Brian Losness-USA TODAY Sports. Pictured: Ahmaad Rorie
Whether it is online, live or a silent sale the thrill of a competitive bid can be an exciting activity to a gambler. That’s the beauty of an auction.
While I have participated in auctions for classic cars, sports memorabilia and Kurt Cobain’s guitar, adrenaline for me is a March Madness auction, Calcutta style.
Calcutta March Madness pools work like this:
You auction off all 68 teams to the highest bidder. There are different methods of play — from each person naming a team one at a time, randomized nominations or bidding on blocks of seeds. For the purposes of this post, we will assume every team is randomly auctioned.
But here’s the fun and difficult part — there’s no set entry fee for a Calcutta pool. You may get a great value early in the auction and overpay later. A No. 4 seed may go for more than a No. 1 seed. It varies wildly by pool.
So there are two basic things you need to do beforehand:
- Estimate how much money you think will be in the pot
- Determine the probability of each team reaching each round
Payout percentages will be determined beforehand and will vary depending on what rules you want to use, but each team will collect a percentage of the pot for winning a game. For strategy in this post, we will assume 1% of the pot for each of the first two rounds, a 3% pot share for a Sweet 16 and Elite 8 victory, 5% for making the finals and 6% for the team winning the national title.
Under this format, a national title team will earn 19% of the total pot, runner-up 13% and so forth with the remaining teams.
The fun part of a Calcutta auction is bidding on teams while keeping a projection of the final pot total, because that’s what it’s all about — value relative to the final pot. But like I said, it’s also a huge challenge because you don’t know what the final pot total will be.
Using Vegas odds, our college basketball power ratings or our Bracket Simulator, you can calculate the probability of each team reaching each round. Then when bidding, you want to make sure you’re paying a smaller percentage of the pot than the expected value of what that team could return. We’ll explain below.
Higher seeds will of course have a better chance of advancing further, which is why they go for more money. Virginia may be favored by 7.5 points or more until the Final Four. This is a team that is capable of winning the 19% overall pot.
Using The Action Network parlay calculator, I can determine that Virginia’s toughest path to the Final Four will have odds around even money, in total. A Final Four visit in our Calcutta auction pays 8%, with a title paying 19% of the total pot.
It’s imperative that you’re running a calculation of the total pot is kept during the auction, dictating Virginia’s maximum purchase price of 8% of the expected pot. Any winning bid over 8% will cut into any hedge strategy for a potential 19% payout.
How to Estimate the Total Pot
Here’s the hard part. Let’s say Virginia goes for $100 as the first team nominated. What does that mean for the rest of the prices? There’s no guarantee Duke will be the most expensive team. There’s no ironclad way to know that paying 8% of the expected pot for Virginia will actually be a good move, even if you feel like it’s a good value initially.
Estimating the total pot becomes easier as the auction progresses, but there are two strategies pre-auction that will help execute the best Calcutta bids.
First, handicap each individual game by knowing the point spread and moneyline cost. When you bid on a favorite, understand there is an opposing underdog with a moneyline that you can use to hedge.
Secondly, handicap the crowd. Some pools consist of people that have a budget of $50 while other auctions I have participated in have reached 5-figure bids. If you shoot over the budgets of all other participants, you may be stuck with the worst value in the contest. So try to poke around and feel the crowd out.
Another strategy is to fire on the first top seed to be thrown out. Generally, the first top seed is the cheapest. As the bar is set, the other owners will try and catch up and overbid. Seeds that are favorites in the betting market will exceed their value in bidding in relation to the first seed thrown out.
In a decade of Calcutta auctions, I have never seen the first top seed NOT be the cheapest in the contest. With strategy in your back pocket, here are a few potential sleepers and their coordinating Calcutta auction strategy.
No. 12 Oregon Ducks
- Spread/Moneyline: -1/-120 vs. #5 Wisconsin
- When/Where: Friday 4:30 p.m. ET | San Jose, Calif.
- Calcutta Pot Price Limit: 1.35%