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Sportsbook Juice
It's the necessary evil of sports betting, the annoying edge the sportsbooks mandate so they can keep their doors open. It's called the "juice", "vig", or "vigorish"; and it's a factor in many types of sports bets.
Take a step back from your individual bet and look at the big picture of sportsbook operations: even though thousands, if not millions of dollars make up the "handle" or "purse" (the total amount of money bet on an event), only a small percentage actually goes to the sportsbook as profits. The leftovers the sporstbook gets is known as "the sportsbook's hold", and in general, a hold percentage of 5% or better is considered good bookmaking.
The best way to illustrate how the juice impacts you is to use a simple example. Let's suppose the Chicago Bulls are playing the Orlando Magic, with the favorite team set as the Magic, 110/90. This 110/90 expression indicates:
1. For every $100 bet on the underdog Bulls (the 110 number) you get $110 back if the Bulls win.
2. For every $100 bet on the favored Magic (the 90 number) you get $90 back if the Magic win.
Wait a minute: why does betting on the favorite Orlando Magic get me less than even money? That's where the concept of Juice comes in. If the sportsbook paid out even money in a balanced wagering setting - meaning the same amount of money has been bet on the Bulls and Magic - they wouldn't make any money, because they'd be paying out the same amount of money in winnings to successful Magic bettors as they would be collecting from losing Bulls bettors.
Instead, they charge the 10% fee (the "juice", the "vig", or "vigorish") for taking the favorite, which is why you get $90 plus your $100 wager back for betting on the Magic:
$100 wager + ($100 won - 10% of wager as juice) = $190 returned.
Thus, the sportsbook makes $10 on this wager, plus all the losing bets on the Bulls. Alternatively, if the underdog Bulls win, the following applies:
$100 wager + ($110 won) = $210 returned.
Thus, the sportsbook pays out $110 for every $100 wagered on the underdog Bulls, and collects all the losing bets placed on the Magic.
The goal of every sportbook is to create a "betting market" (one team versus another) where there is balanced action: equal amounts of money bet on each team. Unfortunately, it's very hard to get perfectly balanced action, which is why sportsbooks can sometimes lose money in the short run. In the long run, they can rely on the juice they charge to subsidize their income.
What does all of this mean for me, Joe Average bettor?
First, you should carefully review your sportsbook's lines/odds for an event before placing a bet. Do the lines seem 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 and odds move as the betting market grows prior to each contest. As a result, significant betting trends for one team or the other will move the odds so the sportsbook can balance its action. Sometimes, it's better to scout out lines as they come available, and then watch them move before placing a bet. That way, you get a feeling for where the money is heading.
Finally, don't forget that in most cases, the sportsbook will be taking a portion of your winnings as a commission/juice for their services. This can be crucial especially if you are betting more than $1000 per game: juice on these bets could be $100 or more, and that can decrease your winnings dramatically. If you followed the advice of sports handicapper and bought a pick, you'll also have to factor that amount of money out of your potential winngings.
In sports betting, everyone get's their cut of the action, with the player being the last one in line to collect. That's how bookies stay afloat and keep their businesses profitable. Always analyze lines/odds carefully before making any sort of bet, you'll thank us later!
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