Risk management
A book has the edge on almost every bet it writes and can still go broke. Risk management is everything it does to make sure it is around long enough for the edge to pay.
The limit comes first
The limit is the most a book will take on a bet, and it is set by how much the book trusts its own number. A side or total on a big game has the highest limit, because that number has been bet into by everybody and is hard to beat. A small league, a player prop or a line that opened ten minutes ago gets a low one: the number is softer, and the people who bet it big usually know something.
A limit is also a statement about the book's bankroll. Take a local bookie with $50,000 behind him. If he lets a player bet $5,000 a game, one result moves 10 percent of everything he has. A player who did that would be called reckless, and I don't see why the bookie should be called anything else. His limits have to fit his roll the way your bets have to fit yours.
There is more on this from the player's side under limits.
Knowing the players
A book does not treat all money alike, and it would be badly run if it did. It keeps a record on every account (what the player bets, when, at what number, and whether that number was better than the close), and after a few weeks it knows which players are there for a sweat and which are there to take its money.
Then it sets terms by player. The recreational bettor gets full limits, bonuses and a friendly word. The sharp gets smaller limits, a delay before his bet is accepted, or a polite note that his business is no longer wanted.
Players hate this, and I understand why. From the counter it looks different. A book has no duty to offer a bet it expects to lose, any more than you have a duty to make one. My complaint is with the books that do it badly: the ones that advertise big limits, cut a man to $50 after two winning weeks and keep sending him parlay boosts.
If you win steadily at a recreational book, expect to be limited. If you are serious, I'd have several outs, so that one book cutting you does not end your season.
Laying off
When a book has more on one side than it can afford, it can bet that side itself at another book. That is a lay-off.
Use the game from the exposure page. The book holds $33,000 to win $30,000 on the favorite and $11,000 to win $10,000 on the underdog, so it loses $19,000 if the favorite covers and wins $23,000 if the underdog does. It lays off $22,000 to win $20,000 on the favorite somewhere else.
| Result | Its own book | The lay-off bet | Total |
|---|---|---|---|
| Favorite covers | Loses $19,000 | Wins $20,000 | Wins $1,000 |
| Underdog covers | Wins $23,000 | Loses $22,000 | Wins $1,000 |
The risk is gone and so is half the profit. A book that was naturally even on this game would have made $2,000. This one makes $1,000, because it paid the other book's vig on the lay-off.
That is why big books lay off far less than people think. Every lay-off pays the juice instead of collecting it, and paying juice goes against everything a bookmaker is in business for. A book lays off when the alternative is a loss it can't stand, and otherwise it holds the position. A player hedging a ticket is doing the same sum.
The smaller tools
- Maximum payouts. A ceiling on what one ticket or one player can win in a day, aimed mostly at long parlays. Read it before you build one.
- Rules against related bets. A book will refuse or reprice a parlay whose legs depend on each other.
- Taking a game down. When news breaks, the market comes off the board until it has been repriced.
- The obvious-error rule. A price posted by mistake can be voided. It is fair when the mistake was plain, and it gets abused. See why a sportsbook voided a wager.
Credit
A post-up book has your money before the game. A credit bookie has your word, so he runs two limits on each player: how much the man can bet on a game, and how much he can be down before he has to pay. Settling every week keeps a debt from growing into one that will never be collected, and a sensible bookie would sooner turn down a bet than take one from a player who is already past what he can pay.
It protects the player as well. A credit limit is the only loss limit some bettors ever have, which says more about the bettors than about the bookie.
Your own book
Run your bankroll the way a book runs its business. Set a limit per bet as a share of it, 5 percent at the outside, and a figure for the week at which you stop. The book manages its risk on every bet. Most players don't, and I think that is the biggest edge the book has.