Odds Changes
Now that we understand the concept of the juice, we can start to make sense of the dynamics of odds markets.
As we saw in the last example, the oddsmaker was running 4.5% juice. But for him to actually guarantee himself this profit, he needs to ensure that the picks coming in for each team in each matchup are as close to 50/50 as possible. In the example, the oddsmaker had 110 risked on each of the two teams in the matchup - a perfect 50/50 split - thus he got himself his 4.5%. Easy enough.
But what happens if Toronto’s top hitter was a late scratch form the starting lineup? People would all of the sudden give Cleveland a greater chance of winning the matchup, and would start picking Cleveland.
This sudden influx of Cleveland picks now has the oddsmaker’s 50/50 balance out of whack, changing it to 60/40. What’s the impact to the oddsmaker?
He becomes “exposed”. Using the same 220 that was risked on the matchup in the last example, we’ll redistribute that so that 60% of it (132) is risked on Cleveland, and the other 40% of it (88) is risked on Toronto. Assume that Cleveland covers the spread, so immediately, the oddsmaker has to return the 132 risked on Cleveland back to the people that picked Cleveland to cover the spread. At odds of -110, and with 132 risked on Cleveland, the oddsmaker must also pay out 120 in profit to the people that picked Cleveland.
But in the other pocket, where he kept the 88 risked and lost by the people that picked Toronto, he doesn’t have enough to pay out the 120 he owes; he is down 32 on this matchup.
When the picks were 50/50, the oddsmaker had 10 left of the 220 risked, which represents his 4.5% profit.
Now, with the picks 60/40, the oddsmaker got exposed. He lost 32 on the matchup, and of the 220 in total that was risked on the matchup, that represents a profit of -14.5%. Ouch.
Not too many industries can sustain 14.5% losses, including oddsmakers. So to help avert disaster scenarios like this, oddsmakers are constantly monitoring the picks that are coming in to ensure that they are as close to 50/50 as possible in order to preserve their profit margin.
In this past example, the odds for both teams was -110, which is a “pick ‘em”. But because the oddsmaker was exposed with the picks coming in 60/40 for Cleveland, he needs to give people an incentive to pick Toronto to get it back towards 50/50. He does this by actually changing the odds for the matchup in such a way that it provides that incentive to pick Toronto.
Instead of both teams having odds of -110, the oddsmaker makes it more attractive to pick Toronto by changing the odds to +100. Now instead of having to risk 110 to win 100, people only have to risk 100 to win 100, so there is less downside potential.
At the same time as changing the odds for Toronto to +100, the oddsmaker makes it less attractive for people to pick Cleveland by changing the odds to -120. Now instead of only having to risk 110 to win 100 for Cleveland, people have to risk 120 to win that same 100. There is more downside potential, now, to pick Cleveland.
Every oddsmaker constantly adjusts their odds to influence the behaviours he seeks to keep the picks 50/50.
Many people have a misconception that every oddsmaker out there competes with each other based on having the best odds. In reality, that’s not completely true. An oddsmaker’s first priority above all else is keeping the picks as near to 50/50 as possible, otherwise they wouldn’t stay in business very long at all.
Because oddsmakers are forced to adjust their odds constantly, we often see extremely wild variations in the odds for the same matchup. In our matchup where Cleveland (+180) was in Toronto (-220), it wouldn’t be uncommon to see the same matchup where a different oddsmaker had it something like Cleveland (+200) and Toronto (-250). To try and win 100 on Toronto, you would have to risk 250 instead of 220, which means that you can potentially lose 13.6% more to win the same amount. There is a pattern emerging here - bigger downside for the same upside. That’s a bad deal in anything, and picking winners is no different.
It pays to shop around and compare odds. You might be risking far too much unnecessarily. Take the time to find the oddsmakers with the best odds, and then invest the time in the process to open an account with them. You’ll thank yourself later.
Want to know an easy way to compare current odds? Sign up for a free WiseStats account! With WiseStats, you can compare real-time odds at 15 of the most popular oddsmakers. You can even set alerts to be notified when the odds change for any matchup, or use the funky chart to look at how the odds have changed over time.
Takeaway: oddsmakers are constantly changing their odds to react keep the picks 50/50, so make sure to shop around and make sure you are always getting the best available odds!