Post by account_disabled on Nov 3, 2020 7:51:47 GMT 2
One of the fundamental, appealing aspects of sports betting is that it’s possible to consistently make a profit. You need to know what you are doing and apply the right strategies, but it can be done. However, most bettors lose money in the long run. There are several reasons why this is the case, one of which is the fact that bookmakers use certain techniques to make sure they are always at an advantage.
Successful sports betting is basically about overcoming this advantage. Bookmakers are essentially your opponents, and you have to learn how to beat them. Before you can do this, you need to understand exactly how they are ensured to make money.
In this article, we explain the methods bookmakers use to give themselves the advantage. We also look at the other main reason why they make money: most bettors make bad bets.
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So, How Exactly Are the Bookmakers Making Money?
Bookmakers make money by the following:
They set the right bet prices (the vig)
Setting and changing the betting lines
Balancing the Book – Eliminating Risk
Counting on Bettor Emotions and Lack of Knowledge
Basic Principle of Bookmaking
The basic principle of bookmaking is straightforward and pretty obvious. A bookmaker takes money in whenever they lay a bet to a customer, and they pay money out every time one of their customers wins a bet. The idea is to take more money in than pay out. The art of bookmaking is in making sure this happens.
Bookmakers can’t control the outcome of sports events, but they can control how much they stand to win or lose on any particular result. They set the odds for all the wagers they lay, which ultimately enables them to ensure a profit.
Charging Vigorish/The Overround
The main technique bookmakers use to put the odds in their favor is the inclusion of vigorish. Vigorish, or vig, is also known as juice, margin, or the overround. It is built into the odds bookmakers set to help them make a profit. In essence, it’s a commission charged for laying bets. To best explain vig, we’ll use a simple example of a coin toss.
The toss of a coin has two possible outcomes and each is equally likely. There is a 50% chance of heads and a 50% chance of tails. If a bookmaker were offering true odds on the toss of a coin, they would offer even money. This is 2.00 in decimal odds, +100 in moneyline odds, and 1/1 in fractional odds. A successful $10 bet at even money returns $20, which is $10 profit plus the initial stake back.
Let’s say this bookmaker had 100 customers all betting $10 on the toss of a coin, with half of them betting on tails and half of them betting on heads. The bookmaker would stand to make no money at all in this scenario.
Even Money Payout Example
As you can see from the above image, the bookmakers are taking in a total of $1,000 in wagers, but they also have to pay out a total of $1,000 in winnings whatever the result. Since they are in business to make money, this is obviously not a good scenario.
This is precisely why they build in the vig to the odds. They can thus guarantee, theoretically at least, that they will make money regardless of the outcome. When two outcomes are equally likely, it is common for them to use odds of 1.9091 (-110 in moneyline, 10/11 in fractional).
Continuing with the coin toss example, the odds on heads and tails would still both be the same, but they would now be at 1.9091. This means that a successful $10 would return a total of $19.09 ($9.09 in profit, plus $10 original stake).
Let’s see how that looks for the bookmaker now, with 50 customers betting on tails and 50 customers betting on heads.
-110 Payout Example
As you can see, the change in odds has made a big difference, and the bookmaker is now making a guaranteed profit on every toss of the coin. The total amount they pay out is always going to be $954.50 against the $1,000 they have received in total wagers. Their built-in profit margin of $45.50 is the vigorish, or overround, and it’s usually expressed as a percentage of the total wagers received. In this case, the vig is equal to roughly 4.5%.
This is a very simplified example, but it does serve to illustrate how bookmakers set the odds to give them an advantage. Things get a little more complicated when it actually comes to sports events, as the possible outcomes aren’t usually equally likely. There are more than two possible outcomes in many betting markets, and bookmakers aren’t always going to take in exactly the same amount on all possible outcomes.
For these reasons, making money as a bookmaker isn’t as straightforward as simply charging vig. Other techniques are required to ensure consistent profits, and this is where the role of odds compilers comes in.
The Role of Odds Compilers
Odds compilers set the odds at bookmaking firms. They are also known as traders, and their role is absolutely essential. The odds they set eventually determine how much in wagers a bookmaker is likely to take in, and how much money they are likely to make. The act of setting the odds for a sports event is known as pricing the market.
There are a number of aspects involved in pricing up markets for sports events. The primary goal is to make sure the odds accurately reflect how likely any particular outcome might be, while also ensuring that there’s a built-in profit margin. Determining the likelihood of outcomes is largely based on statistics, but very often a certain amount of sports knowledge must be applied as well.
Compilers therefore have to be very knowledgeable about the sports for which they are pricing markets; thus, they often specialize in just one or two. They also have to have a solid understanding of various mathematical and statistical principles.
Let’s look at how a compiler might price up a market for a tennis match in which Novak Djokovic is playing Andy Murray. These two players are very close in ability, so the compiler would have to take a number of factors into consideration. They would look at current form, for example, and each player’s known ability on the relevant playing surface. They would also take the results of past meetings into account.
Based on all these factors, they might reach the conclusion that Djokovic has roughly a 60% chance of winning the match and Murray roughly a 40% chance. The odds that approximately reflect these chances are Djokovic at 1.67 and Murray at 2.50. These odds don’t include any vig, which would also need to be considered.
Generally speaking, compilers have a target margin. This may vary quite significantly for any number of reasons, but let’s assume in this case that the compiler wants around a 5% margin. They would reduce the odds for each player by 5%, giving 1.59 for Djokovic and 2.38 for Murray.
A bookmaker’s margin can be calculated by adding the reciprocal of the odds for all possible outcomes and converting it to a percentage. In this case, there are two possible outcomes, and the following equation would be used.
Compiler Example
As you can see, the compiler has achieved the target of a 5% margin. However, the job doesn’t end there. Compilers also have to try and make sure that a bookmaker has a balanced book.
Successful sports betting is basically about overcoming this advantage. Bookmakers are essentially your opponents, and you have to learn how to beat them. Before you can do this, you need to understand exactly how they are ensured to make money.
In this article, we explain the methods bookmakers use to give themselves the advantage. We also look at the other main reason why they make money: most bettors make bad bets.
White and Green Bovada Sports Betting Banner
So, How Exactly Are the Bookmakers Making Money?
Bookmakers make money by the following:
They set the right bet prices (the vig)
Setting and changing the betting lines
Balancing the Book – Eliminating Risk
Counting on Bettor Emotions and Lack of Knowledge
Basic Principle of Bookmaking
The basic principle of bookmaking is straightforward and pretty obvious. A bookmaker takes money in whenever they lay a bet to a customer, and they pay money out every time one of their customers wins a bet. The idea is to take more money in than pay out. The art of bookmaking is in making sure this happens.
Bookmakers can’t control the outcome of sports events, but they can control how much they stand to win or lose on any particular result. They set the odds for all the wagers they lay, which ultimately enables them to ensure a profit.
Charging Vigorish/The Overround
The main technique bookmakers use to put the odds in their favor is the inclusion of vigorish. Vigorish, or vig, is also known as juice, margin, or the overround. It is built into the odds bookmakers set to help them make a profit. In essence, it’s a commission charged for laying bets. To best explain vig, we’ll use a simple example of a coin toss.
The toss of a coin has two possible outcomes and each is equally likely. There is a 50% chance of heads and a 50% chance of tails. If a bookmaker were offering true odds on the toss of a coin, they would offer even money. This is 2.00 in decimal odds, +100 in moneyline odds, and 1/1 in fractional odds. A successful $10 bet at even money returns $20, which is $10 profit plus the initial stake back.
Let’s say this bookmaker had 100 customers all betting $10 on the toss of a coin, with half of them betting on tails and half of them betting on heads. The bookmaker would stand to make no money at all in this scenario.
Even Money Payout Example
As you can see from the above image, the bookmakers are taking in a total of $1,000 in wagers, but they also have to pay out a total of $1,000 in winnings whatever the result. Since they are in business to make money, this is obviously not a good scenario.
This is precisely why they build in the vig to the odds. They can thus guarantee, theoretically at least, that they will make money regardless of the outcome. When two outcomes are equally likely, it is common for them to use odds of 1.9091 (-110 in moneyline, 10/11 in fractional).
Continuing with the coin toss example, the odds on heads and tails would still both be the same, but they would now be at 1.9091. This means that a successful $10 would return a total of $19.09 ($9.09 in profit, plus $10 original stake).
Let’s see how that looks for the bookmaker now, with 50 customers betting on tails and 50 customers betting on heads.
-110 Payout Example
As you can see, the change in odds has made a big difference, and the bookmaker is now making a guaranteed profit on every toss of the coin. The total amount they pay out is always going to be $954.50 against the $1,000 they have received in total wagers. Their built-in profit margin of $45.50 is the vigorish, or overround, and it’s usually expressed as a percentage of the total wagers received. In this case, the vig is equal to roughly 4.5%.
This is a very simplified example, but it does serve to illustrate how bookmakers set the odds to give them an advantage. Things get a little more complicated when it actually comes to sports events, as the possible outcomes aren’t usually equally likely. There are more than two possible outcomes in many betting markets, and bookmakers aren’t always going to take in exactly the same amount on all possible outcomes.
For these reasons, making money as a bookmaker isn’t as straightforward as simply charging vig. Other techniques are required to ensure consistent profits, and this is where the role of odds compilers comes in.
The Role of Odds Compilers
Odds compilers set the odds at bookmaking firms. They are also known as traders, and their role is absolutely essential. The odds they set eventually determine how much in wagers a bookmaker is likely to take in, and how much money they are likely to make. The act of setting the odds for a sports event is known as pricing the market.
There are a number of aspects involved in pricing up markets for sports events. The primary goal is to make sure the odds accurately reflect how likely any particular outcome might be, while also ensuring that there’s a built-in profit margin. Determining the likelihood of outcomes is largely based on statistics, but very often a certain amount of sports knowledge must be applied as well.
Compilers therefore have to be very knowledgeable about the sports for which they are pricing markets; thus, they often specialize in just one or two. They also have to have a solid understanding of various mathematical and statistical principles.
Let’s look at how a compiler might price up a market for a tennis match in which Novak Djokovic is playing Andy Murray. These two players are very close in ability, so the compiler would have to take a number of factors into consideration. They would look at current form, for example, and each player’s known ability on the relevant playing surface. They would also take the results of past meetings into account.
Based on all these factors, they might reach the conclusion that Djokovic has roughly a 60% chance of winning the match and Murray roughly a 40% chance. The odds that approximately reflect these chances are Djokovic at 1.67 and Murray at 2.50. These odds don’t include any vig, which would also need to be considered.
Generally speaking, compilers have a target margin. This may vary quite significantly for any number of reasons, but let’s assume in this case that the compiler wants around a 5% margin. They would reduce the odds for each player by 5%, giving 1.59 for Djokovic and 2.38 for Murray.
A bookmaker’s margin can be calculated by adding the reciprocal of the odds for all possible outcomes and converting it to a percentage. In this case, there are two possible outcomes, and the following equation would be used.
Compiler Example
As you can see, the compiler has achieved the target of a 5% margin. However, the job doesn’t end there. Compilers also have to try and make sure that a bookmaker has a balanced book.