Betting Margins Explained
All bookmakers build margins into the markets they take bets on, in order to (hopefully) guarantee themselves a profit.
Therefore, as a punter if you have the ability to calculate betting margins using a simple formula, then you can easily identify which bookies are offering you the best odds.
The “True Odds”
The best way to explain how this works is using the classic coin toss scenario. In any coin toss the probability of heads is 50% and tails is 50%. So the true odds for both outcome is evens (2.0). 50% + 50% = 100%. Making this a fair, or “round” market.
However, if a bookmaker offered the above true odds on a coin toss and took an equal amount of money on each outcome, they would just break even and not make any money. For example, if they took £100 on heads and £100 on tails, at these odds of evens (2.0) they would be paying out £200 regardless of the result, meaning a profit of £0.
Therefore, bookmakers will offer lower odds than the true odds in order to build in a profit margin. Keeping with the coin toss example, a bookmaker might instead offer odds of 10/11 (1.91) on both heads and tails outcomes. This is now implying that both have a 52.36% probability of being the correct outcome. 52.36% + 52.36% = 104.72%, making this an “overround” market, where the bookmakers margin is 4.72%.
So now if they took £100 on heads and £100 on tails, at these new odds of 10/11 (1.91), and the result is heads, the bookie would pay out £191 (£100 x 1.91) on heads and be left with £9 profit. Likewise, if the result is tails they would pay £191 out on tails and still have a £9 profit.
Now bookmaking is a business, so it’s fair enough that the bookies have their margins, however as punters we should always be looking for the best value for our money, and by this we mean the betting sites that have the lowest margins and offer as close to the true odds as possible.
Example:
Let’s compare the odds offered by Skybet and bet365 for the Tottenham v Man Utd match.
Skybet are offering: Tottenham 5/4 (2.25), Draw 12/5 (3.4), Man Utd 23/10 (3.3)
bet365 are offering: Tottenham 69/50 (2.38), Draw 121/50 (3.42), Man Utd 23/10 (3.3)
To calculate each bookies margin here we make the following calculation using the decimal odds:
Skybet: 100/2.25 + 100/3.4 + 100/3.3 = 104.16%
bet365: 100/2.38 + 100/3.42 + 100/3.3 = 101.56%
From this simple calculation we can see that skybet’s margin is considerably bigger on this match than bet365, so bet365 are the best value by a long way! If you do this for every Premier League match (as we do over on our Premier League Margins page) you will be able to see the bigger picture, and which bookies consistently offer the best value for money.
This formula can be used on any market in any sport. Remember, the lower the bookies margin the better value it is to you!
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