Odds get sharper the more information that is known about the game. This information takes many forms including:
- Bets already made
- Other people’s odds and odds changes
- Lineups and injuries
- The result teams need
What all these things have in common is 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. A long time before the game these things are uncertain, so an uncertainty premium is priced into the odds.
When less information is known, sportsbooks protect themselves by adding more edge on 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 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 odds changing influences this continues right up to the start of the game. Only then do sportsbooks have full betting information.
Other people’s odds
Sportsbooks are constantly checking the odds from other sportsbooks. If everyone else has lower odds on a selection that is an indication that the sportsbooks odds on that selection are too high and they will lower them (while raising the odds on the other selections in the market).
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.
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 on 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.
There is a tension between two things that betters want; the highest odds, and the lowest overround. Overround is the total sportsbook’s edge on all selections in a market (full details). Odds closer to the start of a game have the lowest overround and are the most inline with true probability.
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. Here is an example.
Sports betting syndicates have been known to decide they want to take a large position on Team-A, then in order to 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. Then 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 what they were before and the syndicate beats the closing line. This kind of market manipulation is out of reach for normal punters and is very risky.
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 finds out and changes their odds.