Betting effect of Carmelo Anthony traded to New York Knicks?

The rumors are finally true – Carmelo Anthony has been traded to the New York Knicks (aka, Carmelo’s taking his talents to Madison Square Garden and teaming up with Amare Stoudemire).

What does this mean to sports bettors?

Current NY Knicks betting odds: 25-1 to win the NBA Title ($10 wins $250). There are currently only eight NBA teams with better odds. (See different future odds ranges at various online sportsbooks)

Major changes to a team during the season typically follows a familiar pattern: at first, the public overreacts to the impact (e.g., perceived good changes are considered better than they really are, perceived bad changes are considered worse than they really are).

At this initial stage, there’s typically value betting against the consensus opinion (betting against the team that had the good thing happen to them, and betting on the team that had the bad team happen to them). The two major reasons for this contrarian approach are: a) the public’s overreaction, resulting in marketplace value; b) The genuine effect of the perceived change is often delayed in the real world. For example, a team losing players will rally around the loss for a few games, often doing better than expected initially. A team gaining players will take a while to integrate the new pieces, often underperforming for an extended period.

In the case of the Carmelo Anthony trade, I believe the New York Knicks will be significantly over-valued for 7 to 10 games, and there will be strong line value betting against.

The Denver Nuggets will not be valued highly at first by the marketplace. Typically this would offer value, but in this case I consider the harsh valuation to be justified – the same team-wide disruption affecting the Knicks will also affect the Nuggets. This is very different than a single injured player. A justified low valuation means I am neutral on them betting-wise.

Though it may be surprising to some readers, I see modest value on the New Jersey Nets in the near-term. There is a perception that they somehow lost out on this trade – but in reality they have not been hurt in any way. If the market decides to think less of them, that misperception will offer value.

Typically, after the initial transition stage, the team that was overvalued becomes undervalued as the marketplace becomes frustrated at their expectations not being reached; this is typically about the same time the player integration issues work themselves out. The combination of less regard in the marketplace plus upward trending performance equates to value betting on.

This will likely not be the case with the Knicks. Yes, the marketplace will become frustrated, and the new players will eventually start to gel – but the general overvaluation of New York teams combined with the general overvaluation of marquee players like Carmelo and Stoudemire rarely allow for significant value on such teams. After the initial stage, I will likely be only neutral on the Knicks.

The Nuggets, on the other hand, will likely offer great value in the mid-term. The marketplace will become frustrated as the team tries to gel, but there will be no big-city nor marquee bias unnaturally inflating public perception; as long as the coach can keep the team motivated, their perceived value will hit rock bottom just about the time their new pieces start to play well together – likely offering strong gambling value on the Nuggets after the initial transition stage of this trade.

I expect to see many professional bettors here in Las Vegas and online to ride this pattern with their free picks.

Carmelo Anthony Trade Details:

In addition to Anthony, the New York Knicks receive:  Chauncey Billups, Shelden Williams, Anthony Carter, Renaldo Balkman, and Corey Brewer (from Timberwolves)

Denver Nuggets receive: Wilson Chandler, Raymond Felton, Danilo Gallinaire, Timofey Mozgov, Knicks 2014 first-round pick, Warriors 2012 and 2013 second-round picks, and $3 million in cash.

Additionally, Knicks are sending Eddy Curry and Anthony Randolph to Minnesota.

CONVERSATION:

Do you agree with the “zig-zag” theory of team disruption (underperform and public overvaluation of “good changes” initially, become frustrated and undervalue around when the good things start to happen).

Would you want Carmelo Anthony on your team?