Important Facts Related to Bookmaker Odds
When it comes to the field of sports betting and gambling, there is no standard method of describing odds. In fact, very few look at sports betting odds from the point of view of a bookmaker.
Anyone who has some amount of quantitative background or good knowledge of mathematics would understand that the techniques or methods talked about here in this write-up are quite simple in nature, but not beyond the reach of any first-year undergraduate mathematics student. Our intent here is to explain how bookmakers set the betting odds in layman terms, which can be understood by anyone having little or no mathematical background.
After carrying out a detailed study on sports betting odds, we discovered that no one had actually standardised the important concepts of sports betting. Hence, our intention is to contribute a bit in that direction.
Talking about some of the most important bookmakers in the business, for instance Bet365, Pinnacle, Ladbrokes, William Hill etc., majority of them employ two formats for displaying their odds – American and European. It’s highly recommended that you acquaint yourself with how to calculate odds, probability and bookmaker payouts. Else you can refer to various detailed sources on the Internet to gain this information.
When you add different probabilities implied by the sports betting odds, you’ll find that they normally add up to a figure which is more than 100%. The difference is actually what is referred to as the betting margin, vig, juice, over-round etc. in the sports betting circles.
When we talk about bookmaker margin, it represents the expected profit of a bookmaker. This expected profit is actually the betting margin divided by the sum of betting margin and 1. The exact formula for this purpose is:
Bookmaker’s margin = betting margin / (1 + betting margin)
Bet365 is counted amongst the very few bookmakers in the business that charges a very low bookmaker margin. Assuming that the betting margin 2%, you can expect Bet365 to be making 2 / 102 = 1.96% profit to be precise on every bet placed with it. As you may already be aware, betting margins can significantly impact your profitability from sports betting in the long term.
Let’s go over three very important conditions that are necessary for a bookmaker to stay profitable in this business:
– A bookmaker shouldn’t necessarily be aware of the exact probabilities of every outcome, but should ensure that every set odd implies a higher probability compared to that of the actual outcome. Conventional bookmakers normally sort this out by employing the highest possible betting margin.
– Bookmakers normally register higher profits through accumulators or multiples.
– Bookmakers have the ability of balancing the books and obtaining a definite profit for themselves if they can successfully keep the ratio of bets proportionate to the implied probabilities.