Understanding odds is central to betting and knowledge of how odds work helps you try and find value. We cover the basics of odds elsewhere on the site, including what they mean, how they work, how to calculate winnings and why value is so important. In this article, however, our focus is more on how the odds are set in the first place.
We will look at who does this job and how it has changed over the years. We will also look at how and why odds change, as well as the meaning of terms like steamers and drifters. Last of all, we will also look at the SP, or Starting Price, and see how that fits into the picture.
Who Sets Odds & How?
In the early days of bookmaking, odds would generally be set by the individual bookies. They would perhaps have a small team of traders and odds compilers who would analyse each race, match, tournament and so on, and create a market based on their opinion of how it was likely to play out.
Over time, much has changed, but the underlying principles remain. The easiest way to explain this is with one of the only markets where the true probabilities can actually be known, rather than needing to be calculated, or rather estimated. In cricket, one can bet on which captain will win the toss at the start of the match. This is a standard, fair, random coin toss and so both skippers have a 50% chance of winning.
Armed with this info, the bookie then knows that the “fair” odds on each outcome would be 1/1, or evens. However, if they offer odds of evens, they would be relying on luck in order to make money and luck is for mugs and punters (that’s us all by the way!). So, they reduce those odds slightly, perhaps to 10/11, or maybe even 4/5.
In short then, to set odds, the bookie tries to decide what chance of winning each selection has. They then convert this probability into odds, making prices slightly lower so they can afford shiny shops, fancy websites, to pay to have their name on the top of a Championship football shirt or two and still have some spondoolies left over to keep shareholders in cigars.
Assessing the Probabilities
Reducing the odds to create their overround (or margin) is the easy bit, but working out how likely each selection is to win is far harder. Odds compilers will typically look at all the same factors that any serious punter should do. This will vary dependent on the event and market but basically anything at all that might affect the outcome will be factored in. This might include:
- Quality of Teams/Individuals – Overall and general assessment of ability
- Form – Recent performances, be they races, matches, fights or whatever else
- Home Advantage – In many sports, home advantage is a big plus, due to crowd support (and its possible influence on officials), the familiarity of the surroundings, or just the lack of travel involved
- Head-to-Head – Looking at past performances between teams/players can provide key insights for future games but can be over-valued
- Injuries, Suspensions & Team News – Relevant in different ways according to the sport, but can make a huge difference to the odds
- Weather – The weather can affect many markets across lots of outdoor sports
- Confidence/Morale – Linked to form but also assessable in its own right
- Motivation – If one team needs to win and the other doesn’t, this will affect the odds; Equally, after a huge win, performance may drop in a lesser event or game
- Match-Ups – Some teams or players have a style that just seems to work well against another, potentially making a mockery of ranking or form
- Personal Issues – Perhaps most relevant to individual sports but could also affect a star in a team; Problems in a player’s personal life can have a big impact on performance
Being aware of what factors can affect the result, and therefore the odds, is one thing, but weighing the importance of these and measuring them accurately is quite another. In some ways, betting is simply a battle between bookmakers and punters as to who can be more accurate at assessing these probabilities. The bookmaker has the advantage, however, in several ways.
First, they have a margin for error thanks to the overround, which may be as much as 25%. That means that even if they are wrong, they still have a great chance of making money overall. Second, they usually have access to all the same information as punters but generally have more time, expertise and experience. Third, they are far more likely to operate without emotion. This allows them to assess things more accurately and crucially means they will never chase their losses. Fourth, they can change their odds, as we shall see, to shape and alter the market as more bets are taken and new information comes to light. Last, they can limit and even ban winning punters, only accepting bets from people who have proved themselves, shall we say, less than optimal, when it comes to punting.
Move to Data
Over the past 30 years and probably more there has been an increasing move in the world of bookmaking towards the use of data. This reflects changes in the wider world, with improved computing power and the omnipresent nature of algorithms in our lives. We see stats and data used more and more in so many areas of life and oddsmaking is no different.
A good analogy is to consider football scouting. Not all that long ago players were signed solely on the basis of a gut feeling held by a scout, usually a little Scottish man called Jimmy who didn’t quite make it as a player but was a dab hand at uncovering talent from the lower leagues (when people didn’t talk about metrics). Now a team of experts will analyse every single aspect of a player’s game from a statistical point of view, using metrics that didn’t even exist until recently. Sprints per 90, ball recoveries, progressive carries, shot-creating actions and more are all assessed, whilst wee Jimmy is relegated from the actual to the metaphorical sidelines.
In the same way, many years ago a bookie might price a horse race according to gut feeling. They would, of course, still look at its form and past runs but if the oddsmakers saw something about it they didn’t like, they might be prepared to ignore the stats and offer big odds. Likewise with a big game of football, some bookmakers would be prepared to “take a position” and hold their prices against the prevailing winds if they just didn’t fancy a team and didn’t think they would win. Those days are gone.
Some believe that odds are now largely set by a small group of bookmakers and betting syndicates in Asia, with most of the mainstream bookies in the UK simply copying them or paying to use their prices. Some bookies may still have their own traders and compilers, whilst all will have the power to tweak these initial odds as they see fit in order to create whatever overround they want.
However exactly these odds come about, the use of data and stats is central. Computing power means it is possible to test and retest models after the event, tweaking different factors all the time to try and create an algorithm that gives the best predictions in the future and thus the most accurate odds.
Why Do Odds Change?
Odds mainly change for one of two related reasons. These are that new information comes to light (or existing info changes), or that a large amount of money is wagered on a selection. The more money that is bet on any given outcome, the shorter the odds get, as the bookies try to broadly even out their financial position on all selections. This is called balancing the books and whilst not always aimed for, usually a bookie does not want to have too large a liability on any given outcome.
Obviously new/changed information about the contest can lead to money being bet. For example, if Lionel Messi and Kylian Mbappe pop round to Neymar’s house for lunch on Wednesday and they all come down with food poisoning on Friday, ruling the out of Saturday’s clash, many punters may rush to bet on PSG’s opponent. Ideally, from the bookmaker’s perspective, they will hear this news before punters do and will cut the odds.
However, the chances are that some punters will get the news first and will rush to back the Paris side’s opponents. They may be able to bet sizeable sums at odds of, say, 4/1 before the bookie realises what is going on and cuts the odds to 5/2. This change may take place automatically based on wagering, or because the bookmaker realises what is happening, or some combination of the two.
Drifters & Steamers
Betting is a world jam-packed with lingo, slang and terminology. That can make it a little confusing for those new to it but you will soon get to grips with the different phrases that abound. With regards to odds movements, you may hear “drifters and steamers” mentioned together, or separately, but what do they mean?
Drifters
A drifter is, very simply, a selection whose odds are getting longer. One might say “the odds are drifting”, or perhaps “it is drifting in the market”. But however one chooses to phrase it, a horse, team or player on the drift is one whose odds are becoming bigger.
There is no agreed definition about how much the price needs to change for it to be classed as a drifter. However, a very small change, say from 6/5 (2.20 in decimal odds) to 5/4 (2.25) would not be seen as a drifter. That said, we may say it has “drifted out a touch to 5/4”. In contrast, in our example above, if PSG have moved from 7/10 to 11/10, that would certainly be a drifter.
Steamers
Steamers are the opposite of drifters and are selections where the odds have shortened significantly. So, in the case of PSG, if their opponents were Monaco, going from 4/1 to 5/2 would make them a steamer. In general, but especially when it comes to horse racing, many punters believe that looking out for steamers can be a good way to find winners. The theory is that the price has shortened because people in the know, and possibly connections of the horse, have bet on it. More generally, there is the notion that someone, somewhere, knows something.
This can be a dangerous game though, because even if a horse goes from 12/1 all the way into 2/1, enough to see it classed as a huge steamer, it still probably has around a 70% chance of losing. If you backed it at 12/1, 10/1, 8/1 or even 6/1, then a 20-30% chance of success still means you have obtained excellent value. However, if you backed it at 2/1, or even 4/1, is there really any value at all?
What’s more, whilst a move from 12/1 to 8/1 might be driven by shrewd money, it is also possible that it is simply down to large punts based on little more than hope. And what is certainly true is that further price moves downwards could well be caused by people jumping on what they believe is a steamer, as the cycle essentially becomes self-perpetuating.
What Is the SP & How Is It Calculated?
The Starting Price (SP) is a term you will hear a lot, usually in relation to horse racing and dog racing. In the simplest sense, this is the industry standard price that a horse (or dog) was at the time the race started. It is possible to make any number of bets on the SP, for example a wager on the favourite of a race at the time of the off. If a punter just wants to back the jolly, irrespective of who it is, this is a good option.
However, odds change, so the favourite three hours before might not be the favourite come the off. This bet simply places your money on whoever is the favourite at the start but given you don’t know which horse that is, you also can’t take the odds on it. Here the SP will be used. The same applies if you choose to bet on a horse early before prices have been published. You might select a horse but rather than being able to take a price, you just accept whatever the odds are at the off.
You might also opt for the SP if you believe the horse is likely to drift (ah, that word again). When you make a bet you can choose to take the odds at the time or, alternatively, the SP. If you think the horse will be popular in the market (a steamer!) then taking the available odds may be wise. But if not, if you think it will be sent off at a bigger price, you should choose to take the SP.
Many, but not all, bookies offer Best Odds Guaranteed (BOG). As the name suggests, this gives you the best odds either way. All you have to do is accept the published odds at the time of the wager and if the SP is bigger, you’ll get paid at that higher price. If you like betting on the horses, finding a site that offers BOG on all UK and Irish races is highly recommended.
Calculating SP
Now we know what the SP is and why it affects your bets, how about considering how it is calculated? We have said that it is the price at the start of the race but of course odds vary from one bookie to the next, so whose odds are we talking about?
Well, the precise way the SP has been calculated has varied over the years and it also differs between countries. One thing that has always stayed the same is that it is an industry figure. By this we mean that the SP applies to the race across the board, and you will not see a different SP at a different bookie.
It used to be based entirely on odds offered by trackside bookmakers. However, understandably now, where so many bets are made online, this has changed and prices from online bookmakers are also considered. The SPRC (Starting Price Regulatory Commission) help to ensure that the SP gives a fair reflection of prices that were available to punters in the UK. They are an independent body and their job is “to ensure that the returned price accurately reflects the price available to bettors at the ‘off’ of each race.”
In 2022, the SPRC changed its procedures for calculating the SP to better reflect the modern realities of off-course betting. The fundamentals have remained the same though, and in simple terms the SP is the average odds that were available from a sample of bookies at the start of a given race.