dollars represents savings from 100 lawns mowed. If you lost that you?d be depressed about having to mow 100 lawns again. At the same time, $10,000 is no small sum of money. You are pondering this bet, when the man realizes, that $10,000 isn?t rich in the grand scheme of things either. He?s not here to mess around with trifling sums. He is here to make you a millionaire. Of course, you probably don?t have $100,000 handy. He informs you that its ok if you don?t. If your grandmother flips the coin and you lose, you, or your parents, will simply have to start selling off your possessions to pay the debt. Your computer would be gone, along with probably all of your furniture, cars, and you might have to move to a little apartment, because your house would be gone too, and your credit cards all maxed out. For the next 5 years, you will be working 80 hours a week to pay off the debt, while living in impoverished conditions, since you are now massively in debt. If you win, you are a millionaire. You are sure it?s a 50-50 proposition.
Do you take the bet now?
At what point, if you say no, do you cry uncle? Did you cry uncle at $1000? 100? How about somewhere between $1,000 and $100,000?
This is a fairy tale of sorts of course, but a lot of times in life, similar dilemmas occur. People have the chance to start a business that could make them millions, but failure would quite literally bankrupt them. The odds are seldom so extreme as 10 to 1 on a 2 to 1 proposition, but the emotional worries can sometimes be paralyzing. Over the long term, the stock market has been a consistently better bet than CD?s, savings accounts or accounts that guarantee your money for a long time. At the same time, most financial experts would tell you that it isn?t always a great idea to bet 100% of your life savings on that market. The word diversification is one you often hear.
The same concept applies to neopets. Some investments on paper seem like solid ideas. Odds are they are solid ideas. Collecting an item in anticipation of a significant rise in price in the future is a great way of making some major neopoints. At the same time, investing every last neopoint you have, and then watching the item become worthless would be disheartening. At some point, you have to judge the value of neopoints, figure out a level at which you can stomach losses, and estimate what your income needs are, and make sure you have a strategy to meet them.
How does this all relate to the food club you ask?
Simple! The food club is a series of bets. The bets are weighted in your favor, through finding arbitrages. We can ultimately create the estimated odds we want of a winning situation, and an approximate payout. We can change these conditions every day, and make bets over and over. Unlike the fairytale told earlier, we are not faced with the uncomfortable decision of being forced to wager millions of neopoints in a single day. Depending on your longevity, you are capped at how many neopoints you can wager, since you are limited to 10 bets, and each bet is capped.
Confused?
Lets go back to our example.
Race X
Guatemole the Great: 2 to 1
Grephun the Grinner: 6 to 1
Mollymooster the Mighty: 10 to 1
Silvak the Strong: 12 to 1
Race Y
Kemito Kid: 2 to 1
Lyteric the Lofty: 13 to 1
Gongachoek the Choker: 13 to 1
Togsterthe2nd: 13 to 1
We have already explained how to guarantee profit through an arbitrage. Using the handy dandy conversion chart above, you can see that these are both arbitrage situations since the numbers add up to less than 100. In the first race it adds up to 84, and the 2nd race it adds up to 71, which is the lowest possible number.
What are the actual odds of winning, assuming uncapped numbers? For everything between 3-1 and 12-1, assume the actual odds are correct. For someone at 13-1, give them a 5% chance (since their implied odds may well be worse than even 20-1, this just seems like the actual number in my experience)
To calculate the odds of someone at 2-1, we have to do some subtraction.
For race x, we can subtract 8, 10, and 16 from 100 (see the numerical chart once again). This leaves us with 66, or about a 2/3 chance of Guatemole winning.
For Kemito, he has almost an 85% chance of winning according to the odds. These really sting when kemito loses, and you?ll feel like this happens more than 15%, but really it?s just because the losses in this situation are so shocking they stick out way more than the wins.
So to me, with my system, the other 3 pets, using my system, are either fair bets, or bets with a negative expectation, if we were only to bet on them. The garmfay system would attempt to figure out which pirates are actually better values than the listed odds, and more often than not will find the best values in arbitrage situations (which is why there is some validity to his method). I, in this particular case, am going to run with the 2-1 pirates. Assuming X and Y are the only profitable races, I will make at least the following 3 bets
Race X: Guateomole, 3000 NP (this isn?t my maximum, or yours, but I am using it for illustrational purposes)
Race Y: Kemito: 3000 NP
RACE XY: Guatemole, Kemito, 4 to one odds. 3000 NP
Note you can?t make an identical bet twice, but you can bet on the same pirate in multiple races. This last bet is called a PARLAY. To win the PARLAY, both pirates must win. One pirate winning and one losing will lose me the bet. As you can see though, the payout is bigger. Combine this with race X and Y, and from just 2 profitable races out of 5, I could have a good situation.
If just guatemole wins: I make 3 bets for 1500, one pays out for 3000, I lose 1500.
If just Kemito wins: same as guatemole, I lose 1500.
If neither win, I lose 4500 (ouch!)
If both win: I get paid 4:1 on my parlay, plus 2:1 on each individual race, for a total payout of 12000 or profit of 7500.
So I either make 15,000, but could lose at least 3,000 and maybe more.
Notice IF we took the arbitrage in each race, assuming a 1500 max bet, wed have made 1200 neopoints, with no risk for 8 bets. So that is better than the best I?ve outlined right? Wrong.
If we really look at the EXPECTED profit, over the long run, here is what it will show:
We know the approximate odds of each pirate winning.
The odds that neither guatemole nor kemito win are quite small. 5% to be exact.
The odds that just kemito wins are decent, 29%
The odds that just Guatemole wins are also decent, 10%
The odds that both win, are surprisingly only a little bit better than 50%, in this case I estimate them to be 56%.
If it makes you feel better, I don?t do this math out when I bet, I just bet, because once I proved this to myself the first time, I never needed to prove it again.
For those who are math dorks, you know how to calculate expected value. For those who aren?t, I won?t hit you over the head with the gory details. If we ran this race 100 times, the overall expected profit would be: 4200 ? 810 or 3,390 neopoints.
To go back to the fairy tale. Lets say the man with the suitcase hands you a check for 12 dollars. He says you can either keep the check, or let your grandmom flip the coin. If it comes up heads, you get 68 dollars. If it comes up tails, you simply have to hand the check to the man. Do you let your grandmother flip the coin now?
I certainly would. The neopets equivalent, of course is taking the arbitrage, for the guaranteed 1,150 neopoints. Or you can make the parlay bet, for a 56% chance at 7500 profit, with a 39% chance of only losing 1500.
If you are dead broke, and don?t have any way to earn neopoints, this may not be the greatest thing in the world. If you are fantastically rich, this may seem like a waste of time unless you have an older account and can make real money. If you are netiher of these scenarios, this seems like a decent, but not great way of making money.
There?s more of course, but the profit maximization, and how to blow through all of this in minutes, and get trophies, and millions of neopoints? well that comes?. Next time
EDIT2: This converts poorly from word, and the pictures dont convert at all. Sorry
Well an update. As promised, I had written alot of stuff when I was offline for 4 weeks. I ideally want to get my own server, to host all of this, and organize it in a non-chaotic and EASY to read format, because right now its all pretty brutal to read I am painfully aware. Here is the draft of a decent chunk of my food club guide.
Its not the finished article, adn the best stuff comes later, but tis a start. And after getting no less than 10 forum messages on this in the last month, I figured Id post some of it now, rather than wait potentially a month to publish all of it. For those that dont know, I am a gold trophy holder in food club, along with having sever silver and bronze spots, and when playing actively am consistently in the top 50 in spite of not trying for big scores. Lifetime I am up over 3.3 million in the food club, and that in and of itself ought to be enough to establish my legitimacy at this game.
Feedback is welcomed of course, as I want to make this an enjoyable and pleasant read.
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Get Rich or Die Trying
sirhatter's guide to gambling in the food club
Chapter 1: Introduction
Chapter 2: Finding the Arbitrage
Chapter 3: Capitalizing on the Arbitrage
Chapter 4: Multi Race Bet Strategies and Parlays
Chapter 5: Trophy Chasing, and Betting on Sub-Optimal Races
Chapter 6: Conclusions, and Takeaways for the "real world"
Introduction
So this is the first game guide I have written that is aimed for a mass audience in a long time, and that is for good reason. My writing skills when I first started writing guides were not as polished as they could have been, and most importantly, I didn't really have anything to add.
As most people who are familiar with my work know, my area of specialty is in the battledome, where I have earned a degree of respect for my tactical prowess from a wide variety of established neopians, especially in two player battles.
What I did to make neopoints was hardly unique, and I hardly had a monopoly on the knowledge that made me rich. I restocked, I took advantage of the neo stock market, I took one time opportunities as they came, and I invested in items, and for obvious reasons didn't publicise my investments. So I stuck to writing about the battledome, and let others post their secrets on how to get rich.
As time progressed though, I left a very fast connection and very fast computers for my home computer, which at the time was a pentium 2 with 300 mhz and 96mb of RAM. Needless to say that wasn?t very fast. The restocking method of making neopoints was gone. The one time opportunities, such as towering an item when they initially release it at a very low price, are hard to come by when you have a real job, and cannot get online often. More importantly my interest / addiction / obsession / (insert word of your choosing here) waned, as I became more content with my status. Of course, while I wasn't on as much, I still had a big spending habit on training my pet, and weapons don't typically get cheaper.
As a result, while playing most of the flash games, and restocking were out, I was forced to find a way to replace some of that income, beyond the mall I had joined. The result was my dominance of food club. I have shared this secret in some form or another with about maybe a dozen people. Some have had luck with it, some have not. In either case, this is the one game outside of the battledome where I feel strongly I DO have a unique insight into the workings of the game, and am legitimately better at the game than 99% of the people who play. I have long held fears of publishing this out of fear that it could be used by people for the wrong reasons, namely to cheat through use of multiple accounts, but realistically since this is a game that rewards longetivity, making multiple accounts wont help much, and besides, there are better ways to cheat with multiple accounts (the stock market for example).
As for my credentials, I have a gold trophy in the food club, but anyone lucky, and/or willing to play for 7 days straight at the end of the month then log on at 01:00 NST can get a gold trophy.
The results I have earned though, cannot be attributed to just luck. It has been over a year of fine tuning a system that worked nearly from its invention, and has only gotten stronger from there.
Bet History
Bets Placed Bet Total Win Total Difference
2206 5613000 NP 8960000 NP 3347000
All told, for every 10000 neopoints i have wagered. I have earned back my original stake plus an extra 5960 neopoints in return. For the last 4 months, that number has stayed steadily around 6000, and it would take me losing 900 CONSECUTIVE maximum bets in order for me to break even again. Simply put, I am a winner at this game. There may be bigger winners than me, but not too many, and almost none with my specific system, that I am now laying out for you the reader.
The best part of this game, is that it's income will grow with you, while the time commitment never will. The longer you play, the more you can earn from it. I seldom promise much to my readers, but unless Neopets totally revamps the game, this will be a big winner for you, just as it has been for me. I may someday walk away from this game. Someday there may be no more neopia. Either way, this guide will also give you the reader lessons beyond this game and hopefully my impact will live on. This is a long read, but hopefully its worth your time, and serves it?s purpose.
Has that got your appetite up to make some neopoints?
Then read on. The fun is about to begin.
Finding the Arbitrage
What's Arbitrage? We shall get there. First, take a little trip to Krawk Island. Here is where the greatest gambling game in all of Neopia is played, with a host of other gambling games. Food Club is towards the right. Once you get there, there will be an intimidating array of percentages and advice. You go to place a bet, and you see confusing lists all posting different odds, that apparently can fluctuate throughout the day here and there! It's like a stock market for eating and pirates, but everything seems mad! What to do?
If you click on the rules, it gives you the following suggestions for betting strategies:
Betting Strategies: When you are placing bets, you need to remember that there are many different things to take into consideration. If you are simply using their win/loss record, you are bound to lose a lot of NeoPoints. First thing to do is to take a look at each pirate in the match. You should do some comparisons between their strength (stamina) and their weights. Also, more importantly, look at the foods that could possibly be served for the match. If you place a bet on a strong pirate, but he happens to be allergic to many of the foods that could be served for his match, you are almost guaranteed to lose! To research the possible food courses for a match, simply click on the Next Round link and choose which match you want to look up.
What I can promise you is this: If you follow the site's advice, you will spend a ton of time on the game, and lose money, or maybe break even. That won't do you any good. How do I know this? Once upon a time, I tried following all of these strategies, and I was a losing bettor. I even made a graph here:
Pretty cool looking right? Well it didn?t make me any money, and wasted my time back in 2003. Today it serves as a reminder to not follow the advice listed in the rules.
Follow my advice.
There are two fundamental ways you can beat food club. One is by finding an inequality in the assessed market. What does this mean? Well, if Koshanda the Konqueror has listed odds of 6 to 1, but you think Koshanda's odds are really closer to 4-1, you could bet on that pirate and show profit over the long run. For the best way to do this, which involves some of TNT's advice, I highly recommend the userlookup of garmfay. One of his petpages will have the answers for you. While I have never talked to garmfay, he is one of the very few people I do not know in this game that I manage to hold in high regard. His work is simply superb, and you can tell he is generous with his time and selfless. With that said, his way is very time consuming, though I'd think it has to be effective.
You aren't here though to do things his way. You are here to do them mine. And to a degree mine will have overlap with his you will find out. Instead of finding inequalities, you just have to find an arbitrage, and bet on it. What's an arbitrage you ask again? It's still a great question. We're getting closer to the answer.
Let's take a sample race.
Koshanda the Konqueror: 2 to 1
Zepoby the Zany: 4:1
Sirhatter the Skinny: 5:1
Fusionstorm the Full: 10:1
Garmfay's method would involve trying to figure out which of these pirates were undervalued, and a good bet for their money. My method? I'd take one look at this race, I'd fail to see an arbitrage, and I'd move on. I'd take a look at the next race, and let's just say I find an arbitrage there. Lets show the pirates:
Guatemole the Great: 2 to 1
Grephun the Grinner: 6 to 1
Mollymooster the Mighty: 10 to 1
Silvak the Strong: 12 to 1
Now there's an arbitrage!
What?s the difference between the two races? Great question. I'll list a third case with THE IDEAL ARBITRAGE, and maybe you can figure it out on your own.
Kemito Kid: 2 to 1
Lyteric the Lofty: 13 to 1
Gongachoek the Choker: 13 to 1
Togsterthe2nd: 13 to 1
Well? Do you see it now? This last race, one pirate has great odds, and the others have terrible odds. However... Great odds don't pay as well, so what?s the big deal?
I'll go over that with you right now. Neopets, as part of the rules they put in, capped the odds. I'll try and explain it with a sports analogy, but one that surely anyone can follow. Lets say you, two of your friends and Tiger Woods were to tee off for 18 holes of golf. Who would be favored? Unless if you happen to be on the PGA tour, the odds would look like this:
Tiger Woods: 1.001 to 1
You: 5000 to 1
Friend A: 3000 to 1
Friend B: 11000 to 1
Presumably, there's a chance that lightning strikes Tiger down on hole 7, or you hit a shot so poorly that it bounces off a tree and knocks him out, or a phone rings and Nike wants to give him another 50 million, but it needs him ASAP. Otherwise Tiger is winning, and the gambling public would have to face these odds to bet on.
How would Neopets make these odds? Here's how
Tiger: 2 to 1
You: 13 to 1
Friend A: 13 to 1
Friend B: 13 to 1
Who are you betting on now? I thought so too.
These capped odds are the basis for all of the 3 million I have made from this game. Why is this such a good situation? Well, not only is Tiger, or going back to our Pet analogy, Kemito, more likely to win than half of the time, there is an actual way to GUARANTEE profit. Food Club has a progressive betting system, meaning the longer you play the more you can bet. To make things simple on me, lets say you have an account that is nearing 2 years old. The most you can bet is 1500. You can't make an identical bet, but you can bet multiple times on the same race, and even on the same pirate if you parlay that pirate with someone else. So lets go back to the Kemito Arbitrage situation:
Kemito Kid: 2 to 1
Lyteric the Lofty: 13 to 1
Gongachoek the Choker: 13 to 1
Togsterthe2nd: 13 to 1
You could bet 1300 on kemito (not even a full 1500)
You could then bet 200 on EACH of the other 3 pirates.
What would the results be?
Well, either kemito wins 1300 at 2 to 1 odds, earning you 2600. OR, a longshot wins. You bet 200 on each of the longshots at 13 to 1, earning you 2600. Either way, you have spent exactly 1900 to make those 4 bets. You have 700 profit no matter what. Pretty cool right? Well, not really. 700 neopoints is easy to earn, and its more fun to do it playing games. Plus, there's no suspense and no skill. And you didn't come here to earn 700 neopoints.
The arbitrage though... Thats the key. Going back to the race that also had an arbitrage:
Guatemole the Great: 2 to 1
Grephun the Grinner: 6 to 1
Mollymooster the Mighty: 10 to 1
Silvak the Strong: 12 to 1
You could find an arbitrage here too. Bet 1500 on Guatemole, 500 on Grephun, 300 on Mollymooster, and 250 on Silvak. Overall you spent 2550, and will guarantee yourself 3000 neopoints. It isn't as big of an arbitrage, but it is most definitely there.
As it turns out, the real world seldom sees such arbitrages. I use that term because it is the term the financial services industry uses, which is a fancy word for riskless profit in an otherwise risky industry. These arbitrages in relative terms are huge. A real world arbitrage might involve less then 9 pennies on a $100 transaction, and that would be seen as a big arbitrage, because if it is repeatable, it could make the one who finds that arbitrage a millionaire. Every year PhD's and MBA's search the commodites and futures market for this sort of riskless profitable paradise. Most never find one. The sports world will never offer one. They will instead offer you the reverse. If we go all the way back to the first race, you cannot find a situation that guarantees profit, but you can find one that guarantees a loss. If you bet on "the line" in a sports event, you are getting 1.9 to 1 odds, no matter which side of the line you choose, meaning if you bet 1000 neopoints on each side of the line, you would earn 1900 neopoints on your 2000 neopoint investment. That is a loser. Similarly, if you go to the horse races, or anything like that, you can do the math yourself, you will see there are no arbitrages out there.
So how do you do the math in a quick way?
Let my handy dandy calculator help you here:
Take this chart, and either memorize it, or write it down or print it if you are not facile with math already
2-1 50%
3-1 33%
4-1 25%
5-1 20%
6-1 16%
7-1 14%
8-1 12%
9-1 11%
10-1 10%
11-1 9%
12-1 8%
13-1 7%
Take the 4 races, add up the percentages. If they add up to less than 100, there is an arbitrage there. If it adds up to 100 or more, there is not an arbitrage.
Why is this so important? Why find these arbitrages if the only obvious profit is peanuts?
The next chapter has your answers...
Chapter 3: Capitalizing on the Arbitrage:
Before we go further, I will pass along a gambling lesson of some sort, that I actually first learned in some sort of classroom setting, then read a book where Doyle Brunson explained the analogy a little differently, and I still have a different spin on it. The story goes like this. You wake up tomorrow, to find a very well dressed man in a sharp white suit at your bed. He is carrying a suitcase full of money and is clearly a billionaire. At some point in your dreams the night before you dreamt of becoming rich. This man can make you rich, he claims, and as the answer to your dream, he opens up a suitcase full of money. There is, of course a catch. This man has a rather odd obsession with flipping coins. He is not a con-man, but is a gambler. To prove this to you, he wants to make you an offer. He asks you who your most trusted person in the world. You say its your grandmother. He finds your grandmother and teleports her to you. He then instructs you to find a quarter, any quarter will do. You pull one out of your pocket from the jeans you wore. He makes you the following offer. You hand the quarter to your grandmother. She flips it. You can call the flip in the air. For the sake of simplicity let?s say you always call heads, perhaps you like George Washington or something. If the coin comes up heads, you shall win $10 dollars. The catch? If it comes up tails, you must pay the man a dollar. Now, you may not be rich, but surely that bet is too good not to be true. The man even lets you make that bet 5 times. Heads comes up twice. You win 20 dollars, and then lose 3 from the time it comes up tails. Still you?re up 17 dollars. The man in the white suit, informs you though, that he wasn?t here to help you buy lunch for the next couple of days, but to make you legitimately rich. He wants to up the offer to paying you $1,000 dollars if tails comes up, with the promise of $10,000 if heads comes up. It?s the same fantastic offer, same ratio, but now you start to worry. You have saved that $1,000, and had a real purpose for it. The thousand dollars represents savings from 100 lawns mowed. If you lost that you?d be depressed about having to mow 100 lawns again. At the same time, $10,000 is no small sum of money. You are pondering this bet, when the man realizes, that $10,000 isn?t rich in the grand scheme of things either. He?s not here to mess around with trifling sums. He is here to make you a millionaire. Of course, you probably don?t have $100,000 handy. He informs you that its ok if you don?t. If your grandmother flips the coin and you lose, you, or your parents, will simply have to start selling off your possessions to pay the debt. Your computer would be gone, along with probably all of your furniture, cars, and you might have to move to a little apartment, because your house would be gone too, and your credit cards all maxed out. For the next 5 years, you will be working 80 hours a week to pay off the debt, while living in impoverished conditions, since you are now massively in debt. If you win, you are a millionaire. You are sure it?s a 50-50 proposition.
Do you take the bet now?
At what point, if you say no, do you cry uncle? Did you cry uncle at $1000? 100? How about somewhere between $1,000 and $100,000?
This is a fairy tale of sorts of course, but a lot of times in life, similar dilemmas occur. People have the chance to start a business that could make them millions, but failure would quite literally bankrupt them. The odds are seldom so extreme as 10 to 1 on a 2 to 1 proposition, but the emotional worries can sometimes be paralyzing. Over the long term, the stock market has been a consistently better bet than CD?s, savings accounts or accounts that guarantee your money for a long time. At the same time, most financial experts would tell you that it isn?t always a great idea to bet 100% of your life savings on that market. The word diversification is one you often hear.
The same concept applies to neopets. Some investments on paper seem like solid ideas. Odds are they are solid ideas. Collecting an item in anticipation of a significant rise in price in the future is a great way of making some major neopoints. At the same time, investing every last neopoint you have, and then watching the item become worthless would be disheartening. At some point, you have to judge the value of neopoints, figure out a level at which you can stomach losses, and estimate what your income needs are, and make sure you have a strategy to meet them.
How does this all relate to the food club you ask?
Simple! The food club is a series of bets. The bets are weighted in your favor, through finding arbitrages. We can ultimately create the estimated odds we want of a winning situation, and an approximate payout. We can change these conditions every day, and make bets over and over. Unlike the fairytale told earlier, we are not faced with the uncomfortable decision of being forced to wager millions of neopoints in a single day. Depending on your longevity, you are capped at how many neopoints you can wager, since you are limited to 10 bets, and each bet is capped.
Confused?
Lets go back to our example.
Race X
Guatemole the Great: 2 to 1
Grephun the Grinner: 6 to 1
Mollymooster the Mighty: 10 to 1
Silvak the Strong: 12 to 1
Race Y
Kemito Kid: 2 to 1
Lyteric the Lofty: 13 to 1
Gongachoek the Choker: 13 to 1
Togsterthe2nd: 13 to 1
We have already explained how to guarantee profit through an arbitrage. Using the handy dandy conversion chart above, you can see that these are both arbitrage situations since the numbers add up to less than 100. In the first race it adds up to 84, and the 2nd race it adds up to 71, which is the lowest possible number.
What are the actual odds of winning, assuming uncapped numbers? For everything between 3-1 and 12-1, assume the actual odds are correct. For someone at 13-1, give them a 5% chance (since their implied odds may well be worse than even 20-1, this just seems like the actual number in my experience)
To calculate the odds of someone at 2-1, we have to do some subtraction.
For race x, we can subtract 8, 10, and 16 from 100 (see the numerical chart once again). This leaves us with 66, or about a 2/3 chance of Guatemole winning.
For Kemito, he has almost an 85% chance of winning according to the odds. These really sting when kemito loses, and you?ll feel like this happens more than 15%, but really it?s just because the losses in this situation are so shocking they stick out way more than the wins.
So to me, with my system, the other 3 pets, using my system, are either fair bets, or bets with a negative expectation, if we were only to bet on them. The garmfay system would attempt to figure out which pirates are actually better values than the listed odds, and more often than not will find the best values in arbitrage situations (which is why there is some validity to his method). I, in this particular case, am going to run with the 2-1 pirates. Assuming X and Y are the only profitable races, I will make at least the following 3 bets
Race X: Guateomole, 3000 NP (this isn?t my maximum, or yours, but I am using it for illustrational purposes)
Race Y: Kemito: 3000 NP
RACE XY: Guatemole, Kemito, 4 to one odds. 3000 NP
Note you can?t make an identical bet twice, but you can bet on the same pirate in multiple races. This last bet is called a PARLAY. To win the PARLAY, both pirates must win. One pirate winning and one losing will lose me the bet. As you can see though, the payout is bigger. Combine this with race X and Y, and from just 2 profitable races out of 5, I could have a good situation.
If just guatemole wins: I make 3 bets for 1500, one pays out for 3000, I lose 1500.
If just Kemito wins: same as guatemole, I lose 1500.
If neither win, I lose 4500 (ouch!)
If both win: I get paid 4:1 on my parlay, plus 2:1 on each individual race, for a total payout of 12000 or profit of 7500.
So I either make 15,000, but could lose at least 3,000 and maybe more.
Notice IF we took the arbitrage in each race, assuming a 1500 max bet, wed have made 1200 neopoints, with no risk for 8 bets. So that is better than the best I?ve outlined right? Wrong.
If we really look at the EXPECTED profit, over the long run, here is what it will show:
We know the approximate odds of each pirate winning.
The odds that neither guatemole nor kemito win are quite small. 5% to be exact.
The odds that just kemito wins are decent, 29%
The odds that just Guatemole wins are also decent, 10%
The odds that both win, are surprisingly only a little bit better than 50%, in this case I estimate them to be 56%.
If it makes you feel better, I don?t do this math out when I bet, I just bet, because once I proved this to myself the first time, I never needed to prove it again.
For those who are math dorks, you know how to calculate expected value. For those who aren?t, I won?t hit you over the head with the gory details. If we ran this race 100 times, the overall expected profit would be: 4200 ? 810 or 3,390 neopoints.
To go back to the fairy tale. Lets say the man with the suitcase hands you a check for 12 dollars. He says you can either keep the check, or let your grandmom flip the coin. If it comes up heads, you get 68 dollars. If it comes up tails, you simply have to hand the check to the man. Do you let your grandmother flip the coin now?
I certainly would. The neopets equivalent, of course is taking the arbitrage, for the guaranteed 1,150 neopoints. Or you can make the parlay bet, for a 56% chance at 7500 profit, with a 39% chance of only losing 1500.
If you are dead broke, and don?t have any way to earn neopoints, this may not be the greatest thing in the world. If you are fantastically rich, this may seem like a waste of time unless you have an older account and can make real money. If you are netiher of these scenarios, this seems like a decent, but not great way of making money.
There?s more of course, but the profit maximization, and how to blow through all of this in minutes, and get trophies, and millions of neopoints? well that comes?. Next time
As far as a free web host, I can recommend freewebs. Summer vacation starts in about a week, and I might be able to help you get a site set up for it at that time.