People love to wager on sports, and the betting odds are always a hot topic when it comes to sportsbooks. People usually ask the question, “How do the odds work?” This article will answer that question and shed some light on how bookmakers make their money.
Understanding The Roles Of The Stakeholder
Before diving into the nitty-gritty of how betting odds work, it’s important to understand the roles of the stakeholder. The bookmaker is the person who stands to gain or lose depending on whether or not the bet pays off. This can be either in the form of cash, chips, or both. The bookmaker is obligated to put up the money for the bet if the bet wins, and he will have to pay the winning amount to the bettor. This is typically done through a combination of banking and legal agreements, contracts, and fiduciary responsibility. The bookmaker is also legally obligated to pay out on any winning bets whether they are fixed or live.
The bookie is responsible for generating revenue and managing expenses. This is typically done through taking bets from and putting down bets on behalf of others. The bookmaker takes a cut of the profits when someone wins a bet, and he is also responsible for paying overdue debts. In most cases, the bookmaker is not allowed to take any more bets from that point forward. The last thing a bookmaker wants is to be penalized by the sports authority for taking too many wagers.
The Fundamental Principles Of Bookmaking
In 1885, a 22-year-old named William “Billy” Hill founded the American Book Exchange in Chicago, Illinois. Since then, bookmakers have relied on a number of fundamental principles in order to successfully do their business. Some of these principles are as follows:
- Fair Betting: All sportsbooks provide equal odds to all bettors, regardless of whether or not they are professional bettors. The house advantage is not factored into the pricing of the wagers.
- Full Disclosure: The sportsbooks provide all the relevant information about the teams and players involved in the upcoming game. There are no secret formulas or random number generators used in the formation of the odds.
- Tracking Accuracy: The sportsbooks use well-trained, experienced editors who check the scoreboards, stats, and other pertinent information before putting together the odds sheets.
- Sports Security: The sportsbooks are responsible for ensuring the security of the sport. They may utilize safes, locks, and other security features that are intended to prevent theft, fraud, and other nefarious activities in their facilities.
- Treat Everybody Fair: The bookmakers strive to treat all their customers with respect and fairness, offering them a pleasant betting experience and great service.
- Caveat Emptor (Let The Buyer Beware): The bookmakers never guarantee a specific payout, winning amount, or profit margin. The onus is always on the user to do their own research before placing a wager.
- No Free Rides: The sportsbooks compensate the bettor if the bet loses, which is commonly referred to as “eating your loss.” The bookmaker will not provide any special perks, promotions, or other inducements to the bettor to place a wager. This practice is commonly referred to as “greasing the wheels.”
- Above All, Protect The Integrity Of The Sport: The bookmakers are ethically bound to uphold the integrity of the sports they cover. They may not promote any particular players, coaches, or teams, and they must always stand behind the results of the games they cover. If someone suspects fraud or corruption, the sportsbook must cooperate with any investigations or proceedings that may result.
How Long Does It Take To Set The Odds?
The time it takes to establish the odds for a given sporting event can vary dramatically, but it usually takes about as long as it takes to settle the bet. If you are planning on placing a wager this week, you can typically expect to wait a few days for the odds to be set and available for use. There are some exceptions to this rule, such as major college football and basketball championships where the odds are usually set overnight for the following day’s games.
What If The Line Is Laced?
Traditionally, bookmakers will account for a lain wager by giving the bettor the “under” amount they are willing to risk. This is typically done when a bet is made at a ridiculously profitable odds, which the sportsbook is not willing to lose. If the line is set at -400 and the bet is for the “over” amount, the bookmaker would give the bettor three-hundred dollars rather than taking the bet themselves. The advantage of this approach is that it allows the bookmaker to collect on the bet if it wins, but if it loses, they are not stuck with the entire amount they laid off on the bet.
What Is The Margin Of Acceptability?
If you’re a regular customer of a particular sportsbook, you may also have the pleasure of receiving emails updating you on the status of your account. The bookmaker will typically include a small margin of acceptable range in these emails, as they want to keep you as a customer and not jeopardize your gambling experience by insulting your intelligence with an overly optimistic assessment of your chances of winning. If you receive a message that contains a list of the allowed margins of victory for a particular event, you can assume that the bookmaker is being overly cautious and is not very confident in your chances of winning.
How Do Bookmakers Make Money?
There are four primary ways that bookmakers make money:
- Commission: The bookmakers receive a commission from the winning bets. This is typically less than half of the amount wagered, though some sportsbooks can make a higher take.
- Markers (or Tic-Tacs): The bookmakers allow users to wager on a range of sporting events including horse racing, basketball, and football. The markers hold no cash value and are used only to track bets. The betting volume in markers is typically higher than in cash because there is no actual conversion of the marker into cash. The only way to cash out is to sell the marker back to the bookmaker. The downside to this approach is that markers are only accepted at bookmaker-owned casinos.
- Handicapping: The bookmakers take bets on which team will win specific games. They use advanced statistics to determine the outcome of those games and produce an edge for themselves in the form of a profit. This is the most popular way of making money for sportsbooks because it is easy to grasp. The downside is that it is incredibly difficult to successfully handicap individual games. Furthermore, the edge can sometimes be quite small and requires a lot of repetitiveness on the part of the bettor. Many people consider handicapping to be a form of gambling rather than sports betting, and it is definitely something that you would want to avoid if you want to keep your good standing with the poker room management.
- Liar’s Poker: This is a form of bookmaking where the bookmaker will intentionally overestimate the chances of a team or player in an attempt to get a leg up on the competition. Liar’s Poker is usually performed on big-ticket events like the Super Bowl, World Cup, or NCAA Basketball Championships where the competition is very high. The upside of this method is that it is very effective at getting the attention of potential customers, who may wager on the sportsbook’s behalf. The downside is that it is very unethical and a clear indication that the bookmaker is trying to defraud other bettors.
- Profit-Sharing: This is a relatively new form of bookmaking, used more and more often by the smaller and more independent bookmakers. The advantage of profit sharing is that it is a lot more convenient for the bookmaker. They simply take a cut of the profits rather than having to establish their own book on a daily basis. The downside is that the profit-sharing relationship can be a little shady; the bookmaker simply shares the winnings with the user without disclosing how they came up with the winnings in the first place.
Hopefully, this article has helped shed some light on how betting odds work. It is always a good idea to do your own research before placing a wager, but as long as you are aware of the risks involved in gambling, you will be able to form a better understanding of how the odds work and, more importantly, how to beat them. Play responsibly and enjoy your time at the casino.