How the Sausage is Made

In sports betting, the most important aspect, the lynchpin you might say, is in fact “the line” or “the spread.” Without the line, there is no sports betting except playing who’s going to win, and no one is going to play that because that’s too easy (NFL favorites are winning 60% straight up in 2019). Vegas needs the edge, and their edge is forcing the bettor to literally put their money where their mouth is by asking the same question over and over: “If you think this team is going to win, by how many points?”

I’m the first to admit that I don’t actually know how the sausage is made. I’ve never worked in a Vegas sportsbook, never been an oddsmaker, and a Square through and through. However, after being in the game for some time, I have come to realize there’s more to making a point spread than just crunching the numbers, and as you wade into the sports betting world, you should be aware of the same. So let’s get started.

Crunching the Numbers

The number absolutely matters. Let me repeat this: The number ABSOLUTELY matters. It’s actually scary how good Vegas is at the number, especially game totals (O/U splits are 48.65%/51.35%), which is why people get confused when a number contradicts conventional wisdom, and leads to things like Public Dogs. It is important to look at the line, but it’s also important to place the line in context. Before you go betting your mortgage (DO NOT DO THIS EVER) on Patriots -3.5 in Philadelphia this weekend, you should look at a few things. The first is to remember there is no “one line” that everyone abides by; each sportsbook runs their own ledger, holds their own methodology, and is responsible for the tickets they produce. If you live in Las Vegas, you’re able to “shop around,” which means to place your bet at the sportsbook that has the best line according to your preference; if you’re like anyone else, you have to play the line given to you either by your bookie or an online sportsbook.

An example this weekend is the Bills -6.5. Let’s look at three different sportsbooks:

Caesar’s – line opened at Bills -6 (-110) and now the line is Bills -6.5 (-115)

Golden Nugget – line opened at Bills -5.5 (-110) and now the line is at Bills -6.5 (-110)

Westgate – the line opened at Bills -7.5 (-110) and now the line is Bills -7 (+100)

Each of these opening lines, and their movements, are indication of something. We’ll discuss the line movement below, but it’s good to remember that there was an entire two-point difference between separate sportsbooks that is significant due to the fact that one was over the key number of seven and one was below. So while the number you’re presented with might be the only number you’re allowed to play, before you play it, think about where everyone else is and determine if you’re actually getting a number that gives you an edge.

Balancing the Books

As I explained above, there is no consensus number that everyone adheres to. Each sportsbook is responsible for their own ledger, and is required to pay out any ticket that wins. That means that each sportsbook has to act independently, and in their own interest, even if that action is against conventional wisdom. The one and only thing that will cause a line to move is not a sportsbook admitting they were wrong, but that they are leveraged one way or the other and have to encourage money on the other side in order to hedge against potential losses.

To illustrate, let’s assume I’m an independently run sportsbook with $1000 at my disposal to pay out to would-be sports bettors. I offer Bills -6 to my bettors, and three bettors each put down $50 on Bills -6 at even money (to make it easy math) so I’m on the hook now for  $150. Then, another bettor decides to put down $400 on Bills -6. Now my risk is $550, which is over half of money. In order to hedge against the Bills winning by more than six points, I need to create action on the other side in order to encourage betting on the Dolphins and discourage betting on the Bills. Since I haven’t been getting much on Dolphins +6, I’ll raise the line to Bills -8, which means they need to win by more than a touchdown. Some bettors decide at +8, the Dolphins all of a sudden have value, and I get three bettors to place $100 on the Dolphins. How does this help me?

Assume the Bills win 23-13 and cover the six points. In this scenario, I have to pay $550 to those who bet on Bills -6 (so down to $450). However, because the three bettors on Dolphins +8 lost, I now have an extra $300 to pay that out. In this case, my total loss is actually only $250 and I’m down to $750 rather than $450.

This is how Vegas sportsbooks think, but in the millions of dollars and across every single play that put out across a variety of sports. The largest line movement so far has been the 49ers who opened at a consensus -14.5 favorite and is now a -10.5 point favorite. Let’s dig in a little deeper into which sportsbooks have moved the most:

CG Technology opened at -14 and is now at -10.5

Mirage/MGM opened at -13.5 and is now at -10.5

William Hill opened at -13.5 and is now at -10.5

What this line movement indicates is that each of these three sportsbook opened the line where they did because their methodology told them that’s what the correct spread was. However, it seems like a few Sharps saw a lot of value on the other side of the and bet on the Cardinals. There must be enough money on the Cardinals at each of these sportsbooks they now need to encourage betting on the 49ers in order to hedge against the Cardinals covering that spread. So the question is: Which is the accurate number – 14 or 11? You’ll have to decide.

Public Perception

What isn’t scientific, but must be taken into account when sportsbooks decide to set the number is public perception. What do people think is going to happen regardless of what the numbers say? This is a classic “narrative vs. data” situation and it is why sports betting is so very difficult. It’s difficult because in many cases, the numbers don’t matter and something absurd just happens. It’s difficult because your casual bettors, your Squares, think they know more about a matchup than they actually do. Everything builds on top of another and if a sportsbook doesn’t consider public perception, they could end up in a situation in which they are heavily leveraged on one side of the game.

The reason I’m telling you to consider public perception is so that you can find the edge. Normally, the Public is guided by “What have you done for me lately?” and usually will refer to what they just saw rather than considering performances in the aggregate. I have no doubt the line has moved on the 49ers because of their performance this past Monday night. Know this is factor so that you don’t fall victim to it as well.

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