How Betting Lines are Set
How betting lines are set is a closely guarded secret. When you think about it, it's much like the recipe for Coke or Pepsi, its there on the label but the exact mixture is unknown.
Compounding the problem now is that there is a growing number of online sports books that set the betting lines themselves instead of getting it from an odds maker.
But there are three generally known ways on how betting lines are set:
Formula
Let's say Team A defeats Team B and Team B defeats Team C. We can therefore conclude that Team A can also defeat Team C right?
But what if Team C defeats Team A?
There lies the obvious problem with basing a formula solely on wins and losses. Scenarios such as this happen fairly regularly in sports. For example, in the 2005 NCAA Division I-A football season, Penn State beat Ohio State, Ohio State beat Michigan, and Michigan beat Penn State.
An odds maker's formula on setting betting lines takes into account a team's wins and losses, its points scored both for and against, its schedule, and the location of the team's games. The formula may also include records from the previous two seasons, the previous year's strength of schedule, the number of returning starters, whether the head coach is returning, whether the starting quarterback is returning, and published recruiting rankings from several preseason publications.
Truly, there are a lot of variables that go into an odds maker's. The good thing for bettors is that they only get to choose the favorite or the underdog.
Rating System or Power Rankings
Generally, a sports rating system analyzes the results of competitions to provide objective ratings for each team or player. Rankings are then derived by sorting each team's ratings and assigning a rank to each team. The highest rated team earns the #1 rank.
A ratings system is used on NCAA Division I-A Football teams to determine which two teams to play in the BCS championship game. Sports ratings systems are also used to help determine the field for the NCAA Men's and Women's Basketball tournaments, men's professional golf tournaments, Pro Tennis, and NASCAR.
Odds makers also have their own proprietary rating system or power ranking. The only difference is that there are odds next to the team or player.
For bettors, it may be a good idea to look at rankings or ratings from reputable sports news outlets before making a bet.
Public Perception
On the summer of 2010, NBA All-Stars LeBron James and Chris Bosh signed with the Miami Heat and joined fellow All-Star Dwayne Wade.
What do you get when you have three all-stars on a team that just made it to the playoffs? The public perception that the Miami Heat is an outright championship contender.
And that's why many sportsbooks put the Miami Heat as the favorite to win the 2010-2011 NBA Championship.
Oddmakers sometimes put weight on how the public perceives a team or player when making the odds. Moreover, oddmakers consider how the public will bet on certain teams or players.
Consider the Miami Heat, it certainly is hard to bet against a team with three legitimate All-Stars. Wouldn't you put your money on Wade, James and Bosh?