Chapter 1 Key Takeaways: Introduction to Sports Betting

Key Concepts

  1. Vigorish (Vig): The sportsbook's built-in commission, reflected in the odds, that ensures a profit margin regardless of the game outcome. A standard vig on a -110/-110 line is approximately 4.55%.

  2. Implied Probability: The likelihood of an outcome as suggested by the odds. It translates the sportsbook's pricing into a probability estimate, though it includes the vig and therefore overstates the true probability.

  3. Expected Value (EV): The average profit or loss per bet over the long run, calculated as (probability of winning x profit) minus (probability of losing x stake). Positive EV bets are the foundation of profitable betting.

  4. Overround (Book Percentage): The sum of implied probabilities across all outcomes in a market. It always exceeds 100% in a real market; the excess is the sportsbook's theoretical margin.

  5. Market Efficiency: The degree to which betting odds reflect all available information. Efficient markets leave few exploitable edges, making disciplined, data-driven methods essential for finding value.

  6. Line Movement: Changes in odds or point spreads between the opening line and the closing line, driven by sharp action, public betting patterns, and new information such as injuries or weather.

  7. Closing Line Value (CLV): The comparison between the odds at which you placed your bet and the final closing odds. Consistently obtaining better odds than the closing line is the strongest indicator of long-term betting skill.

Key Formulas

Formula Expression Example
Implied Probability (negative American) |Odds| / (|Odds| + 100) -150 implies 150/250 = 60.0%
Implied Probability (positive American) 100 / (Odds + 100) +200 implies 100/300 = 33.3%
Decimal from American (negative) 1 + (100 / |Odds|) -150 converts to 1.667
Decimal from American (positive) (Odds / 100) + 1 +200 converts to 3.00
Vigorish Percentage (1 - 1 / Overround) x 100 Overround 1.0476 gives vig of 4.55%
Expected Value (P_win x Profit) - (P_loss x Stake) 55% at +100: (0.55 x 100) - (0.45 x 100) = +\$10

Quick-Reference Decision Framework

When evaluating any potential bet, apply the following four-step framework:

Step 1 -- Calculate the implied probability. Convert the offered odds into an implied probability. This is the win rate you need just to break even at those odds.

Step 2 -- Estimate the true probability. Using your model, research, or analysis, estimate the actual probability of the outcome. This is independent of what the sportsbook thinks.

Step 3 -- Compute expected value. If your estimated true probability exceeds the implied probability, the bet has positive expected value. Calculate the EV to quantify the edge.

Step 4 -- Size the bet appropriately. A positive EV bet is only worth taking if it fits within your bankroll management strategy. Never risk an amount that jeopardizes your ability to survive normal variance. The size of your edge should inform the size of your bet.

The core principle: A bet is worth making only when your estimated probability of winning exceeds the implied probability embedded in the odds, and the resulting edge is large enough to justify the risk given your bankroll.

Ready for Chapter 2? Self-Assessment Checklist

Before moving on to Chapter 2 ("Probability Fundamentals for Bettors"), confirm that you can do the following:

  • [ ] Convert odds fluently between American, decimal, and fractional formats in both directions
  • [ ] Calculate the implied probability from any odds format and explain what it represents
  • [ ] Compute the vigorish on a two-way market and explain how it affects bettor profitability
  • [ ] Define expected value and calculate it for a given bet using your own probability estimates
  • [ ] Explain the difference between moneyline, spread, total, parlay, prop, and futures bets
  • [ ] Describe how a sportsbook generates profit and manages risk through balanced action and vig
  • [ ] Articulate why a quantitative, data-driven approach outperforms intuition-based betting
  • [ ] Explain the significance of closing line value as a measure of betting skill
  • [ ] Identify the major stakeholders in the sports betting ecosystem and their incentives
  • [ ] Describe the current U.S. legal landscape for sports betting and its historical context

If you can check every box with confidence, you are well prepared for Chapter 2. If any items feel uncertain, revisit the relevant sections of Chapter 1 or work through the corresponding exercises before proceeding.