To calculate the expected value of a sportsbook's price for a specific outcome, we must first determine the probability of that outcome occurring. The expected value is based directly on the probability of a sporting event occurring, along with the price offered by the book. How can we actually determine these probabilities?
We ultimately look to sports betting experts, or 'sharps', who use their own complex modeling to influence market prices on their favorite books.
By continually shifting lines in response to sharp bets and new information, these market making sports books reach a state of near-perfectly priced markets. These prices, once translated into implied probabilities, represent the likelihood of various outcomes.
However, sportsbooks need to make money. Thus, embedded within these prices is a 'vig,' or guaranteed profit margin for the book. To reach an accurate set of probabilities, this vig must be removed through a process known as 'devigging' (otherwise, each outcome appears more likely than it actually is). The way the vig is allocated to each outcome during devigging becomes essential to the predictive accuracy of the market price.
OddsJam supports five popular methods for devigging, and choosing the right one depends on the specific market circumstances and your historical success rates. The method you select should align with your evolving EV betting strategy.
Multiplicative Method
The vig is spread proportionally among each outcome, so outcomes with higher implied probability (lower odds) get more vig.
This method is the most popular due to its mathematical simplicity, and is considered the standard approach to devigging.
This method can be problematic as it fails to account for the known tendency of bettors (even sharps) to overbet on long-shots and underbet on favorites.
Additive Method
The vig is divided equally among all outcomes.
While this takes bias to overbet on long-shots into account, it can sometimes overweight this bias, resulting in negative probabilities for underdogs.
Power Method (default)
This method is an extension of both the additive and multiplicative methods and involves raising the probabilities to a constant power.
Beneficial because it always maintains probabilities within the 0 to 1 range, avoiding feasbility issues present in other devigging methods.
However, it can overcompensate for betting biases by adjusting long-shot probabilities .
Worst Case
This method takes the vig calculation from the Multiplicative, Additive, and Power method, and uses the least-favorable result. More specifically, this method tells you the no-vig odds that have the lowest return.
Use this method if you want to be as conservative as possible. Typically you'll see lower EV percentages with this method and fewer positive EV bets, but the bets are most likely to be profitable.
Best Case
This method takes the vig calculation from the Multiplicative, Additive, and Power method, and uses the most-favorable result. More specifically, this method tells you the no-vig odds that have the highest return.
Use this method if you want to be as aggressive as possible to get more bets in. Typically you'll see lower higher percentages with this method and higher positive EV bets, but each individual bet is less likely to be profitable.