The difference between a handicapper and a bookmaker, conveyed as a mathematical expression, is -110.
That’s right – the primary difference between the guy behind the counter and the guy in front of the counter is that the guy behind the counter is taking $110 bets and only has to pay a winner $100. Put another way, the bookmaker is only risking $100 to win $110. The handicapper, meanwhile, has to risk $110 to win $100. It is that structural advantage that differentiates a handicapper from a bookmaker. Want proof of that?
Well, let’s look as the Cantor Gaming IPO documents. In their financial overview, Cantor explains:
We employ a risk management team that creates a statistical data base that is comprised of historical data and mathematical algorithms overlaid by injury reports, weather conditions, and other anomalies, to assess the most likely outcome of a sporting event. These algorithmic models are used for risk management, as well as to manage our In-Running sports wagering offering. These are used in the posting of odds/lines which patrons may wager on. We believe that our risk management team, aided with our superior technology, provides odds/lines with a high degree of credibility. This permits us to accept larger wagers than our competitors, as our technology provides us immediate visibility to our risk.
That first sentence could easily be written about handicappers. We’re familiar with countless quantitative handicappers who grind away on historical databases looking for anomalies in match-ups. They layer in data on injuries, weather and other anomalies in search of an advantage. And guess what? The Cantor filing nicely articulates that the Cantor ‘risk management team’ is doing the same thing to try to prevent handicappers from getting an edge.
Of course, bookmakers are also a bit different from handicappers in that they need to consider managing to a balanced book. Going back to the Cantor IPO filing:
The risk management team uses our proprietary software to manage the risk associated with the wagers, using mathematical parameters to provide a balanced book.
So while bookmakers have to keep an eye on creating a relatively balanced book, they otherwise act a lot like handicappers. They analyze box scores. They look at historical data. They look at injuries, weather. They are, as the Cantor IPO document states, attempting to identify the most likely outcome of a sporting event.
Keep that in mind as you continue to build your handicapping skills with the objective of making sports wagering a profitable endeavor.
P.S. This is our second post using information from Cantor Gaming’s IPO filings and we’ll be posting more articles soon. If you missed our first piece on how Cantor Gaming lost $27M in 2010, you can read it here.