Most people have the same goal wen betting on sports. Maximize profits while having fun at it. But in order for this to happen one must first understand what is happening on the other side and what the handicappers are doing. The best way to gain an edge is to understand how sports betting lines are created and adjusted in the same way that an economist would study supply and demand or other themes relate to economics.
Most people like to bet on favorites and overs. Sportsbooks pad their pockets by shading the lines to overprice favorites and overs, on average.
There have been several articles and sources that suggest that this shading takes place. There are articles that state that sportsbooks could potentially improve their profit margins 20-30% by shading their lines. Here, we study the market structure of the sports betting world and see if this makes sense. Instead of centering the line of a game, what if sportsbooks shaded their lines to make certain teams more expensive?
First, we studied a sportsbook’s profit margin if they shaded their lines so that the probability distribution was shifted 1%. For example, the game priced at 180/-220 is centered at 200, so that the favorite might be expected to win two-thirds (66.7%) of the time. Since the sportsbooks know that most people will want to bet on the favorite, they might shift the probability distribution, or pricing, of the event so that this favorite might win only 65.7% of the time.
The best way to understand how the sports books maximize their profit margin is by using the standard -110 line as an example. Any line set at -110 means that the bettor has to risk $110 to win $100. If they win, they get their initial $110 wager as well as $100 in winnings for a grand total of $210. If they lose, they drop $100. In losing instances, the sports book receives $10 more than it would have to pay out for a winning wager, which is 4.5% of the combined $220 betting action. According to these numbers, the bettor would need to win between 52% and 53% of their wagers in order to break even. This simple example illustrates how the sports books use lines to ensure that they have a constant edge over the public. No matter what wagers are placed, the sports book will maintain a 4.5% profit margin.
Now that you understand the basic edge that the sports books keep on all wagers, we can build off those numbers to understand what happens when the books shade their lines to take advantage of human tendencies.
If the greater percentage of the public bets on the favorites to win then the books can shade the lines in order to make sure they pad their pockets with overpriced favorites. If the favorite is moved from -110 to -200, then the book has significantly increased its profit margin should they lose. Sign up now at Heritagesports