How a Sportsbook Can Generate a Positive Expected Profit
A sportsbook is a venue, online or in a brick-and-mortar building, where people can place wagers on sporting events. It also accepts various types of bets, including moneyline, over/under and prop bets. A sportsbook can also offer futures wagers, which have a longer time horizon than regular bets.
Sportsbooks are designed to predict the margin of victory in a match and set a point spread around that prediction. Those betting on the underdog must win by a certain number of points for them to cash out. In contrast, those betting on the favorite must win by a certain margin for those bettors to profit.
In this article, the expected profit on a unit bet was computed for point spreads that differed from the estimated median margin of victory by 1, 2, and 3 points in each direction. The results are shown in Fig. 4.
These figures illustrate that even when a sportsbookâs point spread underestimates the median margin of victory, it is still capable of generating a positive expected profit. This is because the standard payout structure awards a bettor with b (phh + phv) when m > s, and -b otherwise.