Understanding how bookmakers set their odds is not just helpful—it's essential for anyone looking to bet on sports profitably over the long term.
Most recreational gamblers often miss this fundamental concept, focusing instead on game projections, hunches, or the latest buzz from social media influencers. However, a deeper comprehension of where betting prices come from and how they are calculated can reveal profitable opportunities that most bettors overlook.
In Part 2 of our series on profitable sports betting, we aim to clear up the often opaque process of odds setting by bookmakers, empowering you to make more informed and profitable betting decisions.
We've established a foundation by delving into the essentials of sports betting and the pivotal notion of expected value (EV). In Parts 1 and 2, we clarified some fundamental concepts and examined how bookmakers determine odds.
Before diving into Part 2, here's what's been covered:
In the realm of sports betting, odds are numerical values that represent the likelihood of a specific event occurring. These odds can be presented in various formats globally; however, we'll concentrate on the American Odds format in this discussion. American Odds specify the potential return relative to a base figure of 100 units.
But odds also indicate the price of these occurrences. With American odds:
Bookmakers balance risk management with profit goals when setting odds. The difference between market-making sportsbooks and retail sportsbooks lies in their approach and sophistication in setting these odds.
Market makers like Pinnacle or Bookmaker usually set the opening lines and adjust them based on the betting activity they observe. These initial lines have lower limits and lower vigorish (juice), allowing them to attract limited risk in exchange for price discovery from their sharpest bettors. As betting action comes in, they adjust the line and increase the limits, a process that continues until they believe the "true odds" have been accurately set. This adjustment can take several days for events like NFL games or 12-18 hours for daily leagues like the NBA or MLB.
A somewhat simplified example: Pinnacle opens the betting on the Chicago Bears vs. the Green Bay Packers game seven days in advance with the Bears at -3. This indicates that Pinnacle's oddsmakers initially estimate there is roughly a 50% chance that the Bears will win this game by 4 or more points, and a 50% chance they will win by two or fewer points, or lose outright.
Sharp bettors globally, leveraging their statistical models and algorithms, assess this line should be set at Bears -5. Given Pinnacle’s line at -3, and the sharp bettors' assessment at -5, the sharps pounce on the -3 line because it effectively gives them two free points versus where they calculate the true margin of victory should be. They bet heavily on -3, expecting the Bears to likely win by 6 or more points, even though the current line only requires them to cover 3 points. This discrepancy presents immense value.
Pinnacle observes this flurry of sharp activity on -3 and promptly adjusts the line from -3 to -4, also increasing the bet limit from $2,000 to $5,000, while continuing to monitor incoming bets. As sharp betting continues to favor -4, Pinnacle moves the line further to -4.5 and then raises the betting limit to $10,000. This cycle repeats until the betting limits are lifted, and by this point, any significant advantage in the opening line has been eroded by the large volume of informed sharp money. By the end of the week, the line stabilizes at Bears -5.5.
If you were among the sharps who seized the Bears between -3 and -4.5 you now hold a substantial advantage. Contrast that with what the squares do: on game day, casual bettors will open their preferred retail sportsbook app, see the line at Bears -5.5, and place their bets. Due to the house vigorish built into the pricing (which we will explore in detail later in the series), a casual bettor backing the Bears at -5.5 is setting themselves up for a loss over the long term.
Meanwhile, the smart money has been on the Bears at -3 since Monday morning, capitalizing on the value early in the week.
Retail sportsbooks such as DraftKings, FanDuel, and BetMGM adopt a more conservative approach. They typically wait for market makers to set their lines or purchase their line data from third-party providers. Additionally, they establish a vigorish rate that’s at least twice that of market-making books.
This ecosystem, which includes bet pricing from sharp books and third-party data providers to the retailers, often creates a time lag that opens up discrepancies between the odds offered by different retail bookmakers for the same wager.
Moreover, retail sportsbooks usually set much lower limits than their sharp counterparts, limiting their ability to observe and react to sharp, high-stakes action from the world’s most informed bettors. Consequently, they engage in price discovery with more limited information, resulting in less frequent movement of their lines.
This scenario presents a target-rich environment that tools like Optimal are designed to help you identify and analyze. Some retail books are more adept than others at updating their lines to reflect sharp action in specific markets. For example, FanDuel is recognized among the sharp gambling community as being "sharp" on player props, indicating their odds often reflect true probabilities.
Conversely, other retail books are known for maintaining stale, slow-moving lines that become easy targets for sharp recreational and professional bettors. Instead of using this sharp action to inform their pricing strategies, these books often deter these bettors by imposing strict betting limits—sometimes as low as $1—on those who consistently spot and exploit these value bets.
Retail sportsbooks are inherently more risk-averse and cater predominantly to the casual bettor, who is unlikely to possess the advanced knowledge contained in this guide or have access to sophisticated tools like Optimal. As a result, their systems are not configured to profile players and leverage insights from sharp bettors effectively.
Retail sportsbooks also hate (literally, hate) profitable bettors. These books operate with the knowledge that their odds are exploitable by savvy bettors; they are not set up for the price discovery game that the sharp books employ.
There are many ways to profit consistently in sports betting, but in this series we’re going to be focusing on exploiting the differences in odds offered by various retail bookmakers. By comparing odds from a retail sportsbook against those set by a sharp book - or even between retail books - bettors can pinpoint scenarios where a particular retail book’s odds do not accurately reflect true probability.
Why pay $120 to win $100 at ABC Sportsbook (-120) when XYZ Sportsbook offers better value at $105 to win $100 (-105) for the same bet?
Identifying these differences is how Optimal makes you the sharp bettor.
As we build on the foundation laid in Part 1 about expected value (EV), understanding how bookmakers set odds enriches our ability to evaluate profitable betting opportunities. Recognizing the dynamics behind odds setting can transform your betting strategy from reactive to proactive, significantly enhancing your chances of long-term success.
Stay tuned for the next installment, where we will delve into identifying and leveraging betting opportunities that carry a positive EV, ensuring you're always placing smart bets.
