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Information Determines Odds

The probability of winning or losing in a game increases as more information is obtained about the game. This information takes many forms including:

• Other people’s odds and odds changes
• Lineups and injuries
• Weather
• The result teams need

All these things have in common that more is known about them closer to the start of the game. Only by game time is all the information known, so that’s when the odds are sharpest.

These things are uncertain long before the game, so an uncertainty premium is priced into the odds.

When less information is known, sportsbooks protect themselves by adding more edge to all selections, known as padding the odds.

➡️For example, a sportsbook that has a 2% edge on a selection at game time might have a 4% edge a few days before the game.

This protects sportsbooks from new information changing the probability of an outcome after they have already taken bets on it.

• Let’s say there is a lineup change which improves the probability of a selection by 3%.
• If the sportsbook only had a 2% edge on that selection the bets made before the 3% probability change would be -1% against the sportsbook.
• However, with the early odds having a 4% edge, bets made before the 3% probability change still have a 1% edge in favor of the sportsbook.

By the start of the game, the sportsbook has a lot more information so they are confident that they can profit with a smaller edge.

There is much more certainty about the information so the uncertainty premium that was priced into the early odds can be removed.

The opening line and early betting

Early odds providers come up with probabilities for outcomes and derive the opening odds from the probability plus the sportsbook’s edge. The first thing that will sharpen the odds is what side people bet on, particularly known as smart bettors.

If betting on a market is one-sided with smart bettors betting on one selection, then the sportsbook has gotten the odds wrong and will lower the odds on that selection (and raise the odds on other selections in the market).

Like all these changing influences, this continues right up until the start of the game. Only then do sportsbooks have full betting information.

Other people’s odds

Sportsbooks are constantly checking and comparing the odds from other sportsbooks. When one sportsbook’s odds are higher than everyone else’s on a selection, they will lower them while raising the odds on the other selections.

Lineups and injuries

Lineup details change probabilities, change what people bet on, and change other people’s odds. More lineup details are known closer to the start of the game.

Weather

Some teams are better in the wet than others. Bad weather means less scoring and narrower margins which particularly affects probabilities on totals and spreads. In the case of cricket, rain stops play and increases the probability of a draw, in F1 it increases the probability of crashes and safety cars. Weather forecasts change and get more accurate closer to the start of the game.

The result teams need

This refers to teams’ motivation based on standings, which are determined by other teams’ results in previous games.

➡️For example, in soccer tournaments when the result that a team gets determines if another team needs a win or a draw in their next game to advance to the next round of the tournament.

If the result of the morning’s game means that both teams in the afternoon’s game only need a draw to advance, then the probability of a draw goes up and the odds of a draw go down.

The opening odds will have been set before this information is known. By the start of the game, all this information will be known.

Beating the Closing Line

There is a tension between two things that bettors want; the highest odds, and the lowest overround.

➡️Odds closer to the start of a game have the lowest overround and are the most in line with true probability.

➡️Overround is the total sportsbook’s edge on all selections in a market.

⭐However, as a bettor you want the odds to be out of line with true probability, in your favor.

⭐That is more likely to happen with early odds when sportsbooks get it wrong and put up high odds that they then have to lower.

If you take those early odds you will beat the closing line, which is the best indicator for long-term profit, even if the overround is bigger.

So how can you beat the closing line?

Develop a model

The most common and achievable way to beat the closing line is to develop a model which gives a probability that you can compare to the odds. If your model says the true probability of a team winning is 50% and you can get odds of better than even money, then you should make that bet.

If your model is accurate the odds on your selections will often come in and you will beat the closing line.

Market manipulation

Sports betting syndicates employ a strategic approach to maximize their gains and often take calculated risks as follows

1️⃣Take a large position on Team A

2️⃣To get large bets on at the best odds, they make many small early bets against Team A so that the odds on Team A go up.

3️⃣Then they make their large bets on Team-A at the new higher odds, with an edge in their favor.

This causes the odds on Team A to come down to even lower than before, and the syndicate beats the closing line. This kind of market manipulation is out of reach for normal punters and is very risky.

Insider information

Another way to beat the closing line is to have information before the sportsbooks do, so you can bet with it before the sportsbooks change their odds.

➡️For example, knowing that a player is out injured and betting accordingly before the sportsbooks find out and change their odds.

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Will Wood