How Do Sportsbooks Set Their Odds?

From the time betting markets open to the start of the game (and beyond), sportsbook odds tend to fluctuate, potentially turning the favorite at betting open into an underdog. Understanding how odds are set and how they move is an important skill for sports betting success. 

On this page, we’ll explain how sportsbooks set their odds and describe the factors that contribute to odds movement. We will also discuss why sports betting odds can vary between bookies.

How Are Sports Betting Odds Set?

Sports betting odds are set by a combination of complex algorithms and expert analysis by professional handicappers who are contracted by the sportsbooks. These calculations account for injuries, weather, team strengths and weaknesses, recent and season-long matchups, prior head-to-head meetings, and more. 

After the initial odds are set, bookmakers will adjust the odds slightly following betting action with the intent of getting equal dollars on each outcome. This effectively guarantees the bookies can make a profit regardless of the way the game ends. 

For markets like totals (or over/under) betting or spread betting, sportsbooks may also adjust the line if the odds are skewing too heavily to either side.

How Were Odds Set in the Past?

Historically, odds were set by bookmakers in Las Vegas and then distributed across the country. Adjustments to those odds were made based on anticipated regional action.

However, in 1992, the Professional and Amateur Sports Protection Act (PASPA) banned sports betting across the United States. This effectively allowed Vegas to become a convergence point for oddsmaking experts; even today, the term “Vegas” is still thrown around to refer to the sportsbooks’ consensus on odds and lines. 

Why Does Odds Movement Matter?

Odds movement is a naturally occurring result of sports betting action. Savvy bettors track odds movement to assess the public’s opinion of the projected outcome. 

Comparing the odds and lines when they first open to those an hour or so before the start of the game can show discrepancies between the number of bets on a given side and the actual dollars wagered. When reverse odds movement occurs, it’s typically a good indicator that you should fade the pick. 

This can also be used to help calculate the expected value (EV) of the wagers you intend to back. Learning how to find positive expected value (EV+) will help you win more money over time by finding more favorable wagers to back. 

Do All Sportsbooks Have the Same Odds?

Generally, sportsbooks will try to keep their odds somewhat close together so as not to put any other bookmaker at a significant disadvantage (or to prevent taking on unnecessary risk). Differences are usually subtle but can be enough to make a wager more or less valuable, depending on which bookie you’re using. 

Odds shopping refers to browsing your preferred wagers across multiple bookmakers to find which one offers the largest potential profit for the outcome you’re backing. When you habitually shop the odds, your winning wagers will lead to significant gains in your bankroll over time. 

Do Power Rankings Matter?

Power rankings are a tool for analyzing the short-term and season-long trends of all teams in a league (though some rankers will limit their lists to the Top 10). Reviewing power rankings can be a good way to gauge the perceived strength of each team; authors who write in-depth power rankings can also shed insights on the reason for recent performances.

Oddsmakers usually don’t rely on external power rankings, and the rankings they use are rarely available to the public. We recommend using power rankings while doing your own research before making a bet, but it shouldn’t be the only factor you consider, as they tend to carry a heavy recency bias.

Conclusion

As odds change, the timing of placing your wager becomes even more important. Waiting too long to place a bet can result in less favorable odds for the outcome you’re planning to back, reducing the potential profitability. 

Knowing the factors that lead to odds movement will help you identify smarter betting opportunities. Pay close attention to how odds are set and where they move before placing your next wager!

Good luck, have fun, and always gamble responsibly!!