Understanding Odds and Payouts
The “odds” in US sportsbooks are expressed as a pair of numbers for each side of the bet. The odds may also be referred to as the “line”, or the “spread”. Here is a typical example of an NFL “money line” with the wagering odds for a game:
In this “money line” example, the NY Jets are the favorite. A bet of $140 will return a payout of $100 in winnings, plus the original bet amount of $100, for a total payout amount of $240. Point spreads are not involved in a moneyline bet. You select the winner of the game and the payout listed. The odds are aligned with the payout.
In the example above, the NY Jets were determined to be the likely winner by the sportsbook’s analysts. A bettor would receive less than “even money” if the NY Jets were to win the game. The favorite is always the negative number in the pair. The positive number is the payout for the “underdog”. For the favorite, the more probable the win, the lower the payout, and the opposite holds for the underdog.
Notice in the example above, the matched pair does not sum to zero when added together. A bettor only receives $120 for $100 bet on a Giants win, while a matched bet on the Jets side requires an outlay of $140. The difference is the sportsbook’s commission. The difference is sometimes referred to as the "vigorish," the “vig” for short, or the “juice”. This commission is collected by the sportsbook and used to run an efficient and fully compliant betting market.
Even Money Bet
The concept of “even money” implies there is no clear favorite in the game. With moneyline bets, the payout is aligned with the odds.
Here is our NFL example, where the odds are even, payouts are even, and the same “vig” applies to either side. This type of betting situation is referred to as a “pick-em” game - odds imply that either team is equally likely to win.
Point Spread Bet
The moneyline example above is one type of betting format that is more common with MLB wagering but is popular with NFL bettors as well. A more common NFL and NBA betting format is the point spread bet. Here is a typical example of an NFL point spread odds for a game, where the NY Jets are favored and need to win by 4 points to “beat the spread”:
With point spread betting, the payouts are usually even, but the favorite is assigned a negative point hurdle. These points must be covered to win the bet, hence the term “cover the spread”.
In the example above, if the Giants were to lose the game by a field goal (3 points), a bet on the Giants at +3.5 would be a winning wager. As a note, the .5 is usually part of the point spread and is referred to as the “hook”. This half-point is there to support betting action, and avoid ties or a “push”. In the event of a point spread tie on a single bet, you get your wager returned to you.
The point spread is a type of “balancer” to ensure two-way action, given the payout is the same and the Jets are the favorite. Two-way action is essential to the sportsbook in all betting lines. The sportsbook is not in the business of picking winners but collecting their commission with little to no risk.
In our example above, the ideal situation is a large volume of wagers on the game where the total value of the bets is exactly the same for both teams. A betting line that results in equal action on both sides implies zero-risk to the sportsbook. Regardless of the game outcome, the sportsbook collects the maximum commission.
As a bettor, you need to identify value in the odds offered and it is important to know that the sportsbook’s lines are carefully developed to meet this balanced action requirement on every sports event offered.
Before we discuss the basic techniques of betting, we must review the basics of assessing betting odds. A basic understanding of probability theory can provide a good starting point for analyzing the betting lines offered by the various New Jersey sportsbooks.
A bet on any event and the associated payout amounts are driven by an estimate of the probable outcome or expected value. An estimate of the probable outcome times the payout is the expected bet value. It is not necessary to dig out your Stats 101 text, but some basic probability concepts will help bettors apply a consistent betting strategy. When your independent estimate of probable win percentage offers a positive value, then you should make the bet.
Simple Even Odds Example
We can use the simple example of a coin flip to get an understanding of probability as it relates to a typical point spread line.
You and a friend bet on the flip of a coin 1000 times. As we know, with two possible outcomes, the probability of heads winning the flip is 50%, one outcome (heads) out of two possibilities (heads or tails). You would expect that each of you would win 500 times, a win probability of 50% (500/1000). The sportsbook would put up this line for a single “flip” event as follows:
Finding Value in Odds
In this example above we use “implied” odds to find betting value. What are these numbers telling us in terms of a likely win percentage versus the payout?
In this coin flip betting line, we want to look at the "implied” odds for possible value in a Heads bet of $110 for a profit of $100 or a total payout of $210.
The implied odds are determined as follows:
The bet amount divided by (payout + bet amount).
For the Heads or Tails example, the implied odds are as follows: The bet amount of $110 divided by (payout $100 + bet amount $110).
For this calculation we ignore the negative sign: =110/210 = .524, the implied ODDs =52.4%,
Implied odds of 52.4% means a bet on Heads to win a coin flip, expects a win rate of a little more than 52 times out of 100 to break even.
We know the probability is only 50%, so we would pass on this bet. We know we expect to win half the coin flip bets and lose the other half. If we were to bet $110 on the coin flip example, our win payout is a $100 and a loss costs us $110.
What if the bet changed to how likely a random person is to call Heads on the flip of a coin?
In this example, we are not betting on the results of a flip, but what would a random person call pre-flip? Assume we know from our research and preparation that more people are likely to call Heads and we estimate the probability of a person calling heads = 58%.
Given the same odds of -110, we would take this bet, since our expected win percentage of 58% exceeds the implied odds of 52.4%.
The process of finding value in the betting lines requires an analysis of the implied odds offered by the sportsbook compared to your independent win probability. Obviously, the determination of a team’s likely win percentage for a specific game is a lot more complex than the coin flip scenario. It is not necessary to go through the math, but successful sports bettors are consistently improving their sense of likely outcome relative to the odds offered.