How Do Companies Calculate Betting Odds?

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If you’re going to place a bet on the NBA finals, the chances are you’ll check the NBA playoff odds first before you do it. You’re placing money on the outcome, so it’s important for the odds the sportsbook sets to be accurate. As a punter, you don’t want to feel cheated out of your money because of misleading odds. If you’re making a bet such as parlay bet, you’ll be betting on not just one outcome, but several. One misleading set of odds could damage the whole bet.

Note that it’s important to remember that the odds aren’t a prediction of the outcome, but more a statement of the probability of an outcome. If a sportsbook is putting forward a certain team as their favorite, they’re saying it’s likely the team will win. They’re not saying the team will win.

But how do sportsbooks calculate odds? What methods do they use to calculate and set them?

Calculating betting odds

When setting betting odds, the goal of the oddsmakers is to balance the action on both sides of the bet. They’ll create the odds to attract equal action on both sides of the betting line. It’s just as essential for them to manage risk as it is to provide an accurate prediction of outcomes. They want to make a profit but still state a true rough reflection of the outcome of an event.

Power rankings

Power rankings are one method sportsbooks can use to calculate the odds, albeit a slightly old one by today’s standards. These are somewhat mysterious, but it’s inferred that the sportsbooks are looking at such as individual player performance, team performance and schedule. They’ll factor in elements such as the injury report. To this they’ll add a little bit of common sense.

Data analysis

Using power rankings is a somewhat dated way of calculating odds in today’s sports betting world. These and reliance on gut feeling and the sportsbook’s own expertise aren’t enough anymore.

Statistics play a crucial part in sports betting, and people who are placing bets on sports use this same data to help them make their bets. The data is reliable and is a revealing factor that ends up grading teams in a lot of sports.

When setting basketball odds, sportsbooks may look at aspects such as:

  • Points
  • Steals
  • Assists
  • Blocks
  • And turnovers.

Although they’re likely to use more in-depth data, these are a good starting point. The sportsbooks may use this information to rank a player’s contribution to their side and then estimate that player’s value to date. A combination of mathematical averages and estimates then allows a computer to calculate a numerical figure.

Public feeling

This might seem an odd factor to take into consideration, but sportsbooks are wise not to exclude public sentiment when creating their odds. Although sportsbooks employ computers to form their odds, they must make adjustments for public feeling to their betting lines. Some sportsbooks have lost a lot of money because they didn’t consider how sports bettors might feel about a certain event, person, team etc. or perceive them. Bearing in mind public sentiment can help the sportsbook to mitigate risk and protect themselves against potential losses.

Artificial intelligence

A lot of people out there believe greater automation achieves more efficiency. The use of artificial intelligence (AI) and machine learning in the sports betting industry to determine odds is widespread now, although the use of AI is still somewhat in its early days. Companies still have a lot to learn so they can harness the full power of these technologies for sports betting services. What is clear is that they can work with vast amounts of data that is way too much for the human mind to calculate betting odds accurately.

Checking the odds-on other sportsbooks

Competition in the sports betting industry is fierce, and there are lots of high-quality sports betting sportsbooks available to bettors. It’s becoming harder for sportsbooks to differentiate themselves on odds. Online sportsbook odds are available the instant they’re created, and some sportsbooks are starting to check out the odds from other sportsbooks and then create their own odds based on them.

This saves them money because they’re devoting less of their budget to making odds. They can just browse online, get a general idea of the odds other sportsbooks are offering and then set the same odds or roughly the same, whichever suits them.

Calculating odds is a tricky task and the sportsbooks have to find a balance between setting accurate odds and making a profit, but they have their methods. Other ways they’ll calculate their odds include outsourcing the task to a third-party odds-making consultancy. If the odds are unique or unusual in some way, it’s likely the sportsbook has produced these odds itself, rather than hired someone to do it.


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