One of the fundamental, enticing aspects of sports betting is that it is possible to regularly make a profit. You need to know what you’re doing and apply the right techniques. However, you can do that. However, most bettors are losing money in the long run. There are many reasons why this is the case: bookmakers use such strategies to ensure that they are always advantageous.
Productive sports betting is simply about overcoming this advantage. Bookmakers are actually your rivals, and you need to learn how to defeat them. Before you can do this, you need to know exactly how they make money.
In this article, we clarify the methods used by bookmakers to give themselves the advantage. We’re also looking at the other key explanation of why they make money: most bettors make poor bets.
Table of content:
- How Exactly Do Bookmakers Make Money?
- Basic Theory of Bookmaking
- The Overround/Charging Vigorish
- The Role of Odds Compilers
- Creating a Balanced Book
- Summary
How Exactly Do Bookmakers Make Money?
Bookmakers make profits from the following:
- Set the correct bet rates (the vig)
- Counting on Bettor’s feelings and lack of information
- Setting and adjusting the betting line
- Balancing the Book – Eliminating Risk
Basic Theory of Bookmaking
The basic theory of bookmaking is easy and very clear. A bookmaker takes money in if they put a bet on a customer, and they pay money out every time one of their clients wins a bet. The intention is to make more money than to pay. The art of bookmaking is to make sure this happens.
Bookmakers cannot influence the outcome of sporting events, but they can influence how much they hope to win or lose on any specific outcome. They set the odds on all the bets they lay, which eventually enables them to make a profit.
The Overround/Charging Vigorish
The key strategy used by bookmakers to place odds in their favor is the use of vigorish. Vigorish is also recognized as margin, juice, or overround. It’s incorporated into the odds bookmakers set up to help them make a profit. Essentially, it’s a commission paid for laying bets. We’ll use a simple illustration of a coin toss to illustrate vig best.
The flip of a coin has two potential outcomes, one of which is equally likely. There is a 50 per cent chance of a head and a 50 per cent chance of a tail. If the bookmaker offered true odds on the flip of a coin, they would offer even money. And that is 2.00 in decimal odds, 1/1 in fractional odds, and +100 in money-line odds. A good $10 bet on even money yields $20, which is a $10 profit plus the original stake back.
Let’s say this bookmaker had 100 bettors all betting $10 on a coin toss, half of them betting on the heads, and half of them betting on the tails. In this case, the bookmaker will stand to gain no money at all.
As you can see from the above illustration, bookmakers are making a sum of $1,000 in bets, but they also have to pay a lump sum of $1,000 in winnings, whatever the outcome. Since they are in the business of making profits, this is definitely not a positive scenario.
That’s exactly why they ramp up in the vig to odds. They should also guarantee, theoretically at least, that they can make money regardless of the result. When two outcomes are reasonably plausible, it is common for them to have 1.9091 odds (10/11 in fractional, -110 in moneyline).
Going with the coin toss illustration, the odds on the heads and tails would still be the same, but now they would be 1.9091. This means that a good $10 would yield a total of $19.09 ($9.09 in returns plus $10 in initial stake).
The Role of Odds Compilers
Odds compilers fix the odds for bookmaking firms. They are also regarded as traders, and their position is absolutely crucial. The odds they set will ultimately decide how much the bookmaker’s wagers are likely to draw in, and how much money they are likely to make. The process of setting the odds for a sporting event is known as market pricing.
There are a variety of factors involved in pricing markets for sporting events. The primary objective is to ensure that the odds correctly represent the probability of any particular result while ensuring an integrated profit margin. The determination of the probability of results is mainly based on statistics, but very often, a certain amount of sporting expertise must also be applied.
Thus, compilers need to be very informed about the sports for which they are pricing markets; therefore, they frequently specialize in only one or two of them. They will need to have a solid understanding of the different mathematical and statistical concepts.
Let’s look at how a compiler could price up a tennis match market in which Novak Djokovic plays Andy Murray. These two players are very similar in capacity, so the compiler will have to take various factors into account. For example, they will look at each player’s current type and the known skill on the relevant play surface. They will also take into account the outcome of previous meetings.
Based on all these variables, they would conclude that Djokovic has about 60 per cent chance of winning the game, and Murray has about 40 per cent chance of winning the game. The odds that roughly reflect these probabilities are Djokovic at 1.67 and Murray at 2.50. These odds do not encompass any vig, which would also have to be considered.
Compilers usually have a goal margin. This can vary very dramatically for any number of different reasons, but let’s say in this case that the compiler needs about a 5% margin. They will lower the odds for each player by 5%, giving Djokovic 1.59 and Murray 2.38.
The bookmaker’s margin can be determined by applying the reciprocal of the odds to all potential outcomes and translating it to a percentage. There are two potential outcomes in this case, and the following equation will be used.
Margin= (1/1.590) + (1/2.38) = 1.05 = 105%
Creating a Balanced Book
If a sportsbook has a balanced book on a particular market, they stand to make approximately the same amount of money, regardless of the outcome. For an unbalanced book, the outcome will affect how much is made, and may even result in a loss. A balanced book is usually a preference, for apparent reasons, and is what odds compilers usually target.
Summary
Now it should be evident why bookmakers have a mathematical advantage over their customers. They don’t always win money on any single market they price up, but this advantage tends to ensure that they win money in the long run.
However, the advantage can be beaten. It’s not like casino games where odds are stacked against you, no matter what you do. That being said, the mathematical advantage is not the only reason why bookmakers make money. Their success is also due to the simple fact that most bettors place more bad bets than good bets.
To stop being one of those bettors, you need to consider what makes a good bet. Contrary to what many assume, a successful bet doesn’t just bet on what you think could happen. While this strategy can be effective if you are always accurate enough to predict the results of sporting events, the fact is that most people are not.
For the best possibility of winning money on sports betting, you need to recognize good value betting opportunities.
