How Vegas makes futures odds
David Purdum, ESPN Staff Writer
Over the weekend, as the 2015 NBA Finals started to wind down, three Las Vegas oddsmakers gathered in the sports book office of the Westgate hotel to produce the odds to win the 2016 NBA Championship.
The meeting lasted less than an hour. Ed Salmons, Jeff Sherman and Randy Blum each had their list with title odds for all 30 teams. They compared everyone's numbers, honored the tradition of expecting plenty of Lakers money and then produced the first odds on the market, a year in advance of the 2016 NBA Finals.
It's not a complex process, but the results are almost always lucrative for them.
How do they put the odds together?
• First, the oddsmakers review where teams stand in their current power rankings, which they maintain throughout the sports seasons.
• They then examine potential for the upcoming season. With Kevin Love andKyrie Irving expected back from injury, for example, the Cleveland Cavalierswere the clear-cut favorites. The Minnesota Timberwolves, Orlando Magic,Philadelphia 76ers and Charlotte Hornets were the biggest long shots at 200-1. At this point, before the draft, around 200-1 is as long of odds as Salmons is comfortable posting. "After the draft, and you start to see what their roster will be, a team like the Hornets will probably 500-1 or 1,000-1 before the year starts," he said.
• The third part of the equation, Salmons says, is knowing which teams the public is going to bet.
For the books, futures markets -- consisting of betting options like the odds to win the NBA Finals or the Super Bowl -- are easy money, as evidenced by the reliable money that funnels in from California on the Lakers.
Jimmy Vaccaro, a 40-year industry veteran now with the sports book at the South Point casino, estimates 95 percent of bets on the odds to win the Super Bowl are from public bettors.
Vegas loves those public bettors, tourists who come into town and drop $20 on their favorite team without fear. There's a running joke in Vegas about how many casinos Chicago has paid for by betting on the Cubs to win the World Series.
Futures markets "are as easy as it comes," Salmons said.
Chris Andrews, a 30-year veteran Nevada oddsmaker, who now runs the handicapping site AgainsttheNumber.com, agrees.
"In all honesty, there shouldn't be a lot of risk," Andrews said. "Unless you do something really stupid."
Possibly the most difficult part of setting the opening odds is managing the house's edge on the futures market, which is known as the theoretical hold percentage.
Andrews calculates theoretical hold percentage by adding the win probability that the odds imply for each team. Plus-300 odds (3-1), for example, imply a team has a 25 percent chance of winning.
The sum of each team's implied win probability will be more than 100 percent. The amount over 100 percent represents the theoretical hold percentage and the profit the bookmaker can expect to keep from the handle on the market.
Lower hold percentages are advantageous for the bettor. But if a book makes its hold percentage too high, its reputation could be scarred in the minds of local, more savvy bettors. The public, however, may not notice or care. The SuperBook, according to Salmons, shoots for a hold percentage around 27 percent, one of the lowest in Las Vegas.
Thirty years ago, Vaccaro says books wouldn't put up the Super Bowl odds until around a month or so before the season. This year, in four months, an amount more than six figures has already been wagered on the Super Bowl odds at the South Point, an independent book in the off-strip casino.
"[It was a] historical mistake by us not capitalizing on futures sooner," Vaccaro said. "Back then, we thought you needed to break down every divisional game and [we] wouldn't put them up until August. Plus, then we'd take them down after the season started. You really can't get hurt early, even if you put them up on your own. You're writing so much business anymore that there's always a little way to get out of a foxhole without too much damage."
David Purdum, ESPN Staff Writer
Over the weekend, as the 2015 NBA Finals started to wind down, three Las Vegas oddsmakers gathered in the sports book office of the Westgate hotel to produce the odds to win the 2016 NBA Championship.
The meeting lasted less than an hour. Ed Salmons, Jeff Sherman and Randy Blum each had their list with title odds for all 30 teams. They compared everyone's numbers, honored the tradition of expecting plenty of Lakers money and then produced the first odds on the market, a year in advance of the 2016 NBA Finals.
It's not a complex process, but the results are almost always lucrative for them.
How do they put the odds together?
• First, the oddsmakers review where teams stand in their current power rankings, which they maintain throughout the sports seasons.
• They then examine potential for the upcoming season. With Kevin Love andKyrie Irving expected back from injury, for example, the Cleveland Cavalierswere the clear-cut favorites. The Minnesota Timberwolves, Orlando Magic,Philadelphia 76ers and Charlotte Hornets were the biggest long shots at 200-1. At this point, before the draft, around 200-1 is as long of odds as Salmons is comfortable posting. "After the draft, and you start to see what their roster will be, a team like the Hornets will probably 500-1 or 1,000-1 before the year starts," he said.
• The third part of the equation, Salmons says, is knowing which teams the public is going to bet.
For the books, futures markets -- consisting of betting options like the odds to win the NBA Finals or the Super Bowl -- are easy money, as evidenced by the reliable money that funnels in from California on the Lakers.
Jimmy Vaccaro, a 40-year industry veteran now with the sports book at the South Point casino, estimates 95 percent of bets on the odds to win the Super Bowl are from public bettors.
Vegas loves those public bettors, tourists who come into town and drop $20 on their favorite team without fear. There's a running joke in Vegas about how many casinos Chicago has paid for by betting on the Cubs to win the World Series.
Futures markets "are as easy as it comes," Salmons said.
Chris Andrews, a 30-year veteran Nevada oddsmaker, who now runs the handicapping site AgainsttheNumber.com, agrees.
"In all honesty, there shouldn't be a lot of risk," Andrews said. "Unless you do something really stupid."
Possibly the most difficult part of setting the opening odds is managing the house's edge on the futures market, which is known as the theoretical hold percentage.
Andrews calculates theoretical hold percentage by adding the win probability that the odds imply for each team. Plus-300 odds (3-1), for example, imply a team has a 25 percent chance of winning.
The sum of each team's implied win probability will be more than 100 percent. The amount over 100 percent represents the theoretical hold percentage and the profit the bookmaker can expect to keep from the handle on the market.
Lower hold percentages are advantageous for the bettor. But if a book makes its hold percentage too high, its reputation could be scarred in the minds of local, more savvy bettors. The public, however, may not notice or care. The SuperBook, according to Salmons, shoots for a hold percentage around 27 percent, one of the lowest in Las Vegas.
Thirty years ago, Vaccaro says books wouldn't put up the Super Bowl odds until around a month or so before the season. This year, in four months, an amount more than six figures has already been wagered on the Super Bowl odds at the South Point, an independent book in the off-strip casino.
"[It was a] historical mistake by us not capitalizing on futures sooner," Vaccaro said. "Back then, we thought you needed to break down every divisional game and [we] wouldn't put them up until August. Plus, then we'd take them down after the season started. You really can't get hurt early, even if you put them up on your own. You're writing so much business anymore that there's always a little way to get out of a foxhole without too much damage."
