How Do Sportsbooks Set Lines? Line Movement Explained
UNIT 2.7 – HOW ARE BETTING ODDS CALCULATED
Introduction To Setting Lines
Sportsbooks go through a series of analytical assessments to publish betting odds, and the odds that are initially published are rarely set in stone. After a sportsbook publishes their opening line (the initial odds), it’s common for line movement to follow. Line movement is when the betting odds change after being initially published. Factors within a league or on a team can make the probability of a team winning go up or down. In addition, factors within the betting market may influence a sportsbook’s potential profit and cause them to adjust the odds so they can still make money. In this article, we talk about how sportsbooks calculate odds, and how this can impact you as a bettor. In all, this article covers:
This article is part of The Ultimate Beginner’s Guide to Sports Betting, a course by Canada Sports Betting.
Who Sets Betting Odds?
Most sportsbooks do not calculate their own betting lines. Instead, there are a few sportsbooks who employ betting analysts. The betting analysts are responsible for inputting factors into statistical calculators and algorithmic models to determine betting lines. These sportsbooks are typically the first to publish opening lines, while other sportsbooks will copy and attempt to undercut them.
From there, the betting market takes over. Early bettors will begin to bet on the published initial lines, which will indicate to the sportsbook which lines are more popular than others. Using that information, sportsbooks may adjust their lines to lower or raise demand for certain markets until it reaches equilibrium. This equilibrium ensures the sportsbook collects the vigorish. At the same time, sportsbooks around the world will start copying the odds set by the book leaders, attempting to offer similarly competitive odds. The copycat sportsbooks will also adjust the odds as demand for their lines ebbs and flows.
How Do Sportsbooks Set Lines?
Sportsbooks determine odds by analysing various factors and statistics for each sporting event. Through a combination of expertise, algorithms, and market influence, the odds for each possible event are determined. The sportsbook’s goal is to set odds that attract bettors while ensuring they can make a profit regardless of the outcome. Here’s a breakdown of how sportsbooks determine odds, change the lines, and ensure they always make a profit.
Power Ratings
Power ratings, also known as power rankings, are numerical values assigned to sports teams to gauge how they generally stack up against each other. Most sportsbooks have their own power rankings that they use as a starting point in setting lines. These ratings provide a systematic way of comparing teams or players. Power ratings themselves are not static, but are updated regularly through algorithms or mathematical models to calculate ratings for each team or player.
Research, Analysis, and Probability
After looking at the power rankings, analysts conduct additional research and analysis of the teams competing to adjust the power rankings, and subsequently the odds, for a given event. They look at factors like team performance, recent results, injuries, weather conditions, and historical head-to-head statistics that may affect this specific event. The more data they have, the more accurate their odds will be. From there, the bookmakers will calculate the implied probability for each outcome of the event through a statistical calculator.
Setting the Opening Line
Using the implied probabilities for each event, the bookmakers will set an initial or “opening” line. This opening line serves as a starting point for betting to begin, and is usually copied by other sportsbooks. That said, the opening line will often change quickly – for better or for worse. The sportsbook may impose a betting limit on the opening line to prevent bettors from capitalising on incorrectly priced odds relative to market demand.
Adding the Vigorish and Risk Management
Bookmakers include the vigorish in the odds to ensure they make a profit. As a reminder, the vig represents the commission they charge on bets. It’s the difference between the true odds based on implied probability, and the odds they offer. As bets come in, the sportsbook will adjust the line to ensure they always collect a vig on average across all the bets on offer. If a large number of bets are made and the sportsbook is at risk of paying out many winnings, they’ll adjust those odds to discourage additional bets. In addition, they may limit the maximum bet amount or use algorithms to analyse betting patterns to help them reduce risk
Adjusting the Line
Bookmakers continuously adjust the opening line based on incoming bets and factors that affect the likelihood of success for either team. Remember, the sportsbook wants to ensure they always collect a profit from the odds, so they’ll adjust the line to influence betting behaviour. If a large number of bets start coming in on Team A, the bookmaker may adjust the odds for Team A to make it less appealing, and Team B more appealing to create balance.
Competing with Other Sportsbooks
Bookmakers will also consider the odds offered by their competitors. A number of sportsbooks don’t actually calculate the odds themselves through all the above steps – some simply copy the odds offered at other books. Whether they’re the sportsbook setting lines or the one copying, they don’t want to offer odds that are significantly different from what other sportsbooks are offering. Savvy bettors will shop for lines to make sure they find the best price, so sportsbooks try to compete by offering better odds than their competitors.
What Is Line Movement?
Line movement in sports betting refers to the changes in the odds or point spread over time. After the sportsbook has set an opening line, these odds will rarely remain the same as the event draws nearer. These changes occur as a response to betting activity, new information, and adjustments made by sportsbooks. Line movement can provide valuable insights for sports bettors as it reflects how the market perceives the game and can influence betting decisions.
Betting Activity
As stated above, line movement mostly occurs due to betting activity. If bettors wager on one side of the bet significantly more than the other, sportsbooks will adjust the odds to balance out the action. Usually, sportsbooks aim to have roughly equal amounts of money bet on both sides of a game as this minimises their risk and ensures they make a profit through the vig. Line movement can be especially influenced by professional bettors. These experienced bettors will often stake larger amounts of money when they find a value bet, which causes the sportsbooks to adjust their odds in turn.
Reacting to New Information
Bookmakers are constantly monitoring each event they have odds for, and may adjust the odds in response to new information. For example, if a powerhouse player gets injured or weather conditions change, they’ll update the odds to reflect the impact of these new developments. The same way the stock market reacts to bad or good news, the betting market will react the same way. If the majority of bettors believe a particular side is more likely to win, the odds for that side may become less favourable, and the line will move accordingly.
Arbitrage Opportunities
Some bettors take advantage of opening lines to create arbitrage opportunities, which will inevitably cause line movement. Arbitrage betting means to place bets on both sides of a game, but at different sportsbooks with different odds. Arbitrage can occur when different bookmakers offer odds that are slightly misaligned, which creates an opportunity to exploit these discrepancies. This allows bettors to guarantee a profit or break-even opportunity regardless of the game’s outcome. This is usually only possible on opening lines because once an arbitrage opportunity is noticed by the sportsbook, the bookmaker will react quickly and adjust the odds accordingly.
