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How do Sportsbooks Generate Odds?

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One of the primary goals of OddsJam is to help sports bettors better understand the sportsbooks and how they operate. This allows bettors to become sharper with their picks and understand why a certain line may or may not be profitable.

While OddsJam makes it easy to determine when a line is profitable or not, it’s still helpful to understand how the books operate. With that in mind, we’re going to be taking a look at how sportsbooks generate odds.

How are Odds Created?

Odds are constantly being updated and changed with one goal in mind – to have a balanced book. A balanced book is what every sportsbook aims to have to ensure themselves a guaranteed profit, regardless of game outcomes.

A balanced book is when a sportsbook accurately places betting lines where they receive a profit no matter what. Say, for example the Cincinnati Bengals are -130 (risk $130 to win $100) over the Pittsburgh Steelers. The Steelers may be +110 which represents being a slight underdog.

These lines are not created equal to their percentage chance of winning. The most common line for bets like over/under and spreads is -110. These type of bets are mathematically generated to have a 50% chance of winning, but sports bettors aren’t paying 50% odds.

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To explain, -110 is betting $110 to win 100. You are essentially paying that extra $10 to place the bet. This “fee” sportsbooks charge is called the vig, or the juice. This is how odds are created, where sportsbooks charge that extra bit of cash on each side to ensure their profits.

Let’s dive further into this. Bets on the total are some of the most popular in sports betting and are great examples of how sportsbooks generate odds. Say the total points in a game is set at 50. If people begin to bet heavily on the under, or under 50 total points in the game, then the line will move to 49.5 and 49 if it keeps going.

By changing the lines, the sportsbooks guarantee their profit by ensuring there aren’t an exponentially larger amount of bets on one side. The goal is for their vig profits from the losing bettors to be greater than whatever they may have lost from their payouts.

Remember, total bets and spreads (like Los Angeles Chargers -3) are mathematically determined to be 50%. The odds of that are +100 (or $100 to win $100). That’s not what the books are charging though – they’re charging you an extra $10 in most cases.

Sometimes spread and totals bets will increase in their odds without moving the actual line. Say, for example with our Chargers line above, many people begin to place money on this bet. The line may move from -110 to -115 or even -120. The line stays at -3, but the books begin to charge a bit more to make sure they don’t lose profit if the Chargers do not cover that spread.

In that example, if the line moves too much in favor of the Chargers, it may move from -3 to -3.5 and so on. These are examples of how the books are constantly changing lines in order to ensure their profit.

Updated Odds Based on Game Status

Sportsbooks odds are constantly changing based on the actual status of a game. Injuries, weather and other factors change odds and create what is called line movement.

For example, if a football team’s star quarterback is not projected to play, the line will likely a few points in favor of the opposition. Quarterbacks generate the biggest line movement but other impact players can move lines by a few points, or if there’s a number of smaller injuries.

In Week 13 of the 2022 NFL season, the Miami Dolphins opened as roughly +170 on the moneyline in their road matchup against the 49ers. The line moved down to +150, as sharps were betting on the Dolphins early in the week. Following news that Miami would likely be without their two starting offensive tackles, the line moved back up to +170.

The sportsbooks are always in the know before sports bettors. If a line has already moved against a team with concerns surrounding a player’s availability, it’s safe to assume that player isn’t likely to play.

Weather is also a factor that influences sportsbook odds. In outdoor conditions with projected win or rain, totals are often affected. Obviously, heavy storms are going to favor the under, as points become very difficult to come by in poor weather conditions.

Weather conditions can also play a factor in spread bets, as heavy underdogs can get a bit of a line movement in their favor. For example, there was line movement in favor of the Cleveland Browns when they were supposed to face the Buffalo Bills in Buffalo. There was a snowstorm on its way and the line moved a bit in favor of Cleveland, as less points being scored tends to favor an underdog covering the spread.

While that game was ultimately moved to Detroit, it’s an example of how weather can affect line movement.

Beating the Odds

The sportsbooks obviously make money off sports bettors losing, but they also make plenty of money from those who have a net even or slightly above average winning percentage. That is because of the vig, or the juice charged by the sportsbooks, as mentioned above.

In order to secure a long term profit sports betting, you must be line shopping for bets that are +EV, or positive expected value. This is because of how hard it is to make a long term profit betting.

A 50% success rate sports bettor will not make a long term profit or break even if they are placing bets that have a large amount of juice. They’ll be at a rather substantial net loss, actually.

The only way to beat the odds for certain is mathematically. Luckily, OddsJam has a number of tools to help you do just that!

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