A few weeks ago, I wrote a piece
about expected value
and I told you that you’d better become best friends with odds,
probability, and statistics extremely fast if you wanted to take your
handicapping to the next level. Well today, I am here to tell you that you
are going to want to make a new friend, and his name is economics.
Economics is the study of supply and demand and often can be used to study
certain financial markets. I completely understand if you’re asking
yourself why this even matters when it pertains to sports betting, but the
two essentially go hand-in-hand once you understand how the oddsmakers use
economics to help secure bigger profit margins.
The goal of this article is to study the structure of the sportsbooks and
understand how oddsmakers use the practice of ‘Line Shading’ to help
increase profit margins and decrease the bettor’s chances of winning. The
best way to start is by taking a look at a simple example centered around a
Vig in Sports Betting Explained
Sportsbooks Profit Margin – The Short Answer
For the purpose of this example, we are going to stick with the -110
standard point spread line. As I’m sure you already know, the -110 line
means that in order for you to profit $100, you must bet $110. If you win,
you would receive $210 (your original stake – $110 plus the $100 winnings).
If you were to lose the bet, you would lose $110.
Because all sportsbooks are in the money-making business, they would
receive 4.5 percent or $10 of the combined $220 betting action. We already
know that a bettor must win 52.38 percent of his bets in order to break
even by consistently betting -110 lines. If we were to look at this example
, you would find them to be exactly centered with the exact probability of
the game’s outcome.
For example, if you have a game featuring the Miami Dolphins and Buffalo
Bills, the Dolphins would be -220 favorites, while the Bills would check in
at +180. This means that the game is exactly centered at 200, which says
that the favorite has a 66.7 percent chance of winning, while the underdog
has a 33.3 percent of winning. This line is not shaded in either direction
and as such, will allow the sportsbook to maintain their 4.5 percent profit
margin over the long-term.
Sportsbooks Profit Margin – Shading the Line
I can’t restate this fact enough – sportsbooks are in the business of
making money and will do anything they can to boost their bottom line. That
includes taking advantage of human tendencies and shading the line so that
they can increase their profit margins. Typically, we as human beings like
to bet on favorites and “overs”. Sportsbooks know this well in advance and
shade the line so that the favorite becomes overpriced and the total is
In the above example, a game that is centered around 200 would bring in a
profit margin of 4.5 percent. If the sportsbooks know that most people want
to bet on the favorite in this spot, they would take action and shade the
line so that the probability of the favorite winning went down from 66.7
percent to around 65 percent of the time.
By doing so and having around 60 percent of the public money backing this
now shaded favorite, the profit margins jump from 4.5 percent to 4.9
percent. If the sportsbooks felt the need to shade it another percent down
to a win probability of 64 percent, the profit margins would then jump to
5.3 percent with 60 percent of bettors backing this side and 6.7 percent
with 80% percent of backers betting the favorite.
What Does Line Shading Mean for Bettors Moving Forward?
Well, now that you are aware that sportsbook practice line shading to help
increase their profit margins, you must really trust your instincts and
models that give you the true odds or probability of a certain team
winning. If you feel like the number is off, and you can find a +EV, then
jump on the opportunity and don’t look back. If you believe that the
numbers are skewed or inflated in a negative way against you, I would
recommend looking elsewhere for a game to bet because the sportsbooks have
already taken any value that was in the line right out of it. It would
almost be the smarter play to take the +180 underdog more often than a -220
favorite given the fact you’d only need a 33 percent cash rate to break
even betting the dog whereas you would need to win an at 66 percent clip to
break even betting the favorite. And lastly, it’s never a bad idea to bet
against the public.
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