The myth of balanced action

[tech]

You run a sportsbook and you have to set the line for New England at Pittsburgh this weekend. Let’s say that you think the “true” line is NE -1. In other words, the result would fall on either side of that line 50% of the time. But, you also know that the line that would balance the betting action is NE –4. What line do you post?

[craig r]

If the sportsbook I ran had a lot of money (the reason I say "alot" is because of how much action comes down on an AFC title game) I would hang -1. If it truly is 50/50, then I would have a huge edge here for two reasons: 1) Get tons of money on NE at 2) -110. My book would get way more than 50% of the action on a 50/50 proposition. Basically it might get 75/25 action. Crap, I would take that on a coin flip anyday. And then couple that with the fact that people have to lay -110.

I base my answer on the way your question was phrased. As if we could have either -1 or -4. I would probably not want to risk as much and would maybe move line to 1.5 (no pushes) or even 2.

craig

[QuickLearner]

If I'm the football linemaker and I think that NE will win the game by 1 point... but I want to allow for the public's heavy NE action, then I might hang NE-3 as my first number.

Youe example is made more difficult because 3 is such a critical number. It would take a world of one-sided action to move me off the 3. I'd manipulate the payoff rather than move the number (NE-3 -115, then NE-3 -120, etc.) in order to keep the action balanced.

[craig r]

The problem with hanging the 3, is that you are now encouraging action on PIT. Which is not what you want to do if you want to maximize how much money you are going to win. I would want as much action on NE as possible.

craig

[2the9s]

[ QUOTE ]
What line do you post?

[/ QUOTE ]

The same line that every other book has. Even if the action is not balanced, the benefits of moving the line to balance it don't seem to make up for what you'd lose by getting middled by smart gamblers.

[Easy E]

How many "smart" gamblers, as a percentage of all gamblers, do you think there are?

Go by money invested, if you'd prefer

[ttleistdci]

[ QUOTE ]
How many "smart" gamblers, as a percentage of all gamblers, do you think there are?

Go by money invested, if you'd prefer

[/ QUOTE ]

Do "smart" gamblers = long term winners?

If so, I'd say percentages are in the single digits.

[2the9s]

Regardless of how many "smart" gamblers there are, they will bet substantially more than a square when they have a big advantage. Catching a middle around the 3 is huge, and a LOT of smart money would take advantage of that.

[QuickLearner]

If I'm trying to balance the action I want to find the perfect balancing point between sharps who would take Pitt and the value and squares who would take NE and pay the penalty. Per unit wagered, though; one sharp betting $5K would equal 100 squares at $50. I would never want all NE action, no matter what the line. That ball has points! Those refs are human! That field is slick!

Books don't really "play," they get paid a commission to facilitate the "trades." Just like Wall Street, eh?

[craig r]

That is the whole purpose of Tech's post (i would assume); he is pointing out that balanced action is not the purpose of a book. they want to win. Pinnacle is known for finding edges and exploiting it (i have been told that they were part of the "computer group" in vegas..don't know if this is true though).

There is a book, called "The Odds." The book is highly entertaining, but it is also very informative. Some of the people that the book discusses are linesmakers and sportsbook operators. There is some of an "interview" type format as well.

Don't get me wrong, in my example above, I am probably leaving myself too wide open. But, why balance the action when you can get +ev by taking a "risk?"

craig

[judgesmails]

Assuming our book is not operating in a vacuum, and our competitors will hang 4 to balance action - I post NE -3.5 -105 so I don't facilitate middle action and still encourage +EV wagers for my book.

[Iceman]

[ QUOTE ]
That is the whole purpose of Tech's post (i would assume); he is pointing out that balanced action is not the purpose of a book. they want to win.

[/ QUOTE ]

Books generally try to set an accurate line, despite the fact that they won't win as much square money that way, since that protects them from getting hammered by well-funded sharps. If a book sets a line or price that's more than a tiny difference from what other books have, then they're risking being arbed or middled. In many cases, the square money tends to be very lopsided (generally on the side of favorites and overs). The squares can do very well in the short-run at a time when "name" teams are winning, when lots of favorites are covering, or when scores are high, but in the long run either things will come back to normal or the lines will adjust to the new conditions, and the books' built-in comission will win out over all but the best bettors.

[ QUOTE ]
Pinnacle is known for finding edges and exploiting it (i have been told that they were part of the "computer group" in vegas..don't know if this is true though).

[/ QUOTE ]

Pinnacle has a different business model than most of the other books. Most of the books on the NFC Championship are at Falcons +5.5 -110 and Eagles -5.5 -110. Pinnacle wants to make a massive bet on the Eagles. Instead of placing that bet at -110, they just offer the line Falcons +5.5 +102 Eagles -5.5 -112. People will jump on the Falcons at that price, and Pinnacle effectively gets their bet on the Eagles at -102 instead of -110.

[kdog]

[ QUOTE ]
But, why balance the action when you can get +ev by taking a "risk?"

[/ QUOTE ]

Taking a risk is fine to an extent. Balancing produces guaranteed value which is used to offset those +EV situations that don't win. The edge in these sports +EV situations is small and exploiting them is really a long term thing. It doesn't take a whole lot of standard deviation to create a good sized red figure. No book wants that when they can show a nice consistent profit otherwise.

[tech]

Everyone had a lot of good points. As several people mentioned, there is not one "right" answer, because it depends on where other books have their number, how much you expect sharps to pound the number in favor of the true line, etc. But, the highest EV comes somewhere between -1.5 and -3.5, specifically at the point where you think the level of risk is acceptable based on the money coming in.

The big point here is that you would probably not want to set the line at -4 in my example, even though that is the point where you would get balanced action. Why? Two reasons: (1) you are giving up EV, and (2) you are giving yourself the most exposure to sharp bettors who also know the true line, as you do.

[tech]

[ QUOTE ]
Taking a risk is fine to an extent. Balancing produces guaranteed value which is used to offset those +EV situations that don't win. The edge in these sports +EV situations is small and exploiting them is really a long term thing. It doesn't take a whole lot of standard deviation to create a good sized red figure. No book wants that when they can show a nice consistent profit otherwise.

[/ QUOTE ]

Then why does anybody ever take risk? Why don't they just do something safe? Successful businesses of all kinds take risk because they want to maximize profits, not to stop at a nice little figure. Simply profiting off the vig used to be the way books operated. Now the vig barely covers the overhead at some places.

[Wake up CALL]

[ QUOTE ]
2) you are giving yourself the most exposure to sharp bettors who also know the true line, as you do.


[/ QUOTE ]

Sorry but this makes no sense, please elaborate. If your assumption that this number will balance the action you don't care if the "sharps" are on the right side or not.

[tech]

You are right. If you know the action will be balanced there, the second concern is not an issue. I was referring to the posts that were concerned about the "big money" sharp bettors coming in and nailing you.

[kdog]

[ QUOTE ]
Then why does anybody ever take risk? Why don't they just do something safe?

[/ QUOTE ]

Maybe my original post wasn't clear. I am saying that there is an acceptable level of risk. Something like a 60-40 or maybe even a 65-35 imbalance. A situation where if the books position is correct there is a nice chunk of additional profit but they don't get crushed if they're wrong.

[ QUOTE ]
Successful businesses of all kinds take risk because they want to maximize profits, not to stop at a nice little figure.

[/ QUOTE ]

Comparing risk in other types of businesses with bookmaking is apples and oranges. Other types of businesses that are SUCCESSFUL would never continually place themselves in even 60-40 situations.

[ QUOTE ]
Simply profiting off the vig used to be the way books operated. Now the vig barely covers the overhead at some places.

[/ QUOTE ]

If you have first hand knowledge of any of these please post them so I will be sure not to open an account with them. Anyone operating in this fashion has a risk of ruin higher than I care to deal with.

[DCJ311]

The only situation where a book would want to 'gamble' is if they were an extremely well funded book. For example, if I am a very well funded professional sports bettor or syndicate, who routinely gets down 6 figures on games, I would be much better off starting my own sportsbook.

For example, if the market line on a game is Eagles -5.5 -110 and I strongly believe the fair line for the Eagles should be -6.5 +100 or something to that extent, then I could lay my own line of Eagles -6 -115 to encourage bettors to play ATL +6 -105.

This way I am taking a fairly lopsided position on PHI -6 +105, which is much better than if I am laying PHI -5.5 -110 at a sports book on my own. I have a hugely +EV bet, and since I am well funded, I can be willing to accept the risk of losing 6 figures on the game. I mean, if I was going to bet PHI -5.5 -110 myself for 100k, why not be willing to take 100k of action on PHI -6 +105?

Anyways, a lot of books do gambling on their own, with Pinnacle and Olympic being high on those lists. Pinnacle consistently offers the sharpest lines, and the guys behind the scenes are clearly winning sports bettors on their own.

However, a more underfunded sports book should definitely accept less risk on their games, since a strong swing in variance could wipe them out. It is much better for them to take the 'sure thing' and sacrifice EV than to accept unnecessary risk for a more highly +EV situation.

[TimTimSalabim]

An even better example was the Colts-NE game. The books knew that the true line was somewhere around NE -6 (maybe even higher). But they also knew the public loves teams that score lots of points so the balance line was closer to pick'em. So they set the opening line at NE - 3 knowing that they're going to get a crapload of money on the wrong side (Colts), which is exactly what happened. The books ain't dumb.

[Ed Miller]

The same line that every other book has. Even if the action is not balanced, the benefits of moving the line to balance it don't seem to make up for what you'd lose by getting middled by smart gamblers.

To be clear, it doesn't matter what the other books are hanging (EV-wise, at least) if you KNOW you are hanging the "true" line. In this example, if NE -1 is 100% certain to be the "true" line, then any book can hang it without fear of "being middled."

[Iceman]

[ QUOTE ]
The same line that every other book has. Even if the action is not balanced, the benefits of moving the line to balance it don't seem to make up for what you'd lose by getting middled by smart gamblers.

To be clear, it doesn't matter what the other books are hanging (EV-wise, at least) if you KNOW you are hanging the "true" line. In this example, if NE -1 is 100% certain to be the "true" line, then any book can hang it without fear of "being middled."

[/ QUOTE ]

If you're at NE -1, the true line is NE -1, and all the other books are NE -4, people will bet PHI +4 on other books and NE -1 on yours. You will get a flood of action on NE -1, and 50% of the time you'll win 100% of that action, while the other 50% of the time you'll pay out 100/110 on that action, for an overall profit of 5/110 times the action you attract. The other books might get middled as a result of you posting that line. But you'd have to be very sure that -1 really was the true line, especially since there is a key number in between you and the other books.

[DCJ311]

[ QUOTE ]
The same line that every other book has. Even if the action is not balanced, the benefits of moving the line to balance it don't seem to make up for what you'd lose by getting middled by smart gamblers.

To be clear, it doesn't matter what the other books are hanging (EV-wise, at least) if you KNOW you are hanging the "true" line. In this example, if NE -1 is 100% certain to be the "true" line, then any book can hang it without fear of "being middled."

[/ QUOTE ]

This argument is true, but very silly. If the 'true' line were -1 in this case, then if you were to bet +4, you would have yourself a play that wins approximately 65% of the time. The market line is very rarely off the true line by that much. In this certain example, it is likely you have made a large mistake in predicting the true line. If you are so happy to book -1 yourself, why not go out and bet up all the +4 you can find, as this would be a much better way to maximize your +EV per dollar invested.