Last
week, I discussed some of the factors involved in betting on preseason
football. One portion of that column featured an interview with
BoDog's top bookmaker Kent where I quoted him as saying "we just
follow the money and try a lot harder to balance action" in reference
to moving lines on preseason games. This week I want to explain line
moves from the House's point-of-view in more detail. Much of this
comes from a similar article I wrote last football season, but I think
it is important enough for bettors to understand how a sportsbook
operates that I will publish it every year!
Remember that sportsbooks make their money by withholding a small
commission on winning wagers. If Player A bets on Atlanta -4, risking
the standard $110 to win $100 and Player B bets $110 to win $100 on
Buffalo +4, then the sportsbook makes $10 regardless of the outcome,
as long as the final score isn't Atlanta by 4 points (in which case
both wagers would be pushed and nobody makes any money). Since the
total wagered is $220, the house's gross profit % in this simple
scenario is about 4.5%. This number is the Theoretical Hold
Percentage (or THP for short) for a straight wager. Now lets
discuss a couple of reasons why this number is only theoretical.
First,
in the real world, action is very rarely perfectly balanced and
sportsbooks almost always have a vested interest in the outcome of
every game. When action isn't balanced, and the outcome of an event
could lead to a loss for the house, the sportsbook is exposed. Each
sportsbook determines how exposed it can be on any given event. It is
a combination of this tolerance for risk and the sportsbook's wagering
action that drives line changes. If a sportsbook has $5,500 wagered by
its clients on Atlanta -4 and $2,200 wagered on Buffalo +4, then the
sportsbook stands to lose $2,800 if Atlanta covers (collects $2,200
from players who bet on Buffalo but has to pay $5,000 to players who
bet on Atlanta) but stands to win $3,500 if Buffalo covers (collects
$5,500 from players who bet on Atlanta but has to pay $2,000 to
players who bet on Buffalo). This may not seem like much risk, but if
you multiple these numbers by 10, 20, 50, 1000 or more, you can
appreciate why sportsbooks move lines to balance action. One
sportsbook might move to -4.5 when it is exposed by $5,000 on Atlanta
where another sportsbook might be comfortable at -4 until it is
$250,000 offside. It depends on the anticipated total handle, the
game, the sport and the book's tolerance for risk.
Some
sportsbooks handicap the games themselves and may shade the line a
half point or more in a direction to generate more wagering on the
team they think will not cover. If they like Atlanta to cover the -4,
they may open the line at -4.5. If they like Buffalo, they may open
the line at -3.5. Or, they may open the game at -4 and simply decide
to allow more risk on one team then the other. For example if the
house likes Atlanta and has a normal risk tolerance of $25,000 on a
given line, the house may then decide to move to -4.5 after only being
$10,000 offside on Atlanta, but would wait to be $40,000 offside on B
before moving to -3.5.
Right
now, other than cursing me for too much math, you may be thinking:
"why don't sportsbooks just keep moving the line until they are
balanced?" The reason sportsbooks don't balance action at any cost is
because there is also a risk involved every time a line is moved. Lets
use some very simple examples to demonstrate the risks.
Example
#1: There is $110 on Atlanta -4 so the house moves the line to -4.5 to
attract action on Buffalo (now at +4.5). Someone bets on Buffalo +4.5
for $110 so the house is happy. However, there is an unpleasant side
effect if the final score is Atlanta -4. The player who bet on Atlanta
has his wager pushed, but the player who bet on Buffalo wins and
collects $100, so the house loses $100. When the final score lands on
one of the outer extremes of the range of pointspreads for a game the
house is said to have been sided.
Example
#2: There is $110 on Atlanta -3.5, so the house moves the line to -4
to attract action on Buffalo. At -4 it takes $110 more on Atlanta and
decides to move to -4.5. Someone bets on Buffalo +4.5 for $220 so the
house is happy ($220 total on each team). In this case, there is a
very unpleasant side effect if the final score is Atlanta -4! The
player who bet on Atlanta -3.5 wins $100, the player who bet at -4 has
his wager pushed and the player who bet on Buffalo wins and collects
$200 so the house loses $300! When the final score lands between the
outer extremes of the range of pointspreads for a game the house is
said to have been middled.
It
is the risk of getting sided or middled that keep books from moving
lines, and it is the risk of having a position on a losing team that
force them to move the line. Books that move lines too far can
suffer heavy losses with a bad outcome, as will books that don't move
lines enough. The difficulty in knowing when to move lines is what
makes bookmaking an art and not a science.
At the
start of last season I asked Kent, BoDog's head bookmaker, what level
of risk he is comfortable with. "At BoDog, we don't like to gamble…
even though we're in the gambling business. To minimize risk for
ourselves and for our players, we take reasonable measures to balance
action by making calculated line moves. We don't move lines recklessly
to balance at any cost because of the risks of sides and middles. Our
players will occasionally find value in the lines but can be
comfortable knowing we aren't risking the house on any game." This
week I asked him if there were any changes in his strategy. "No, we
have had success in the last year and even with the heavy growth we've
experienced, we will be sticking to the same basic philosophy….the
numbers are just a little bigger".
Every
book moves lines a little differently and so every day there are
differences in the lines between books for the exact same game. I will
talk about the opportunities presented to sports bettors as a result
of these differences in next week's column on shopping lines. I will
come back to the topic of balancing action in two weeks when I discuss
key numbers (spreads of 3 and 7 in football).
I
always welcome comments, questions and suggestions via email at
rob@bodog.com
Rob Gillespie
Operations Manager
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