Betting on sports is exciting, but have you ever wondered who sets the odds and how sportsbooks actually calculate them?
We are talking about a billion-dollar industry where sportsbooks are thriving, therefore it seems like they’ve developed a bulletproof system for calculating odds and setting lines, otherwise they would have been all out of business.
Calculating the odds and setting lines is based on an in-depth analysis of many different factors that can influence the outcome of a game. In other words, this process requires data, a lot of data!
Analyzing the data will give sportsbooks a probability a chance. In other words, how likely a certain event in a match will happen. This is where the odds and lines are born.
Online sportsbooks work differently from online casinos. Sportsbooks use systems to analyze historical data, while casinos like OC88 are based on RNG. You can learn more about OC88 here.
The process of placing a bet on a sports match is no different for bettors. They also look at data and make a decision. However, understanding how odds work and how sportsbooks set lines can actually help you understand the process better and therefore make more calculated decisions.
In today’s article, we will dive into the process of how sportsbooks calculate odds and set lines.
Photo: Photo by Valentin Balan on Unsplash
What are the Odds?
Odds in sports betting describe the likelihood of a specific event occurring. They come in a variety of forms, including decimal, fractional, and American odds. Decimal odds reflect the overall payment, which includes your investment, whereas fractional odds show the possible profit in relation to your stake.
American odds, often known as moneyline odds, show how much you must risk to win $100 (positive odds) or how much you would gain with a $100 bet (negative odds).
How are Odds Calculated?
Nobody really knows the exact system sportsbooks use to calculate odds accurately, but it is safe to say that they are not doing it by hand. In fact, they use complex algorithms and statistical models to calculate the probability or chance of a match.
Basically, the software analyzes data with parameters like players' statistics, injuries, home or away, historical matchups, form, team performance, and much more to come up with a probability for a certain event.
Then this probability which comes in a percentage from 0-100% is converted to odds to make the process less understandable by players. These advanced algorithms that are recently infused with the power of big data and AI are getting more and more accurate. They are also capable of generating probabilities for many different outcomes in a sports match.
Example Scenario:
Let's say a basketball game is scheduled between Team A and Team B. Sportsbooks consider Team A as the favorite due to their recent winning streak and strong lineup. The odds for Team A might be -150 (American odds), implying you need to bet $150 to win $100. On the other hand, Team B's odds might be +120, meaning a $100 bet would yield $120 in profit if Team B wins.
What are Betting Lines?
Betting lines, also known as point spreads or handicaps, level the playing field by giving an advantage or disadvantage to teams. They aim to attract equal betting action on both sides of a bet, ensuring the sportsbook profits regardless of the outcome.
How are Lines Set?
Sportsbooks adjust betting lines based on betting trends, sharp bettors' actions, and new information. If the majority of bets favor one team (creating an imbalance), the sportsbook may adjust the line to encourage betting on the other side, balancing their liabilities.
Balancing Act:
Imagine a football game where Team X is heavily favored. To balance the action, the sportsbook may set a point spread of -7 for Team X and +7 for Team Y.
This means if you bet on Team X, they must win by more than 7 points for your bet to win. Conversely, if you bet on Team Y, they can either win the game or lose by less than 7 points for your bet to succeed.
The Human Factor
Behind the algorithms and data crunching, there's a human touch that fine-tunes the odds and lines. Oddsmakers, often with years of experience and deep sports knowledge, play a crucial role.
They blend data-driven insights with intuition, adjusting lines based on subtle factors like team chemistry, motivational factors, and historical trends that algorithms may overlook.
Final Words
Basically, sportsbooks want people to bet equally on two different outcomes. That’s why they adjust the lines based on betting trends which translates into profit.
If two opposite outcomes have the same amount of money placed by bettors, the sportsbook will break even, meaning that it will take the money from the losing bets to pay out the winning bets, and in most cases, they will make a profit.
Understanding how odds and lines work and how they are actually set by sportsbooks can help you increase your winning chances. Now that you know how the system works, let’s put it into practice and test out a few strategies.