Sports betting became legal in the United States in 2018. Since then, and at the time of writing, 18 states have legalized sports betting. New betting laws have brought cause for joy. Gone are the days of shady off-shore betting websites. Sports fans can now wager on their favorite games through apps on their phone. The options and betting types are limitless. With increased access and new opportunities, the number of causal bettors is set to rise. With the increase in volume, it can be expected more people will lose. Sports betting is a tough gig, few people make money from it. In this article, I hope to show you why sports betting is hard, and offer a few tips to lose less.
For this article, I will be referring to sports betting in the context of wagering on the NFL. I do not discriminate, I enjoy all types of sports betting, however, I am most familiar with betting on football. The NFL is also the largest league in terms of wagering. So, I seem to be in line with the masses.
Sports betting is hard, significantly more people lose money than win money. Sportsbooks wouldn’t be in business if they did not make money. But why is sports betting so hard?
Let us start with just how close most NFL games are. Above is a chart showing the ending point differential for all games in the 2020 NFL season. The yellow line indicates the median difference, which is just under 8 points. What this means in plain English is half of all NFL games finish within a one-score differential. Sportsbooks are well aware of this information, hence most game lines are somewhere between 3.5 and 7.5. Game lines are the most popular type of bet. But what they are exactly? A game line is a handicap one team gives to another to make the game fair. Most teams are not equal in strength therefore a sportsbook offers one team a point spread to make the game fair. A margin by which one team must win for the bet to be won.
An example of a spread would be if Miami is playing New York and since New York stinks the spread is -7.5. For a ticket to win the bet either Miami must win by more than 7.5 points or New York must lose by less than 7.5 points.
There is a lot of randomness in NFL games. Things do not allow go as planned. And with most games finishing within one score the variance leads to a small margin of error for the bettor.
To illustrate just how hard it is to win in sports betting let us build a simple model of the world. In this world all NFL games are either won or lost by one score or less. And all spreads are also within one score or less. In this simple fictitious world, you may believe you have a 50-50 chance of correctly guessing the winning team. And for the purpose of this demonstration ill give you that ability. If you correctly pick the winner 50% of the time, you’d still be a loser in gambling terms. Now imagine just how hard things get when we add the complexity of real life into our gambling model.
How is that you say, why would I lose if I hit 50% of my bets! And the answer is simple- vigorish! That harsh-sounding word is what keeps sports books profitable and the causal sports bettor a loser. Vigorish is the price you pay to place the bet. It is typically the negative number you see next to both teams in a sportsbook. The most common vig is -110, or 1.909 for my fellow Canadians. It means you must pay 110$ to win 100$ So winning 50% of your bets actually loses you money. To breakeven on standard bets you must hit 52.3%.
If you’re wondering how I calculated this breakeven number below is the formula. Bets with a negative number, ex: bets where you must pay a price to win, is in the first line. Positive bets with a positive number next to it, ex: bets with no juice is in the second line.
It is at this point most people say, “Yeah, but I know football. I’m better than 50% at picking winners”. To that I say, record your picks and keep a running log. The truth hurts, most football fans fare much worse than a 50% win rate against the spread.
That is not to say opportunities do not arise. Teams can be improperly assessed, and lines can be divergent from what is going to happen. But for all the occasions that offer a good opportunity, there are a million more times an efficient line is set and you have less than a 50-50 chance of guessing correctly.
The formulas above do give us a good reference point for how the price you pay for a certain bet changes the breakeven percentage. On bets where you must lay 110$ to win 100$, you must win 52.3% of those bets just to breakeven. Whereas if you could find bets with +110 odds you would only need to win 47.6% of those bets to breakeven. Knowing the breakeven odds of every bet is the starting point to understanding how to manage your bets. One way to think of it is “if I take this bet will the outcome happen more often than the breakeven odds”. For example, the Packers are going off at -3.5 at -110. Will Green Bay beat team X by 3.5 more than 52.35% of the time. Thinking of bets in terms of probabilities is the starting point to making smart bets.
Now, remember, no matter how smart you, no matter how much football you watch Sports Books have more information. They also know how to use and interpret that information in more productive ways than you do.
So, with that in mind here are some tips to lose a little less. And maybe even make sports betting an inexpensive hobby.
First, shop for the cheapest line. With so many apps and online ways to bet on sports, it is worth having multiple options to scan for cheaper bets. For example, if one book is offering the Giants -3.5 at -105 and another book is offering the Giants -3.5 at -110 then you are way better off paying -105. You just reduced your breakeven amount from 52.3% to 51.2%. It may seem like a small margin but it adds up over time. Besides, you wouldn’t pay a higher price for the same good in stores, why do so with your bets?
The next tip is one most people hate to hear. Avoid parlays. The forbidden fruit of sports betting, parlays are the cause of more frustration than anything else. Pairing multiple outcomes may increase your payout but it comes at the cost of complexity and unpredictability. Anytime you add risk and randomness to your ticket you are asking for trouble. If possible, avoid parlays completely or if that is out of the question make them limited to two teams.
Last, is a simple but often overlooked tip. Manage your bankroll. People get in trouble when they start betting more than they can afford. This typically starts after a tough losing streak. You are going to lose some if not most of your bets. So always live to bet another day. A simple way to manage your bankroll is first to determine the amount of your bankroll. Set aside an amount of money that you are comfortable losing. For example, if you have 200$ for leisure money and want to dedicate that to the NFL season, then that is your bankroll. Professional sports bettors advise never to bet more than 2% of your bankroll on any bet. Well, they often have more money and make much higher wagers than us mere mortals, so in my experience betting 5% or 6% of your bankroll on any single bet works just fine. This means if you have a 100$ bankroll then no bet should before more than 6$.
These tips often get labeled as boring or risk adverse. But many more people have lost and been burned by sports betting than have made a fortune. Discipline and knowledge of probability can take you a long way in sports betting. Don’t drink the Kool-Aid and fall victim to the allure of fool’s gold. Bet smart.