Odds And Line Origination in Sports Betting Markets

Sports bettor and poker player Bryan Nicholson runs the rule over the booming data-driven sports betting industry....

odds and betting lines origination and compilation in sports markets

If you want to get ahead in the sports betting markets these days you need to know what you're up against. The more information you have as to how the sports betting markets are formed and what drives the odds and line movements, the better.

AI Driven Betting Odds and Markets

The sports betting industry is ever changing and we are moving into a time that's becoming more and more data-driven. This goes for all walks of life and not just in betting on sports. Odds compilers, or "originators" as the buzzword goes while the sports betting boom hits the US, are in short supply. I myself originate golf tissues. The frame of the odds and market on the exchange when it becomes liquid will usually resemble my tissue odds to a high degree. The exchange has become more and more of a tool to guide market making and it now runs the show. If we have syndicates, big players, consultancy companies etc seeding the markets, it means when they become liquid they will be close to an accurate reflection of the fair odds for the most part. Or so the theory goes...

"    the more money in the market, the harder it is to beat     "

So there's no need for sportsbooks to spend a lot of money on highly skilled odds compilers anymore. The trader's brief is to make sure their prices are not bigger than the exchange to stop arbitrage betting. They can model their odds on the exchange numbers, adding in whatever margin and terms that suits them and their customers. In fact a lot of the more highly skilled odds compilers, traders and originators have been pushed out of the trading rooms as the quants took over. Either they went to specialist sports betting companies, took a shot at going professional punter themselves, or moved on altogether. The quants taking over market compilation is actually great news for sports bettors. there are inefficiences everywhere. I'd advocate for you to spend a lot of time studying how the markets actually work and what pricing them up involves - this is how a true edge in sports betting can be garnered.

Where do the betting odds originate from?

There are some originators at the bigger companies or at B2B consultancy companies that supply the odds and lines for the sports betting markets. These guys will be copied by a lot of the softer books. The big Asian betting companies or sharp books like Pinnacle control the odds and lines in the football markets and expected goals (xG) is now incorporated into odds in specific football matches when odds are being compiled.

The margins are how the sportsbooks make their money. The overround or margin is a % the bookmakers add to their books that give them their vigorish/juice and their margin or overround / ("hold" US) commission advantage. In a perfect world the book will add up to 100% when the originators price up but they will add to more than this when you sum all the implied probabilities from the all the possible outcomes together, given the small percentage margin added to the selections. The lines will move from weight of money, or at the sharp books - from some of the bigger players. The aim is usually to balance the book thus trying to secure profit no matter the result of the game, but that's a rare feat. The overround is what protects the bookmaker and commission (vigorish) is calculated using the formula

Overround (hold) and formula for the Juice or Vigorish

1 - 1/book %) x 100 then turn it into a percentage. For example if two teams on the moneyline in the NFL are priced up 10/11 vs 10/11, first off divide the denominator by the (numerator + denominator) which would be:

  1. (11/21 = 0.5238) x 100 = 52.4% (rounded off)
  2. Do the same for the other side and as you can see 52.4+52.4 does not add to 100%, it adds to 104.8 %. This 4.8% is the book overround (total margin) or the "hold".
  3. To calculate the commission which is the juice/vigorish, using the formula above:
1- (1/104.8) * 100 = 0.0458. Multiply x 100 to turn it into a percentage of  4.58% which is the bookmaker cut on turnover. 

As you can see the overround margin (or hold in US) isn't quite the same as the commission (juice  / vigorish) - a concept even many pros miss so don't worry too much.

If you enjoyed this content there's plenty more where that came from in my upcoming book "Hypnotised By Numbers"

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