Sportsbook for Dummies: What are the odds?
One day, after many years of sports betting I had a conversation with a person working for a bookmaker. It was in the betting shop where he worked as a manager. So I asked him "Why are the odds on Liverpool's away win only 1.5". You won't believe what his answer was. A simple sentence... "No fucking idea".
I asked a few more questions and came to realize that he knows no more about sports betting than I do. I believe he does not deserve any more judgement than I do. He was working for a bookie not having an idea how things work, but I was the one having my money in play - and most of the time losing it.
This however sparked a curiosity in me. How does a sportsbook exactly work? Are the bookmakers risk takers? What are the odds? How are the odds created? Why am I most of the time losing money?
I thought bookmakers were in a risky business but guess what... they are not. Of course, you have to have deep business knowledge otherwise you'll get screwed from different sides, but the odds are playing in your favour. Let's start with the very basics and that is the following question.
What odds stand for?
The short answer is "probability", but it is not that simple. Let me demonstrate this in the match between Liverpool and FC Barcelona played in 2019. After the huge 3:0 defeat at Barcelona, the bookies fancied Liverpool to win the home much with decimal odds 2.5 (traditional British odds 3/2). Putting the decimal odds into the calculator we get an implied probability of 40%. The math is simple 1 : 2.5 x 100 = 40%.
Did the 40% represent the real probability of Liverpool's win? Of course not. Bookies are using complicated predictive algorithms and the outcome is verified retrospectively. For now we would like to speak about fair odds. Fair odds is something you don't get from a bookie. Let's say the predictive algorithms of a bookmaker came up with odds 2.8 (35,7%). The difference between the odds offered and the fair odds is the market margin of a bookie. The average margin is usually 7% per match and that is what bookies aim to keep from the volume of bets.
This means that if punters placed bets worth 1 million, statistically should bookmakers keep 70 000. To succeed, they need to spread the stakes in the correct ratio between a home win, a draw and away win. They do it by moving odds up and down. how exactly is beyond my knowledge. I recommend the betting academy at rowdie.co.uk to find out more about it.
Can the bookmakers lose?
Of course they can and every now and then they really do. But imagine you have 1000 fixtures per day and now I am talking about football. Each fixture has about 30 more bet options (handicaps, exact score, number of goals...) and adding other sports, you get thousands of betting options per day and with that volume it doesn't really matter if you lose one game. At the end of the day the outcome should be close to your market margin. It is obvious that bookmakers are not really the risk takers.
Why do people lose in sportsbooks?
From my point of view, the answer might be that they are doing something they don't understand. They take the offered odds most of the time without thinking twice. The punters don't understand the math and probability in the background.
There is one simple solution to it. Take you time to study. It only takes a couple of hours and gives you so much more advantage. Remember: It is your money that is in play in Sports betting.