Stop Losing Money by Taking Underdogs and Favorites at Face Value
February 11, 2021
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If you just found out how to convert odds into probabilities, you’re probably feeling pretty smart. Not only are negative odds favorites and positive odds underdogs. But you also know how much the sports betting lines you’re looking at are taking from bettors. You can figure out the vig. It skews the odds a little, but you still have a good idea who the better team is, right?
Wrong.
There are two factors that skew win/lose probabilities beyond reason: hype and money.
Setting your feelings aside, did the Chiefs really have less than a 1-in-4 chance because they were two touchdowns behind halfway through the game?
No. The probability of the Chiefs winning was not that low at halftime and Tom Brady hadn’t locked a win up. The odds changed dramatically because of money.
When the Buccaneers started winning, sportsbooks anticipated a slew of bettors wanting to cash in on underdog odds. Sportsbooks made the potential reward for betting on the Chiefs bigger to get some cash on that side of the line, too. Remember, the losing bets pay the winnings, and sportsbooks can’t run out of money.
The Chiefs didn’t deliver in the second half, and the odds adjusted accordingly. However, it was not a sure thing at halftime. There’s always room for a rebound from a team. (Broncos fans understand the corollary – that a great first half doesn’t guarantee even a good second half.) Extreme odds partway through the game don’t mean the game is called. They mean sportsbooks are trying to balance their risk.
How Hype Skews Win/Lose Probabilities
Betting on the election is illegal in the United States, but it’s legal overseas. And international sportsbooks took a lot of wagers on the 2020 presidential election. However, they didn’t set their odds based on electoral college math like:- An incumbent president running on a bad economy is near-certain death.
- The Red Mirage that showed Republicans ahead before mail-in ballots were counted.
- Influential pollsters like FiveThirtyEight favored Biden on election night.
The Financial Tightrope Sportsbooks Balance On
Bettors know there are two ways to win a moneyline bet at a sportsbook:- Bet a lot on a favorite to win a little.
- Bet a little on an underdog to win a lot.
- Lower the odds on the team with all the money.
- Increase the odds on the team with little money.
Super Bowl Odds
The election was a clean case study in taking sportsbook probabilities for favorites and underdogs with a grain of salt. We could watch the election probabilities change in real-time and compare them to sportsbooks. Surprise, surprise, they didn’t match. Sportsbooks had to factor in the financial liability of most fans betting on one team, regardless of the team’s chances. However, the Super Bowl has an important lesson for bettors, too. Here are BetMGM odds on the Chiefs and Buccaneers before the game and before the second quarter ended:| Pre-Game Odds | Pre-Game Win Probability | Halftime Odds | Halftime Probability | |
| Kansas City Chiefs | -157 | 61.1% | +350 | 22.2% |
| Tampa Bay Buccaneers | +138 | 42% | -500 | 83.3% |
March Madness
I’m writing this late at night on February 10, 2021. March Madness starts on March 18. If my editor is as fast as I am – and he’s quick – you’ll have five weeks’ notice to avoid two stupid mistakes:- Don’t bet on a team just because you love them.
- Don’t confuse extreme odds with an early call to the game.
