Part of what makes sports betting fair is to ensure that odds reflect the actual likelihood of an outcome.
Your decisions as a bettor should be based on prices that correctly assess the impact of various factors. That’s why you’d wager with or against the grain, based on the length of these odds.
But have you ever wondered what is behind these numerical representations of chance? Why do bookmakers end up choosing certain probabilities that they convert into odds? What goes into the calculations that lead to these results?
These are the questions that we’re going to answer in this article. It’s also important to note that we’re going to talk about pre-match odds. Those that you find during play are dynamic live prices that operate on different principles, especially real-time conjecture.
May this presentation give you a better idea about what exactly factors into sportsbook calculations.
Odds are for balancing the books
There is a major back-and-forth that any bookmaker must adhere to when they enter the market: it has to insulate itself from heavy losses while presenting itself fairly to the potential bettor.
One of the core principles of any sportsbook is that it does not gamble. It does not slide toward a certain outcome for the sake of fully maximizing its margin of winning. Instead, it does what it can to ensure that each set of odds is a true reflection of that outcome’s probability of happening.
You could say that the mentality of a sportsbook is to lose as little money as possible in the event of a player’s successful bet. If you win by betting on the favorite, you win less because the likelihood of that result was quite high. The opposite applies to underdogs.
As long as the chances are correctly represented, gamblers will generally find their way to the odds by considering them fair.
However, there are circumstances when a bookmaker’s process has flaws, which is when a certain category of gambler swoops in. We’ll discuss this as we make our way through this text!
Circumstantial factors depend on the sport
Before we get into the actual details, we need to mention something else: the calculations are highly focused on the traits of a sport.
If you’re betting on boxing or tennis, individual aspects are easier to assess. However, if you’re going for betting odds football prices or for another team sport, there are many more variables, some of which we’ll address here.
The core of it is that earlier in the season/tournament, there is a lack of recent data when compared to a later match-up. For this reason, form, collective health, and other factors that we’ll discuss are not as prevalent as when there is more wear and tear.
That’s why, depending on when you decide to bet, there will be more volatility in price settings.
Major variables that influence prices
It’s almost impossible to showcase and disclose every single thing that goes into these calculations. This is especially important since the mathematical mechanisms that generate odds are complex formulas that balance numerous entries with varying impact.
We’ve selected some of the most high-profile ones, and we will explain them as best as we can for them to be manageable.
Form analysis to understand each team’s strengths and weaknesses
Every competitor’s chances going into a match or fight will generally be best indicated by recent spells. That’s especially true if you’re looking at sports whose seasons and competitions have long calendars with matches that are close to one another.
The more recent the data, the better a bookmaker can understand if a result is an outlier or a showing of maintained consistency. There’s a lot of variance in these elements because, again, a team is both a sum of its parts and a unit that must operate together.
If there are difference makers who are showcasing signs of slumps, they are downgrading vectors. The opposite applies if they’re in form, given that they can always have an impact that can directly influence the final result or smaller markets.
Naturally, there are other things that go into form assessment. As they say, availability is the best ability, which means that injuries and fair play factor in. Suspended players, or those who are either out or wobbled due to these ailments, will be variables that way into calculations.
You should also note that morale and perceived functionality/dysfunctionality have a similar effect. Public discourse and rumormongering that indicate locker room issues, hot seats, or impending firings can be signifiers of psychological realities, and you better believe they matter!
Statistical models that assess efficiencies
This is where the discussion shifts toward the much-revered or furiously-maligned sports analytics. They are a combination of a next-gen understanding of sports, but also a methodology that can fail to see the unpredictability of human failibility.
Ultimately, it’s hard to see how online gambling platforms can predict extraordinary circumstances, which is why betting on the underdog can occasionally pay. But, before something like this happens, there needs to be carefully calculated odds.
Depending on the sport, advanced metrics use various types of statistical sets. They measure the impact and success rate of certain actions, such as passes, blocks, tackles, and so on, depending ot the circumstances in which they happen.
Afterward, they synthesize them based on the existing samples, which is what allows them to understand the actual impact of players who see limited action. Such efficiency assessment is particularly good for pattern-driven tendencies from starters. It also works well for games where subs must get in and do their part.
You’ll also see these statistical approaches in head-to-head analyses. If there are elements such as rivalries, the mental and emotional impact of these high-stakes games can turn into repeated tendencies that are native to those circumstances. Synthesizing them can tell a sportsbook if there’s a certain level of exceptionalism that they should predict.
Market sentiment as a way to harness public perception
When the majority of bettors start putting money in the market, there will be some tendencies that may influence the sportsbook into taking measures by adjusting its prices. This also applies to previous cases when there are specific wagering patterns, and a new set of odds may take that history into account.
If there’s a proportional balance between how the money goes (more on the favorites, less on the underdog), or somewhat a tie (if the teams are really close), the bookmaker knows that the public sentiment is in line with how the odds are in place.
On the other hand, you have cases when there’s a mass movement toward betting on the underdog. This would mean that many are seeing those odds as really doable, which means that the bookie may have misplaced its confidence in the favorite.
Any such scenario in which there are divergent or unusual betting patterns from the masses would be an alarm signal.
Sharp money and its weight
This element may be the simplest to fathom, but you could also say that it’s the hardest to turn into an actual adjustment for a sportsbook.
Sharp money means that certain bettors, well-known by the bookies when assessing hit rate, are swinging in a certain direction. Usually, this would also indicate that there’s a weakness in the thinking or calculation process since these sharp gamblers agree on an outcome.
- If they bet on the favorite, they probably consider that the odds are favorable enough to turn a sizeable profit. In this case, the sportsbook probably underestimated the discrepancy, which would lead to shortening odds on that favorite party.
- Now, should they go quite hotly in the underdog, that’s a big alarm for the bookmaker, indicating that they should’ve gone with a more balanced set of odds.
Based on these inferences, sportsbooks understand that the tendencies of those who have a history of correct bets have identified an exploitable weakness. Their bets are already placed, but modifying the prices quickly can save the bookie some really important money.
The vig is the cherry on top
As far as we know, the vigorish, vig, or juice, is the commission that any set of odds will establish. It’s a direct part of your stake/winnings that the sportsbooks keep in order to maintain a sustainable business.
What this actually means is that the odds assigned to a game will likely exceed 100% if you turn them into implied probabilities.
Let’s take a theoretical example from football. You have 2025’s KC Chiefs vs LV Raiders:
- The Chiefs have -175 odds, which translates into 63.6% implied probability.
- The Raiders, as the underdogs, are at +145, which means that they have a 40.8% implied probability of winning.
If you put them together, you have 104.4%, with the 4.4% being the overround. On average, NFL games have a 4-6% vig on them.
In such a case, the books are actually adding this overround to each team. A realistic outcome based on a fair market standpoint would be:
- -156 for the Chiefs, the equivalent of 60.9%
- +156 for the Raiders, the representation of 39.1%.
As you can see, the difference between the de-vigged and juiced-up odds is not much, but it’s a small retainer that factors into the calculation.
Conclusion
Now that you have a better understanding of how odds turn up on a bookmaker’s site, you have the opportunity to sharpen your decision-making. The main way to do so is to bet based on your financial limits, so please follow the principles of responsible gambling.
This content is provided for informational purposes only and is not a substitute for professional advice. AFP editorial staff were not involved in the creation of this content.
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