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### Introduction

This article discusses the concept of beating the closing odds – also known as beating the closing line – in sports and race betting. Many punters subscribe to the theory that consistently beating the closing odds/line implies you will be a long-term winner in betting.

There can be confusion over the terms odds, line and spread. This stems from differences in betting terminologies used in the United States and elsewhere. In Australia we call the bookmaker odds the “odds” and the handicap in line betting the “line.” In the United States they frequently refer to the odds as the “line” and the handicap as the “spread” or “point spread”. In American parlance the odds are often referred to as the line because they call head-to-head wagers money line bets.

Using a rugby fixture as an example, suppose the following markets are available on Australia vs. South Africa:

In Australia the decimal odds will be presented as:

 Head-to-head Line Australia 1.62 -4.0  |  1.91 South Africa 2.30 +4.0  |  1.91

Sticking with decimal odds, in the United States you will see something like:

 Money Line Spread Australia 1.62 -4.0  |  1.91 South Africa 2.30 +4.0  |  1.91

Often you will see the term “handicap” used instead of “line” or “spread”.

So when someone says “closing line” are they referring to the odds or the handicap? Because most of the online literature on this topic comes from the US, more often than not they will be referring to the closing bookmaker odds rather than the handicap.

To prevent any confusion this article will avoid the use of the term “line” and will refer to the bookmaker odds as the “odds” and the line/spread as the “handicap”. Using the example above the handicap for Australia is -4.0 at 1.91 odds.

### Opening and Closing Odds

When a bookmaker opens a market for an upcoming event, the initial odds they offer are called the opening odds. These odds are primarily based on statistical analysis of the teams’ forms and will also factor in player injuries and other relevant information that the bookmaker has access to.

Once the odds become available punters will start placing wagers. If punters feel the odds for a particular selection are good value they will bet on that selection disproportionally until the bookmaker adjusts the odds down to incite punters to bet on the other selection(s). The odds will continue to shift based on punters’ reactions to the latest odds.

The final odds just before the event commences are called the closing odds. In American parlance this is commonly called the closing line. The closing odds reflect all news, statistics and punter sentiment.

### Efficient Market Hypothesis

Theory suggests that the closing odds on average are more accurate than the opening odds in gauging the probability of an event outcome. This theory is based on the efficient market hypothesis, which is a term more commonly applied to financial markets. The efficient market hypothesis in the context of sport betting states that all publicly available information will be reflected in the betting odds, so there should be no bias in the betting outcomes.

The theory goes like this: if punters feel inefficiencies in the odds exist – let’s say the odds on the away team after a bye are on average too generous – they will seek to exploit that inefficiency by wagering in those circumstances. Their wagering activity will lead to odds shifts on future events such that the identified inefficiency no longer exists. Based on the efficient market hypothesis no market inefficiencies can persist in the long term.

How this ties into beating the closing odds will be discussed shortly.

### “Sharps” vs. “Squares”

To stress the importance of beating the closing odds, we will first define “sharps” and “squares”.

Bookmakers classify punters into two categories: sharps and squares. Sharps are astute punters who make money in the long run. Squares, on the other hand, will lose money in the long run unless they get lucky. Some bookmakers have reputations for banning the accounts of sharp punters, arguing their service is intended for “recreational gambling” only. Other bookmakers embrace their sharp customers. Bookmakers can determine which of their clients are sharps and then use their betting activity to shift the odds. The bookmakers will use the sharps’ wagering activity as a gauge of whether they have the odds right or not.

But how does a bookmaker distinguish between sharps and squares? If a newcomer makes fifty or so wagers and is up by 25%, his he or she a sharp, or did they get lucky?

### Beating the Closing Odds

Bookmakers identify sharps as those who persistently beat the closing odds. To beat the closing odds means the odds at which the punter wagered are higher than the bookmaker’s odds just before the event started. When the opening odds become available, sharps will identify the odds that are too generous relative to the probability that the selection will win. They will place wagers on that selection until the odds drop to a point where that bet no longer represents good value.

Wagers placed at overly generous odds are called +EV plays, meaning the wagers have a positive expected value (EV). An illustrative example of a +EV play is as follows:

Coin toss:
Tails: 1.80 odds

Assume the probability of heads and tails are both exactly 50%. For a \$100 wager on heads the expected profit equals wager*[(odds_heads-1)*(probability_heads) + (-1)(probability_tails)] = \$100*[(2.10-1)*0.5 – 1*0.5] = \$5. Because \$5 > 0 this is a +EV play.

While the wager above has a 50% chance of losing, from a risk neutral perspective it is a good bet because betting repeatedly on this market would be profitable in the long run. Punters who make +EV plays in betting will win some and lose some, but will be long-term winners because they wager at good value odds.

### Why Beating the Closing Odds is Important

Supporters of the beating the closing odds concept argue that the opening odds don’t reflect all the information in the market. For this reason inefficiencies will exist. Subsequent punter activity will shift those odds up or down to reflect all of the available information. The closing odds will, at the very least, be more efficient than the opening odds, because they now reflect punter knowledge and sentiment – i.e. more information than the opening odds. If you can persistently beat the closing odds this suggests you have superior information to the bookmaker. The efficient market hypothesis suggests that the closing odds provide an unbiased reflection of the probabilities of each outcome. To persistently beat the closing odds suggests you are able to identify overly generous opening odds. The fact that the market has since adjusted those odds down is an acknowledgement of this.

Analysis of whether a strategy is beating the closing line provides insight into the merits of that strategy. A common concern for successful punters is knowing whether they have a genuine edge over the bookmaker or whether they have simply been lucky. Perhaps they have an edge in one sport and got lucky in another. The theory goes that by recording whether they have beaten the closing odds, the punter can differentiate between a good strategy and blind luck. A persistent track record of beating the closing odds suggests that it was insight rather than luck that was the driver for their success.

On the flip side, perhaps a new betting strategy has initially provided negative returns. Does this suggest bad luck, or that the strategy is flawed? If the strategy does persistently beat the closing line this may suggest that the punter has been unlucky and that the strategy does have its merits.

A key benefit of beating the closing odds is that it can often give you an opportunity to hedge your original bet before the event starts. This is especially easy on Betfair and other exchanges that support lay bets.

### Beating the Closing Handicap

For handicap wagers often the handicap will shift instead of the odds. Recall the rugby example discussed previously. If you place a wager on Australia (-4.0) at 1.91 odds and the handicap shifts to (-4.5) at 1.91 odds, you haven’t beaten the closing odds but you have beaten the closing handicap by 0.5. Punters who primarily bet on handicap markets are aiming to beat the closing handicap rather than the closing odds because handicap wagers are intended to have a 50% chance of winning. This is why bookmakers often shift the handicap in response to an imbalance in wagering rather than adjust the odds.

### Steam Chasers

The majority of punters don’t have sufficient access to data or model building knowledge to gain an edge over the bookmaker. Rather than attempt to build models of their own, many punters will instead employ the strategy of steam chasing. This involves basing betting decisions on odds movements rather than the odds themselves. A punter who engages in this strategy is called a steam chaser.

The theory behind steam chasing is that the sharps will identify and jump on +EV bets once the odds become available. This will cause the odds for +EV wagers to drop with most bookmakers. This movement in the odds is called “steam.” Steam chasers seek to identify and bet on selections that have falling odds in the belief that they must have been identified as overvalued by the sharps. They will bet on those selections with bookmakers whose odds have not yet fallen in line with other bookmakers. Odds with these bookmakers are called stale odds (or stale lines in the US) because they are not as up to date as the odds with other bookmakers.

In some circles steam chasing is extended to include wagering on the odds after they have fallen. Critics of this point out that these punters have probably missed the boat. By the time the odds have dropped the wager may no longer be a +EV play. If too many steam chasers jump on the bandwagon of falling odds they are likely wagering on a selection with -EV because the odds have dropped too far.

Steam chasers can actually act to the benefit of the sharps because if the market odds shift sufficiently, the sharps can hedge their original bets by placing wagers on the opposing outcome, which by this time may now be a +EV play of its own.

### Caveats to Beating the Closing Odds

The theory that beating the closing odds will lead to long term profit does have its critics. While it is true that sharp punters will often beat the closing odds, this is not their primary intention. Success in betting comes from placing bets at odds that are higher than the associated probability of winning – i.e. making +EV plays. A punter who bets on heads in a coin toss will enjoy long-term success if they wager at odds greater than 2.00. This is regardless of whether the closing odds are greater or less than their wager. Your focus as a punter should always be on the value of the odds and the value of the odds alone. Based on the market efficiency hypothesis, if you do consistently find good value wagers, you will likely beat the closing odds more often than not, but your success stems from finding value.

On a related note, beating the closing odds doesn’t guarantee you have made a +EV play. Suppose you bet on heads in a coin toss at 1.98 odds. If the line shifts to 1.90 you have beaten the closing odds, but if heads has a 50% chance of winning, this is not a +EV play.

Differences between opening and closing odds will not only reflect punter activity. Additional player news and weather conditions leading up to the event can also shift the odds and handicaps. Supporters of beating the closing odds theorise that you must bet early on events before the markets become efficient. However additional information leading up to the event may shed new light on how a fixture will play out. Suppose you back the overs in a over/under market on the total rugby score and the odds initially drop, suggesting you have made a value bet. If conditions on the day are atrocious then the overs odds could blow out past the odds at which you had wagered. In hindsight you had made a value bet with the information available to you at the time, but subsequent information and new conditions have shifted the odds against your favour. This highlights a risk of wagering early on a fixture.

### Beating the Closing Odds/Handicap in Practice

The biggest challenge to beating the closing odds is recording the closing odds in the first place. Observing the odds prior to the event start can be tedious. A web search for “closing line data betting” will list a few data sources, many of which require payment to access them. Understandably, access to closing odds data is much easier the more popular the sport/league. Two services in the US that offer free trial access are SportsOptions and SportsInsights.

In terms of measurement of the degree by which you beat the closing odds, this can be done in absolute or relative terms. Using decimal odds, some suggestions are:

Beat closing line = (wager odds – closing odds)
Beat closing line percentage = (wager odds – closing odds) / (closing odds – 1)

Note that the first equation treats (1.10 – 1.05) the same as (50.10 – 50.05), despite the fact that the shift from 1.10 to 1.05 has a far greater impact on profit as a percentage of the stake. The second equation provides a relative value based on the closing decimal odds minus 1. Using the 1.10 and 1.05 odds, this equates to (1.10 – 1.05)/(1.05 – 1) = 100%. This reflects the fact that the wager odds provide twice the profit of the closing odds for a winning bet.

Australia Sports Betting has developed a free to download Excel betting tracker that supports the recording and analysis of beating the closing odds and handicaps.