Your Loss is my Win (so is your Win)

Bookmakers do not gamble. Ever.

Feels like common sense, right? For a while, this wasn’t obvious to me. I was picturing professional punters working very hard, putting their employer’s money at risk every single day. But no, while some companies gamble, bookies don’t.

The Bookie’s Game

Bookmakers have a very simple business model: pay the winners with the money of the losers (and pay yourself in the process).

Let’s consider the match opposing Stéfanos Tsitsipàs to Hubert Hurkacz on 08/08/2019 for the Rogers Cup in Montreal. Odds were in favor of the Greek (1.41 to win versus 2.90 for Hurkacz to win).

Tsitsipas - Hurkacz bets

This figure illustrates the various bet settings that can occur for this specific event. Any point on the graph stands for a specific repartition of the money waged on each player.

The dotted dark line represents a balanced repartition of the bets, meaning that whoever wins, the bookmaker is guaranteed to make the same profit. If the point moves around inside the blue area, the bookmaker still makes a profit, but the result of the game will have an impact on the amount. On each side of the light blue area, this is where the bookmaker starts to bet too!

Thoughts About Odds

One can assume rationally that a bookmaker, for any given bet, wants to be in the blue area (and preferably near the dotted dark line) in order to have what is called “a balanced book”. And it can do so primarily through odds manipulation.

Odds are at the center of the bookmaker’s business. For instance, getting a wider blue area can be achieved by raising the implicit probability - equivalent to decreasing the decimal odds - thus increasing the margin for the bookmaker. Obviously, such transformations eat up the potential earnings of the players, so odds must be dealt with carefully.

The initial value of odds and their evolution in time depend on a wide range of parameters and contextual data. Such parameters include:

Bookmakers put a lot of energy into crafting the right odds - the odds that are going to maximize profit while minimizing risk.

Handling “lucky (or superskilled) betters”

While making sure they are not losing money overall, bookies also have to watch out for players that consistently make a profit in the long run. These rare players are almost systematically the target of a restrictive measure from the bookmaker such as:

Sometimes these unlucky betters simply found a loophole allowing them to win regularly over time, or they are just really good at predicting outcomes… at least beyond what’s acceptable for the bookmaker.

Not much publicized, these actions illustrate how much control bookies really have over their own financial interest. A good better is nothing but someone that regularly loses money over time. Thus being a great punter is very likely to endanger the serenity of your betting practices, so stay sharp!

Shield & Sword