It’s the necessary evil of sports betting, the mandatory fee sportsbooks charge so they can keep their doors open. It’s called the juice, vig, or vigorish. It’s a factor in many types of sports bets.
Take a step back and look at the sportsbook business model. Thousands, if not millions of dollars make up the event "handle" or "purse". This is the total money wagered each event. But only a small percentage actually goes to the sportsbook as profit. The leftovers the sporstbook gets is "the sportsbook’s hold". In general, a hold of 5% or better is considered good bookmaking.
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Let’s illustrate how the juice works. Suppose the Chicago Bulls are playing the Orlando Magic. The Magic are favored. 110/90 odds indicate:
1. For every $100 bet on the favored Magic (90 number) you make $90 if the Magic win.
2. For every $100 bet on the underdog Bulls (110 number) you make $110 if the Bulls win.
Why does betting the favored Orlando Magic earn less than even money? That’s where the Juice comes in. If the sportsbook paid out even money with balanced action they wouldn’t make a profit. They would pay the same amount in winnings to successful Magic bettors as they would collect in losses from Bulls bettors.
Instead, they charge 10% vigorish for clients taking the favorite. That means you get $90 in winnings plus your $100 back for betting the Magic:
$100 wager + ($100 won – 10% juice) = $190.
The sportsbook makes $10 on your wager. If the underdog Bulls win:
$100 wager + ($110 won) = $210.
The sportsbook pays out $110 for your $100 wagered on the underdog Bulls. It collects losing bets placed on the Magic.
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The goal of every sportbook is to create a betting market in which there is balanced action: equal amounts of money on each team. Unfortunately, it’s hard to get perfectly balanced action. Sportsbooks can sometimes lose money in the short run if the underdog comes in. In the long run, they can rely on the juice they charge to subsidize their income.
Sportsbooks routinely shift lines to encourage bettors to pick a team in order to balance their action. Bookmakers particularly confident in a final outcome will accept unbalanced action IF their risk is minimal.
What does all of this mean for me, Joe Average bettor?
First, review your sportsbook’s odds before placing a bet. Are the lines fair or are they skewed towards one team? If so, can I capitalize on this "bad line"? Make informed wagers. Don’t make haphazard guesses and throw your money away.
Second, lines move as the betting market changes. Significant betting trends for one team will move the odds. The sportsbooks will try to continually balance their action. Sometimes it’s better to monitor opening lines as they become available. Then check later before placing a bet. See where the smart money is heading.
Finally, don’t forget the sportsbook’s juice. This can be crucial if you are betting more than $1000 per game. Juice on these bets could be $100 or more. If you bought a handicapper’s pick, you’ll also have to deduct the pick cost from your final winnings.
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In sports betting everyone gets a cut of the action. That’s how bookies stay afloat and keep their businesses profitable. Always analyze lines and odds carefully before making any sort of bet, you’ll thank us later!