What is Line Shading and How Oddsmakers Use in Sports Betting and Wagering
A few weeks ago, I wrote a piece about expected value and I told you that you'd better become best friends with odds, probability, and statistics extremely fast if you wanted to take your handicapping to the next level. Well today, I am here to tell you that you are going to want to make a new friend, and his name is economics.
Economics is the study of supply and demand and often can be used to study certain financial markets. I completely understand if you're asking yourself why this even matters when it pertains to sports betting, but the two essentially go hand-in-hand once you understand how the oddsmakers use economics to help secure bigger profit margins.
The goal of this article is to study the structure of the sportsbooks and understand how oddsmakers use the practice of 'Line Shading' to help increase profit margins and decrease the bettor's chances of winning. The best way to start is by taking a look at a simple example centered around a -110 line.
Related: Vig in Sports Betting Explained
Sportsbooks Profit Margin - The Short Answer
For the purpose of this example, we are going to stick with the -110 standard point spread line. As I'm sure you already know, the -110 line means that in order for you to profit $100, you must bet $110. If you win, you would receive $210 (your original stake - $110 plus the $100 winnings). If you were to lose the bet, you would lose $110.
Because all sportsbooks are in the money-making business, they would receive 4.5 percent or $10 of the combined $220 betting action. We already know that a bettor must win 52.38 percent of his bets in order to break even by consistently betting -110 lines. If we were to look at this example from a moneyline perspective , you would find them to be exactly centered with the exact probability of the game's outcome.
For example, if you have a game featuring the Miami Dolphins and Buffalo Bills, the Dolphins would be -220 favorites, while the Bills would check in at +180. This means that the game is exactly centered at 200, which says that the favorite has a 66.7 percent chance of winning, while the underdog has a 33.3 percent of winning. This line is not shaded in either direction and as such, will allow the sportsbook to maintain their 4.5 percent profit margin over the long-term.
Sportsbooks Profit Margin - Shading the Line
I can't restate this fact enough - sportsbooks are in the business of making money and will do anything they can to boost their bottom line. That includes taking advantage of human tendencies and shading the line so that they can increase their profit margins. Typically, we as human beings like to bet on favorites and "overs". Sportsbooks know this well in advance and shade the line so that the favorite becomes overpriced and the total is extremely inflated.
In the above example, a game that is centered around 200 would bring in a profit margin of 4.5 percent. If the sportsbooks know that most people want to bet on the favorite in this spot, they would take action and shade the line so that the probability of the favorite winning went down from 66.7 percent to around 65 percent of the time.
By doing so and having around 60 percent of the public money backing this now shaded favorite, the profit margins jump from 4.5 percent to 4.9 percent. If the sportsbooks felt the need to shade it another percent down to a win probability of 64 percent, the profit margins would then jump to 5.3 percent with 60 percent of bettors backing this side and 6.7 percent with 80% percent of backers betting the favorite.
What Does Line Shading Mean for Bettors Moving Forward?
Well, now that you are aware that sportsbook practice line shading to help increase their profit margins, you must really trust your instincts and models that give you the true odds or probability of a certain team winning. If you feel like the number is off, and you can find a +EV, then jump on the opportunity and don't look back. If you believe that the numbers are skewed or inflated in a negative way against you, I would recommend looking elsewhere for a game to bet because the sportsbooks have already taken any value that was in the line right out of it. It would almost be the smarter play to take the +180 underdog more often than a -220 favorite given the fact you'd only need a 33 percent cash rate to break even betting the dog whereas you would need to win an at 66 percent clip to break even betting the favorite. And lastly, it's never a bad idea to bet against the public.
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