After a great first week of football, I thought it would be important to explain line moves from the House’s point-of-view in detail. Much of this comes from a similar article I wrote last football season, but I think it is important enough for bettors to understand how a sportsbook operates that I will publish it every year!
Remember that sportsbooks make their money by withholding a small commission on winning wagers. If Player A bets on Atlanta -4, risking the standard $110 to win $100 and Player B bets $110 to win $100 on Buffalo +4, then the sportsbook makes $10 regardless of the outcome, as long as the final score isn’t Atlanta 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 a sportsbook has $5,500 wagered by its clients on Atlanta -4 and $2,200 wagered on Buffalo +4, then the sportsbook stands to lose $2,800 if Atlanta covers (collects $2,200 from players who bet on Buffalo but has to pay $5,000 to players who bet on Atlanta) but stands to win $3,500 if Buffalo covers (collects $5,500 from players who bet on Atlanta but has to pay $2,000 to players who bet on Buffalo). 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 Atlanta where another sportsbook might be comfortable at -4 until it is $250,000 offside. It depends on the anticipated 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 Atlanta to cover the -4, they may open the line at -4.5. If they like Buffalo, 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 Atlanta 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 Atlanta, 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. Let’s use some very simple examples to demonstrate the risks.
Example #1: There is $110 on Atlanta -4 so the house moves the line to -4.5 to attract action on Buffalo (now at +4.5). Someone bets on Buffalo +4.5 for $110 so the house is happy. However, there is an unpleasant side effect if the final score is Atlanta -4. The player who bet on Atlanta has his wager pushed, but the player who bet on Buffalo wins and collects $100, so the house loses $100. When the final score lands on one of the outer extremes of the range of pointspreads for a game the house is said to have been sided.
Example #2: There is $110 on Atlanta -3.5, so the house moves the line to -4 to attract action on Buffalo. At -4 it takes $110 more on Atlanta and decides to move to -4.5. Someone bets on Buffalo +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 Atlanta -4. The player who bet on Atlanta -3.5 wins $100, the player who bet at -4 has his wager pushed and the player who bet on Buffalo wins and collects $200 so the house loses $300. When the final score lands between the outer extremes of the range of pointspreads for a game the house is said to have been 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. The difficulty in knowing when to move lines is what makes bookmaking an art and not a science. Just remember that every book moves lines a little differently and so every day there are differences in the lines between books for the exact same game.
Which brings us to a recap of last week’s action. Thursday’s college game (S.Miss/UAB) was anticlimactic; it wasn’t going to be over before the NFL game started so it didn’t get much action. (Just one example of how things would have been different if a bookmaker created the schedules for all sports…). For the NFL game, action was outstanding, coming very close to the numbers from last Super Bowl, but not quite. Early action was on the Jets and I saw some books dip to Washington -2.5 but I am glad we stayed the course as action came back late on Washington and we ended up with Redskin money. The 16-13 Washington win meant spreads were a push (except for the shops that moved to -2.5 and back) but the low score gave the House a little profit for the night.
Friday’s college game saw better action. There was a little money on Oregon State -8/8.5 and the Over so the Fresno St 16-14 win was an Ok result as well.
Saturday started off mildly enough with a moderate win for the book on Wake Forest’s upset of North Carolina St. Then there was a split in decisions as the book won with Bowling Green’s shocker over Purdue but players getting it back with UConn’s big win over Army. The mid-afternoon games were definitely kind to the House with Georgia Tech’s big win over Auburn and Washington State’s near-upset of Notre Dame being the two biggest decisions of the day. We were lucky to get the pair. The book was even luckier with UCLA +3 when Colorado missed a late extra point that would have gotten a push for Buff’s bettors. That had to be the toughest beat this weekend. Marshall’s strong performance against Tennessee was also good for the book and the Washington/Indiana game managed to make 25 an interesting spread by landing on the number! The early evening games went to the players though with good wins on Florida State -15, Oklahoma State -22 and West Virginia -10. The only game that round that went the book’s way was Alabama’s back door cover against Oklahoma in a game that drew more action than any other college game this weekend. Action on totals was far more balanced this weekend than last. The only real decision there was a win for the players in the Over on Miami’s thrilling comeback against Florida. What a great game to watch! Overall, it had been a good day for the book (and a record for us for college football handle in day by almost double!) and we were expecting a little extra action on the late games (LSU/Arizona and Stanford/San Jose St.) as bettors chase losses but they really didn’t get that much action. Perhaps bettors are more disciplined this year or maybe everyone was just getting ready for Sunday’s NFL!
Sunday was hopping busy until 1pm ET, then the phones went dead and we got to watch some football! The biggest decision of the day (and the weekend) went to the bettors when Indy squeaked past the Browns 9-6. Other early scores were good though with Jacksonville covering, the Giants winning outright (will Kurt Warner ever be 100% healthy again?) and the Texans shocker in Miami. That game was good for the book as it killed a lot of 10 and 13-point sweetheart teasers. The 49ers were a popular bet in the middle set of games and bettors did very well when the 49ers dismantled the Bears. For the late game, the Titans got the game so bettors managed to rally to cut into the book’s profits from the early games. Totals ended up 7 Over and 7 Under for the day but the biggest play was NE/Buff under and that went against the House. However, we got the next four when SD/KC, Ind/Cle, NO/Sea and Oak/Ten all came in under the number.
Action for the Monday Night game was split pretty evenly, although there was a little money on the Bucs straight-up and on the Over. I’ll be back next week with another Frontlines, so until then, enjoy another great week of football action.
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