Subtitle: two ways to win at sports betting
In my previous post, I looked at decimal odds from the players perspective. In this post I will consider decimal odds, or the price in general, from the sportsbook perspective.
I'll use a running example for this post. Suppose for some upcoming football game the analysis desk at the sportsbook determines that the favorite for this game has an 80% chance to win the game. The underdog has a 20% chance to win.
How would the house post a line for players to bet against. From my previous post, from the players perspective
x = 1 / D
where x is the players break-even probability, and D is the decimal odds.
Now for the house it then is
D = 1 / x
The house is holding the probabilities x, and can use these to calculate its break-even odds D. So for this game the favorite is 4/5, and the underdog is 1/5. So the house is indifferent with the lines
favorite decimal odds line: 1 / (4/5) = 1.25
underdog decimal odds line: 1 / (1/5) = 5.0
If the analysis desk is right about the probability, then this line would be unexploitable to the house. The house would expect to break even.
Now the house wants to make a profit, not just break even. So the book could take the mathematical break even line above, and shave a bit off it to create some profit margin - a some margin of error in their analysis of the game.
So if the house takes a 10% discount off the mathematical line, then the players could see a posted line of
favorite line: 1.13
underdog line: 4.5
--
Now I promised to show two ways to win at sports betting. The first way to win is when your analysis of the game is better than the sportsbook analysis. Suppose you've studied this football game and you feel the favorite is stronger, 90% to win the game.
At 1.13, your break even point x is 88.4% if your analysis is better than the house analysis then you can make an expected profit betting on the favorite.
--
When the house posts lines, one of their goals is to balance the action. When the action is properly balanced, the house will make a profit on the game no matter which side actually ends up winning.The house has none of its own money at risk. Winning wagers are paid out from losing wagers, and there is some left over for an operating margin for the sportsbook.
I imagine that when the profit is assured, the sportsbook can pour a cold beer, sit back and just enjoy watching the game along with all of the players.
Consider again the football game above. Suppose the betting action comes in at the same ratio as the mathematical line. 80% on the favorite, 20% on the underdog. Suppose 5 people each make a $10 bet on the game. So 4 bets on the favorite at 1.13 and 1 on the underdog at 4.5. The house takes in $50 from the five players.
If the favorite wins then the house pays out 4 $11.30 tickets, so it pays out $45.20
If the underdog wins then the house pays out 1 $45 ticket, so it pays out $45
So the action on this game is properly balanced. The house will make a profit no matter what happens in the game. All winning bets are paid out with the money from the losing bets. None of the sportsbook money is at risk in this game.
--
Trying to balance the action leads to the second way to win at sports betting. Suppose the risk management desk looks at the discounted mathematical line from above of 1.13 / 4.5 risk management is concerned there will be too much action on the favorite, putting house money at risk if the favorite wins. Cutting the line on the favorite to 1.10 might help some. But to get more action on the underdog to balance the action, the house moves the line to 5.5 on the underdog.
Now the break even line on the underdog is 5.0 at 5.5 it is profitable to take the underdog - even though you will lose the bet 80% of the time. So sometimes the house may post lines to balance the action that are profitable opportunities.
No comments:
Post a Comment