What is a parlay bet in sports?

The parlay bet, AKA accumulator or combination bet, is a leveraged method of betting on multiple sports outcomes. Although submitted as a single wager, the play actually consists of more than one bet. You require more than one betting event for this. An efficient explanation of parlay betting can be achieved by contrasting it with a straight betting scheme.

Nothing more fun than hitting a parlay win on a huge play.
What a save for the parlay win!

Let’s say you have identified two separate spread/total bets paying the standard 1.91 (-110) that you believe are good ones and you would like to wager 200. What most people would do is wager 100 on each event – this is known as straight betting or flat betting. Assuming these contests are unrelated, the table below illustrates the possible outcomes.

Outcome Probability Profit/Loss
Win both 25% +182
Win one, lose one 50% -9
Lose both 25% -200

Conversely, the parlay bet is structured such that if you win the first event, the whole payout and profit from it is invested in the second bet. You go “all-in” on the second event if you’ve won the first. Continuing from the example above, assume for simplicity that game A finishes before game B begins and that a punter had the correct side of game A on a parlay with his same overall wager of 200. This is the parlay structure:

Bet A: 200 wager X 1.91 price = 382 payout

Bet B: 382 wager X 1.91 price = 729.62 payout

So we have wagered the same 200 but after the first leg of our parlay wins, the payout is rolled into the second leg, yielding the following possible outcomes:

Outcome Probability Profit/Loss
Win both 25% +529.62
Win one, lose one 50% -200
Lose both 25% -200

Note from above that if we lose either event, our whole wager is lost. It’s all or nothing – we need to be perfect to win. An exception to this is in the event of any pushes – in this case, the leg in question is graded a tie and discounted from the parlay, making it as though it never existed. For example, in a two-teamer as illustrated above, if we win one and push the other, we just get the straight wager x price on the winning leg. Conversely, if we lose one ad push the other, the bet is lost.

In comparing the two graphics above, we can see that nothing has changed about the probabilities of outcomes – the drastic change is in the profit/loss column. To summarize, with straight betting, we are just losing commission half the time. The other half of the time is split evenly between the perfect day and the bad one where we lost both bets.

Conversely, the parlay table shows us that we lose our entire stake a whopping 75% of the time. The other 25% of the time we are way up on our investment. This is the basis of why many “sharps” do not recommend parlay betting. Statistically speaking, if we were to repeat this experiment over and over again with both types of sports bets, in the long run, the profit/loss variance associated with the parlay betting scheme is incredibly higher yet the expected return percentage wise is actually exactly the same… or is it?

Taking small shots at long parlays while betting is a fun way to help increase profits and build the roll.
Don’t make the first out of the game at third base! Building bankrolls with parlay bets is a game of patience.

This exercise is incomplete and our example needs to be augmented. People who dismiss parlays generally fail to take this step – they end the exercise right here and conclude that there is no incentive for a punter to accept the higher variance. Basic financial theory tells us that higher risk needs to equate to higher potential reward – so where does our risk premium come from?

Debunking traditional parlay thinking

“Parlays will eat away at your bank roll because you pay so much more juice.”

This is an inaccurate statement. As a percentage of your wager/possible profit, the commission is exactly the same as straight betting. Parlays do in fact have higher absolute commissions associated with them because the bet structure involves higher wagers in theory. Remember from above how if our first leg wins then it’s rolled into the second part of the bet in an “all-in” fashion? In theory, the second leg is no longer 200 to win 182 like the first leg is – it’s actually 382 to profit 529.62 overall. Looking at it another way, it’s 382 to profit an additional 347.62 on top of the 182 we already profited from the first event (total of 529.62).

We still have merely the same 200 at risk but the structure of the bet has rolled it over and put us all in on the second event. This is where the idea of a higher absolute commission comes from – just like in straight betting, when we bet a higher amount in absolute terms, of course the possible commission on a win is higher. Bet 100 to win 91 for a commission of 9, bet 1000 and pay commission of 90 on a win, etc. However, from a percentage point of view, the commission paid on winning parlays is exactly the same as in straight wagering.

“Parlays are just riskier sports bets with no added benefit so it is best to just stay away.”

This is false. Parlay wagering benefits punters in ways that flat betting cannot. The biggest difference between straight betting and parlay betting is in the theoretical unit size. Extending the example above, our straight bettor would just wager 100 on each event. The parlay bettor has built in variance of theoretical unit size – he still actually wagers the same 100 on each event (for 200 total) but whenever the first leg wins, he has the theoretical 382 amount for the second bet despite still having just the 200 at risk in reality.

These built in changes to theoretical unit size is what actually creates the additional variance as well as opportunities for us to exploit the betting markets for maximum bankroll growth. This is where the typical arguments against parlay betting fall apart. If the bettor is willing to embrace variance, there is a risk premium up for grabs. Accepting this risk in exchange for a higher reward vaults the punter into a leveraged situation – expected returns are higher and bankrolls can grow faster as a result.

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