Issue #4 - Balancing the Books
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Issue #4 - Balancing the Books
From The Frontlines
Jan 3, 2002, 16:59
By Rob Gillespie www.BoDog.com

Last week, I discussed how shopping around for the best number can really help you make more money. Now I want to talk a little more about why the numbers are different at different sportsbooks.

As discussed earlier, sportsbooks make their money by withholding a small commission on winning wagers. If Player A bets on Team A -4, risking $110 to win $100 and Player B bets $110 to win $100 on Team B +4, then the sportsbook makes $10 regardless of the outcome, as long as the final score isn't Team A 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 sportsbook A has $5,500 wagered on Team A -4 and $2,200 wagered on Team B +4, then the sportsbook stands to lose $2,800 if Team A covers (collects $2,200 from players who bet on Team B but has to pay $5,000 to players who bet on Team A) but stands to win $3,500 if team B covers (collects $5,500 from players who bet on Team A but has to pay $2,000 to players who bet on Team B). 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 Team A where another sportsbook might be comfortable at -4 until it is $250,000 offside. It depends on 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 Team A to cover the -4, they may open the line at -4.5. If they like Team B, 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 Team A 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 A, 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 Team A -4 so the house moves the line to -4.5 to attract action on B. Someone bets on B +4.5 for $110 so the house is happy. However, there is an unpleasant side effect if the final score is Team A -4. The player who bet on Team A has his wager pushed, but the player who bet on Team B wins and collects $100, so the house loses $100. This is known as getting sided.

Example #2: There is $110 on Team A -3.5, so the house moves the line to -4 to attract action on B. At -4 it takes $110 more on Team A and decides to move to -4.5. Someone bets on B +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 Team A -4! The player who bet on Team A -3.5 wins $100, the player who bet at -4 has his wager pushed and the player who bet on Team B wins and collects $200 so the house loses $300! This is known as getting 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. 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," he chuckled, before explaining further: "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, and can be comfortable knowing we aren't risking the house on any game."

I will come back to this topic in a few weeks when I discuss key numbers (spreads of 3 and 7 in football). Next week I will give you all a real glimpse behind the curtain when Kent will give us a detailed look at the lines and wagering activity on the first week of NFL Playoff games.

Got a question or comment for Rob? Send him an email: rob@bodog.com

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