• How Do Mob Bookies Work
• How Do Bookies Odds Work

A common misconception is that a bookmaker’s job is simply to “balance the book” to guarantee profit. While a bookmaker will often manage their risk across all the available options in a market, this might not always be the case. Read on to find out how often a bookmaker balances their book.

In case it's higher than 7.5% (for 2-way arbs), cooperation with such bookie would be unprofitable. Pinnacle is considered to be an evident leader in this sphere. Bookmaker bonus is additional pleasant surprises that will only positively influence your choise. Some bookies grant you an initial depoit after signing up. You may use it on. Where do bookies get their information is an interesting question, but the answer is not the same for all bookmakers. The best bookmakers compile their own odds using their own team of odds compilers that will study ratings, form-lines, statistics, and a variety of other factors that they may use to price-up a. We look at how bookmakers set their odds so that they would make money off the bettors. A bit more on decimal and fractional odds: https://support.skybet.com. In a perfect world, a sportsbook receives equal betting volume on both sides of a wager then, win or lose, they’ll make 5-10% on the juice (or ‘vig’). As such, it’s integral to understand that the chief function of oddsmakers isn’t to create an accurate (and probable) picture of.

Last year I wrote an article examining odds setting from the perspective of the bookmaker, focusing on the favourite-longshot bias. My finding was that it will often be optimal for a rational, profit maximising and risk minimising bookmaker to introduce a favourite-longshot bias into their odds.

I wanted to write another article looking at odds setting and variance from the bookmaker’s perspective. In this article I examine the likelihood of a bookmaker balancing their book (profiting regardless of outcome) on any given market, as well as optimal odds setting strategies when bettor biases are introduced.

Balancing the book

A bookmaker isn’t always seeking to balance their book. Given their pockets will be deeper than most clients’, bookmakers will generally welcome variance, especially when they think they have superior predictions. The belief that a bookmaker is looking to balance their book minute to minute, hour to hour, or even day to day is generally an oversimplification.

Let’s assume two bookmakers want to offer odds on a coin flip. They both recognise the true probability is 50% for heads and 50% for tails. One wants a 5% margin, the other a 2% margin. They set their odds at 1.90 and 1.96 respectively.

One hundred square bettors decide to make an equal sized bet. They don’t know the true probability and therefore the outcome they end up backing is assumed to be random (50:50). To get an idea what this looks like from the bookmaker’s perspective I simulated this situation 5,000 times for each bookmaker.

Their range of positions before the coin is flipped can be visualised in the chart below. The 2% margin book is on the left, 5% on the right. A bookmaker’s potential position can be read vertically. For example, after laying 100 bets, the most extreme position for the 2% margin bookmaker was -33.3% if the coin landed Heads, or +37.3% if it landed Tails. This position occurs when the split of wagers is 68:32.

At the bookmaker with 5% margin, their book was balanced in 37% of the simulations. At the 2% margin book this was just 15%. How does this balanced book percentage look after 500, 1,000 or 5,000 bets?

As we would expect, the more bets that a bookmaker can lay, the more likely they are to balance their book. We can see how much more difficult it is for a low margin book (even knowing the true probability and without any sharps in the market) to balance their book on a given market.

Exploiting bettor biases

Let’s now assume the 2% margin bookmaker has some information regarding the betting preferences of its client base, and predicts that there is a 60% likelihood that a bettor will back Heads. Where should they price the market?

Let’s continue assuming there are no sharps in the market. If the bookmaker holds the odds at heads 1.96 and tails at 1.96, their expected return remains constant at +1.96%. However, the possibility that they balance their book disappears if they lay any more than around 100 bets. Here’s what their range of positions would look like after 5,000 bets. The chart represents 5,000 simulations. Tails is, of course, the preferred outcome for the bookmaker.

In this scenario, the bookmaker has priced the odds efficiently but won’t balance their book because of bettor ‘irrationality’. If the bookmaker wants to maximise its likelihood of balancing its book, they would price the market off the predicted proportion of wagers. With a 2% margin distributed proportionally this would be somewhere around heads at 1.63 and tails at 2.45. If they lay 5,000 bets at these odds, their range of positions will look like this.

The bookmaker has increased their chance of balancing their book to 84%, while their expected return remains the same at +1.96%. We can see how a bookmaker who only takes bets from squares will be incentivised to offer inefficient odds, more closely reflecting their client’s irrationalities than the true probability. By operating in this way, they obtain the benefit of lower variance without having to sacrifice expected return.

Where they decide to price the market depends on their risk appetite. Continuing the example above, bookmaker expected return is plotted for different odds implied probabilities in the chart below.

The expected return will be highest when the odds are set at the implied probability midpoint between the true probability (50% here) and the predicted proportion of wagers on that outcome (60%). The bookmaker can maximise their expected return by setting the odds for heads at 1.78 (55% implied probability). What does variance look like with a market of heads priced at 1.78 and odds of 2.18 for tails?

This example shows that the incentive will always exist to shorten the odds for an outcome that a soft bookmaker believes will attract an inefficiently high proportion of wagers.

Next let’s consider what happens to the likelihood of balancing a book if the bookmaker sets odds efficiently and either ignores or doesn’t identify a bias in their clients’ preferences. Assume they set efficient odds (1.96 for both heads and tails) but the likelihood that a bettor bets on heads is unknown. In the chart below I have plotted this percentage over the range from 45% to 55%.

If proportion of bets laid strays slightly from the true implied probability (50%), the likelihood of balancing the book diminishes rapidly. For example, if a bookmaker lays 1,000 bets and the likelihood of laying a bet on heads is 46%, their chance of a balanced book reduces from 45% (at 50% likelihood of laying heads) to just 3%.

We can begin to see how challenging it is for a low margin bookmaker to balance their book in any given market. As the odds move away from even money this task only becomes more difficult.

Bookmaking in a nutshell

This analysis was predicated on a few strict assumptions, namely knowledge of the true probability, an accurate assessment of bettor preferences and a lack of sharp punters. Relaxing these assumptions will likely make book balancing even more difficult.

• Read: Do you know how difficult betting is?

In reality, a bookmaker won’t know the true probability, bettors will bet differing amounts, and at Pinnacle, sharps will attempt to punish what they believe are inefficient odds. The addition of sharps will limit a bookmaker’s ability to exploit squares by offering odds that differ from their estimate of true probability.

Whether they ultimately set odds that diverge from what they believe to be ‘efficient’ will depend on a number of factors. These include the relative risk appetites of the bookmaker and the sharps, the proportion of square to sharp money, as well as the timing of each groups’ participation in the market.

This is bookmaking in a nutshell - a cat and mouse game of quantifying uncertainty, predicting bettor behaviour, and managing variance over time. On the one hand, nuanced and multifaceted, on the other, simple and predictable.

Where to begin?

Perhaps the easiest thing is to start by the basics, a sportsbook, whether it is a physical sportsbook or an online sportsbook, is basically a company that accepts bets from sports bettors. The sportsbook offers a list of upcoming sporting events and different options on how to bet on the outcome of the same.

So for example, if the NFL season is taking place, the sportsbook will offer its clients the chance to bet on each of the games scheduled, generally bettors can gamble on which team will win a specific game, or the total score of a game, there are also what are called “props” or “prop bets” (short for proposition bets), which are nothing but wagers on an individual player or specific event, for instance, “Who will be the first player to score a touchdown on X game”. Future bets are also an alternative, basically when players are offered the opportunity to bet on the potential outcome of a championship, such as “Who will win the 2019-2020 Superbowl”.

The number of sporting events offered by a sportsbook or the different alternatives offered to bet on each event really depend on each company, some aspects can play a role on this, for instance, the size of the sportsbook, the knowledge of their line makers, and even the software they use.

A sportsbook makes money thanks to what is known in the industry as the juice or vig which is simply said, the cut charged by the company or bookie to offer the service.

How Does This Work?

The juice is the difference between what a bettor has to wager and what that wager pays back, this depends on the type of bet and line, but to give the most common example, if I want to bet on the Patriots to win with a regular spread I will be required to risk say $110 to win $100, in other words for every $1.10 wagered the bettor can win $1. The juice is adjusted depending on the probability of an outcome or how much money is being wagered on aside.

It’s a numbers game, the sportsbook tries to get as close action as possible on each side of a game in order to then win a percentage after all the payouts through the juice.

Both physical sportsbooks and online sportsbooks nowadays use a software platform to take the action, from their clients, granted, this aspect is of utmost importance for online sportsbooks since the clients themselves are the ones using the platform to place the bets, therefore it must be friendly and simple to use.

The difference between using a physical sportsbook or an online service to place your bets has to do with legality and convenience. Bookmaking in the United States, for instance, is highly regulated, it is only legal to bet on some states, even though there is legislation that will allow this to change in the very near future, at this point it is still illegal in most states. So, this has caused sports bettors to look for alternatives, and this is where offshore sportsbooks come in the picture, these sportsbooks are in countries where their activities are regulated, and some are willing to take action from clients located in the United States. Legal physical sportsbooks in the United States pay taxes and customers, of course, are protected being a regulated business. Offshore sportsbooks pay taxes in their jurisdiction.

Online sportsbooks are very convenient since they allow bettors to place their wagers from anywhere and at any time using their mobile phone, computer or tablet. These companies rely heavily on their reputation, big online sportsbooks have maintained throughout the years by running tight businesses, offering good service, fast payouts, secure websites, etc.

How Does a Sports Betting Site Work?

As we mentioned before, online sportsbooks operate under the same principles as physical sportsbooks, they offer lines on different sporting and non-sporting events, in order to do this they have to use a specially designed software, there are several options in the market, some sportsbooks have costume designed their own software, but the vast majority pay a selected software company, the options vary some are more geared towards the European market while others cater more to the bettors from North and South America, mainly due to the format of the lines they handle, the sport options they offer, etc.

“The software choice is very important for a sportsbook since much of their business depends on the quality of the same. Equally important is their technology infrastructure, a good software requires good equipment to run properly, sportsbooks need to invest heavily on this to ensure a smooth operation with no service interruptions, we need back-ups and redundancy and a strong security system where client information is stored”, explained a representative of www.AcePerHead.com.

“Excellent customer service, line movers, processing of deposits and payments are key components on any successful sportsbook, the only way a sportsbook stays in business is by always being a step ahead on terms of technology and service to its clients, it’s a very demanding industry”, continued the AcePerHead.com rep.

AcePerHead.com is what is called a pay-per-head service (PPH), basically a sportsbook that offers its services to bookies that require their own websites to handle their clients. In other words, PPH services offer their platform and a complete turnkey solution to bookie agents to operate their business, in return their get a weekly payment per active player.

Most online sportsbooks today also offer online casino services, virtual and live, as well as poker or live betting software in sporting events.

We have now covered all the basics on how a sportsbook works, now the rest is up to you. If you are just getting started in using online sportsbooks, we suggest you do your share of research, there is plenty of information on reputable books and those that you need to watch out for.

How Do Mob Bookies Work

Start small to try out their pay per head services, especially their payouts, and always compare the quality and reliability of each, test their system during crunch time and ask all the questions you need to their customer service staff.

How Do Bookies Odds Work