Bookmaker Odds and How They are Formed

Guest Contribution – Certainly, every gambler has thought about how the odds in bookmakers are formed and how bookies make money.

We’ll try to offer exhaustive answers to these and other questions in today’s article.

Bookies odds formation

To begin with, let’s figure out what forms the initial bookmaker odds for a particular sporting event. No matter the odds type (european, fractional, decimal, e. t.c) – formation of the odds is based on two main factors: outcome probability and the bookmaker’s margin.

By the way, you can easily convert odds with this handy european odds converter, built into many popular services. 

The first factor of bookies odds formation is quite simple – each event has more and less likely outcomes. The lower is outcome probability, the higher are odds. And vice versa, the more probable the outcome, the lower the odds.

Therefore, it’s logical that in matches between an obvious favorite and underdog, the low odds will be on the chalk’s winning since the probability of this outcome is extremely high.  The outsider’s winning, in turn, will be evaluated with higher odds, as there is a lower chance of winning.

By the way, in the case of an outsider’s success, a bookmaker can hit a good jackpot, since most of the bettors will obviously bet on the favorite winning. However, such occasions are rather rare.

Usually, with large bookmakers, there are always experienced analysts in the team, whose task is to form the bookies odds for a certain event. Of course, only in case that this bookie is not a clone, i.e., it doesn’t use the line of another bookmaker in its work.

What is margin?

Another important factor in the formation of odds is the bookmaker’s margin. It’s also the way bookies make money. The margin is a certain percentage of its own profit, which is originally placed by a bookie on every match/fight/race, etc. Thereby, in spite of the outcome, the bookie wins in any scenario.

By way of illustration, what is a margin –  let’s consider a specific example:

Let’s say we have a match between two absolutely equal teams. Accordingly, their chances to win are equal to 50% to 50% (or 0.5 and 0.5). In a good way, the odds for both outcomes should be 2.0 (1/0.5). But bookies are clearly not satisfied with such a situation as they need to get their guaranteed income.

That’s why the bookmaker puts a margin on the odds, which largely depends on the level of its “appetite”. In our case, let’s take a round number of 10%, to make it clearer how this margin is set.

So, these 10% the bookie will distribute between two outcomes (per 5%), and accordingly, the probability of each of them will be equal to 55% (or 0.55). Now let’s calculate the final odd, which will give us a bookie taking into account margin. It will be equal to: 1/0.55 = 1.82.

Thus, you can bet on each of the outcomes only 1.82 with absolutely equal chances to win of two rivals. Of course, 10% of margin is too much, but 4-7% can be found among many bookmakers.

Some newbies can think that margins do not affect parlay bets, but it’s just the opposite. With the case of a parlay bet, the margins for different outcomes are multiplied. The only thing you can do is carefully calculate odds with the help of the money line parlay calculator and agree on a bookmaker’s margin.

Now you understand what is margin and how do bookies make money with a help of this. As we mentioned above, the percentage margin level can vary greatly in different bookies, depending on their greed.

For instance, the average margin of Pinnacle is only 2.2%, while Bet-at-home value is 6.5%. Sportingbet also sets about 5.8% margin.

As for betting exchanges, their system is slightly different. They don’t earn on margin, but on commissions with players’ wins, so the odds there are often quite competitive. Lack of margin makes exchanges attractive for professional gamblers.

Bookmakers’ earnings and arbers

Today we talked about how bookmakers make money. Now, let’s figure out how the earnings of bookmakers and the margin directly affect the arbers.

Arbers are the professional bettors who operate with a surebet strategy. Surebet is a situation that allow to place bets on opposing outcomes and get profit no matter the result. When betting on opposite outcomes in different bookmakers, we essentially beat them with their own weapons because such bets allow us to bypass the margin. 

And this means that the bookie loses its guaranteed profit. Accordingly, it’s quite logical that bookmakers don’t welcome arbers in the ranks of their customers and try to fight with them in every possible way.

However, arbers always find ways to outplay bookies, especially with the help of arbitrage betting scanners. Such scanners gather information about existing surebets from dozens of bookmaker lines and provides their list to customers. Nowadays, there are many forums and thematic articles, which will help you to find the reliable surebet software in a matter of seconds.

Summary

From this article you understand how do bookies make money and how bookies odds formed. It is important to know for newbies in betting.

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