So you have a fantastic bookie that does a wonderful job of balancing the betting action. Ideally it’s 50/50.
Is the profit from a bookies Enterprise just on the commission? Is this person and skill somehow marvelous or is this all a movie/TV trope?
My Daddy’s bookie led a opulent lifestyle. He made money somehow. I assumed he did his own betting and was a good handicapper. Sports betting is a whole nother animal. I’ve often thought they had inside info.
The “secret” to a bookies profit is that he doesn’t give odds based purely on the likelihood of something happening, although that will inform initial odds, but on where people are betting. If a large number of people bet on one horse, the odds offered on that horse will shorten a lot. There’s still enough people betting on the other horses (because the odds will be longer to tempt people in) that they make a profit pretty much whoever wins.
And that’s exactly how a bookmaker calculates the odds. Opening prices will be based on form, but they soon change as bets are placed. The whole point of a ‘long-odds’ outsider is to encourage the foolhardy to bet on them.
The job of whoever is keeping the ‘book’ is to know how much the bookie stands to win or lose on each race. If there is a risk of a loss, the smaller firms will lay the bet off to a bigger one - this is a kind of insurance to ensure that if the worst happens (some accumulators maturing or some disproportional bets on a particular animal maybe) the losses will be mitigated, although the potential profit will be too.
You mention 50/50, by which i assume you are meaning some sort of sports book. Say a football game, head to head. If the betting line truly represents an even chance of outcome, the head to head line will be something like 1.85 or 1.90 to 1 for both teams (or -110 in moneyline).
So if the bookie has taken 50/50 betting, he will still profit no matter the outcome, as the overall payout is less than 2to1 and therefore he pays out less than he takes in, no matter the outcome.
As the line moves to favour one team or the other, betting will adjust and it is the skill of the bookie to match that action against his book to make sure he is not over exposed to an unfavorable outcome.
Typically bookies don’t take commission as such, there is a spread between the odds they offer such that if they manage to get equal (or nearly equal) action across the competitors, they will always make a profit. This is known as their margin, overround, or vigorish (vig for short). All the bookie has to do is ensure their total odds, in percentage form, add up to more than 100%. For example, in a two-horse race (and ignoring the possibility of any ties), if the odds of both horses were evens, on average the bookie would make no money as whatever they took on one horse, they would pay out on the other. This is because odds of even money, expressed in perecentage terms, is 50%, so with two sets of odds at 50%, they add up to exactly 100%. In practice, in such a situation the odds might be (say) 4/5 on both horses (i.e. you bet $50 to win $40 plus your stake back, i.e. both horses are ‘odds on’). This would translate to percentage odds of about 55% + 55%, leading to a total of 110%, i.e. a margin/overround/vig of 10% in favour of the bookmaker.
Anyone can work out the mathematics of this fairly easily. The skill of the bookmaker lies in setting the initial odds correctly, such that he attracts bets amounting to roughly equal levels of risk on all outcomes, thus ensuring his profit is close to whatever overround he wishes to achieve. Sticking with the above example, if the two horses are genuinely evenly matched, this should work. But if one is in fact more fancied than the other, it will attract more bets and could result in the bookie paying out more than he takes in.
Now, as Teuton has explained, the bookmaker will adjust for this by shortening the odds of a horse that has attracted more bets, and lengthening the odds of unfancied horses to attract more bets, thus balancing their book. But since this is a reactive process, they can still lose out if their initial odds are wrong. Generally, the favourite winning is a bad outcome for bookmakers, since although they are paying out winners at lower odds, they are also (pretty much by definition) paying out many more of them than if an outsider had won at long odds.
I don’t really know why I bothered typing all this since I had to refer to this Wiki article to get it right, and it probably explains it better than I have anyway: https://en.wikipedia.org/wiki/Mathematics_of_bookmaking
There are also bets such as"Will both teams score?" that the bookmaker will not be trying to balance his portfolio, as the yes option will be overwhelmingly more taken up than the no, if it’s even offered. The bookmaker makes his money on the long term odds of “will both teams score” coming in, although he loses money on that market on each individual game where “yes” comes in.
The only bookie I’ve ever known also did “numbers” as well as consumer loans. The loans were where he made out. He had people paying just the interest for years.
Seems like this would be true only if they somehow must accept lots of bets at the initial odds, without adjusting them.
The profit is built in with numbers. Traditionally, they paid 600 to 1 when the odds were really 1000 to 1. There would be days when they did lose money* (and might have to borrow from a bigger bookie to cover), but there were many more days when they made a profit.
*Like when everyone bet 776 on the 4th of July. 
Let’s say I’m a bookie taking bets on a single coin toss. I offer 1.8 to 1 odds on either heads or tails. If the bets are split evenly between heads and tails, I make money.
But what if the first ten people through my door all bet on heads? Then I quickly change my strategy to offer 2.2 to 1 odds on tails…at least until I’m sure I have enough bets on tails to offset the bets on heads.
In any case, I make sure that the bets I take are a “can’t lose” proposition. Sometimes bookies can’t/don’t do this and that’s when they get themselves in trouble. For example, they find that they can’t get people to bet on heads, no matter what the odds.
Depends on the bookmaker. The vigorish is usually around 5-15%. It depends on the legality of the bets and the competition from other bookmakers. Small time bookmakers usually use Vegas odds and don’t massage the odds too much, counting on the vig to make money. If they get too much action on one side they can hedge by betting with a bigger bookmaker. For the big bookmakers sometimes they just have to live with the exposure. If they give too long odds based on early action the sharps will come in heavy in the last bit and expose the bookmaker to even more risk.
Varying the odds with the amount bet, IIRC, was specifically how legal horse race betting worked, wasn’t it? The more people that bet on a favorite, the less the odds payoff to the later bettors, so the track was not at risk of losing their shirt. I seem to recall some movie or TV where the odds on the screen kept changing as people placed bets.
I assume that this was parimutuel or totalisator betting.
In the UK I used to see this at greyhound track meetings. Each bet was entered into the machine by an electrical contact and the odds/price paid were shown on a big board at the side of the track as they continually changed. Of course, some people would watch the board and if the odds on a particular dog shortened, they would assume that it was more likely to win and bet on it. This plan is of course, self-defeating.
In parimutuel betting you won’t know what odds you’re getting until betting closes. Every bettor on a given horse gets the same odds. The track sets the odds so that it wins a constant percentage. Bookies using those parimutuel odds may be in trouble however. (In fact I think this might have been an occasional ploy — a syndicate would bet the horse-that-will-lose at the track to give the winner long odds, while betting the horse-that-will-win off-track.)
At Vegas sportsbooks, you get the spread or line in effect at the time you buy your ticket. The spread or line may change thereafter but it doesn’t affect your ticket. Vegas sportsbooks probably offer low-vigorish early bets to regular big bettors, so that they will help them set the initial odds.
Many bookies are actually just working for some higher bookie. But if they think the line is wrong they may put records and money for bets expected to lose in their left pocket instead of in their right pocket!
Where I live, the numbers racket is very popular! You can bet a 3-digit number with 600-1 odds (500-1 retail) on the 1st or 16th of each month. Earlier bets are not generally accepted, since some popular numbers will be forbidden.
I had a relative who was an underground lottery operator here. He was a man of leisure except on lottery day. Then he shut down 20 minutes before the winning number announcement, toted up to see if had big exposures, and laid off bets in a sealed envelope that raced over to Mr. Big via motorcycle. I was very tempted to say “Mr. Big is paying only 600-1; I’ll pay 650-1.” But it would be a very big feather in a policeman’s cap to catch a foreigner taking lottery bets!! :eek:
What numbers do they use?
This is silly. Bookmakers take the long term view and are not worried about ensuring every single event gives them a profit. If the numbers guys believe that the odds of heads is 50% (2.0) they will not offer odds that imply a ~45% chance (2.2). That’s an invitation for the next guy to come in to say “£10000 on heads, please” and the bookmaker is screwed.
This was actually a sub-plot in The Grifters - Angelica Houston’s job was to place large bets to drive down the odds on long-shots so her bookie boss didn’t get burned. At one point she didn’t make it to the track, a long-shot came in, and she had to explain to the boss why he shouldn’t hurt her.
There’s a legal government lottery on the 1st* and 16th of each month; the underground lottery uses the same numbers but in a different way. (The winning 3-digit number in the underground lottery is the last three digits of the grand prize winner in the government lottery.) The government drawing is an elaborate televised procedure. (* - The dates vary for holidays. For example the January 1 drawing is actually done December 29 or so.)
The government lottery was rigged at least once, with the grand-prize winner being 113311. (It was a famous story at the time, but the peculiar link is one of the few English versions that Google finds.) The 113311 government tickets were hard to come by — the riggers made their money in the underground buying the combos 331, 313, 113, 131, 133, 311, 111, 333. (They didn’t rig the exact number, just arranged that most of the digits would be 1s or 3s.)
I appreciate your responses, I admit much of what you guys have said is going over my head.
Pretend I am a child.
So you’re a bookie and the game is a single coin toss. You’re in the know and get the odds are 50/50 and there are a lot ‘Heads’ fans so you skew the odds to even the action giving those that choose heads worse odds than those that choose tails.
How does that help you as a bookie though? Say you are good at your job and are right so the action is perfectly balanced. Wouldn’t what you gain on whoever lost be lost on whoever won?