Sports Betting - How do Odds make money for a sportsbook?
We spend most of our editorial space talking about places to bet and how to win money. Naturally, this is the kind of fodder that attracts the most readers and website traffic, because everyone likes to win their bets, right? Well, everyone wants you to win your bet EXCEPT for the sportsbook. They’re looking to cash in on chance or your poor clairvoyance, so that they can keep their doors open another day.
The essential ingredient for making money at a sportsbook is creating favorable odds. As a result, most online sportsbook linesmen are highly compensated, since they are essentially the point man on the incoming finances. Linesmen are hired to spot bad lines, reel in big players, and keep the bottom line in the black.
Odds are simply a mathematical estimate, so to speak, about a given sports matchup. The idea behind determining odds does depend on some knowledge of sports and current sporting events, but it also is much like what an insurance actuary might do: figure prices for selling “games” to the public in such a way that win or lose, the sportsbook makes money.
Another way to think about odds is this: the linesman is trying to create a “market” for a given matchup. In this market, there are two sides: the favorite and the underdog. This is where the mathematical aspect of making odds comes into play. The linesman must create a balanced situation where the sportsbook will hold a certain percentage of the entire net amount wagered. If a huge crowd of people are betting on the favorite, the odds will be adjusted in such a way that betting on the favorite will pay much less than 1:1, and bets on the underdog will pay much better than 1:1. Making these adjustments encourages gamblers to try betting on the dog, and balances the game for the sportsbook.
The Juice Factor
For example, if you want to make money off the favorite in a sporting contest, the sportsbook will charge you “juice” for your action. When the game concludes, you get your initial bet back, plus your winnings which are less than the total value of your bet. Generally the “juice” or “vig” charged by sportsbooks is around 10%. Without the Juice, the sportsbooks would have no way of protecting themselves financially, and would have to close their doors. This is why winning bets on the favorite are paid less than 1:1.
Then, there are those that like to bet on the underdog, in which case a successful wager is rewarded with the return of your original bet plus your winnings, which are more than the value of your bet. This is the sportsbook’s way of saying “You bet on the team that wasn’t likely to win, and you faced greater risk. Therefore, we’re willing to pay you back better than 1:1 for your gamble”.
Contests with Multiple Participants
Note, the scenarios above are based on a head-to-head contest between two teams. If you’re interested in betting on golf, tennis, or other “tournament” style events, setting the odds is different because there are more contestants and therefore more variables at play.
For example, a bet on the “favorite” player of the Wimbledon Tennis Tourney might pay 1:1.75, because the player has to be triumphant in several matches before the final head to head game. Offering odds on this player encourages people to bet, but also makes money for the sportsbook, since this player will defeat several other contestants in the process. The sportsbook makes money on all those bettors that picked the underdog over the tournament favorite in early rounds of the event.
What’s a guy gotta do to win?
Plain and simple, know the odds, watch if they move, and bet on the team that you know will win. Sometimes, sportsbooks will offer a “bad line”, where they grossly underestimate the potential of the underdog to win. In these guys, wise bettors will bet with the dog, and when all is said and done, they will make a nice bit of cash. If you get really good at spotting bad lines, you’ll be known as “shark” or “wiseguy” to sportsbook linesman. Accordingly, the linesman will watch how you bet, and how the crowd is betting, in general, on a event. Should things get lopsided, the odds will change up until the moment the matchup begins.
Good luck from Sportsbetting3.com!
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