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Do you know how the books make money? There is a football game tonight and my sportsbook of choice has set the line at 5.5 The under is at -108, and the over is at -112. Let's convert these odds into percentages. -108 is roughly 51.9% and -112 is roughly 52.8%. These percentages add up to 104.7%. This is how the books make money.
Let's do the simplest version of this math. Let's imagine a sports book is offering a coin toss with both heads and tails at -110. The book is taking 4.76% vig. (-110 = 52.38%) You would expect there to be equal money on each side of the coin toss. In our hypothetical scenario we have $5 million on each side of the bet, meaning that before the coin toss the book is holding onto $10 million. Heads wins and the book has to pay out $9,545,454.55 to the winners, keeping 454,545.45 for itself.
Vig isn't something you need to worry about too much. Your profit and payout are determined by the line, so you should take the position you want in the sportsbook that offers you the best odds regardless of their vig. There have been plenty times I've seen one book taking ~6% vig and another book only taking ~3%, but the line I'm looking to bet is more favorable in the first book, so I place my money with them regardless. But there are two reasons that consdering vig can be helpful.
1. De-Vig Odds to Find "True" Implied Probability
You can use our no vig calculator to de-vig odds. Aside from being interesting, this can be useful if you bet across multiple sportsbooks. If you try to figure out the average odd by just looking at the lines set by different books there's a lot of noise in that signal. By de-vigging the odds you can get a more accurate sense of what the market believe to be an events true probability.
2. Negative Hold
This is the special one. Every once in a while you'll be able to find a pair of odds where the vig is negative, or where the implied probabilities add up to less than 50%. What does this mean for you?
Let's return to our coin toss example Imagine that for whatever reason the book has set heads and tails at +110 each. +110 implies ~47.67% probability. So imagine In the situation where there are 5 million dollars on each side of the bet, the book would have to payout $10,500,000.00 to the winners, losing $500,000.
What does this mean for you? It means you're getting your odd at a better odd than the true odd. If you have $10 on heads and heads wins you make an $11 profit. And what happens if you bet $10 on heads and $10 on tails? You make a profit of $1.00 regardless of the outcome. This is a no risk bet for you. When this happens the books usually correct is very quickly so keep an eye out. (We can help you with that)
Next Up: What Is Edge?
