Bookmaker Odds and Margins

oddsIf you are going to be a gambler, then it is vitally important that you fully understand the betting odds that are given for each event. The betting odds will indicate to the gambler the chances of their selection winning and the financial return that is available.

For each event, a book is created that gives the betting odds for each competitor taking part. They reflect the probability of that competitor winning. The odds of Manchester City winning the Premier League will be much shorter than for Swansea winning it, simply because the bookmaker believes that City have a better chance of winning the title than the Welsh side. The lower the odds the bookmaker offers, the more they believe the probability is that they will win. More about probability later in this article.

Odds Formats Explained

There are three main ways of expressing odds, namely decimal odds, fractional odds and American odds

Fractional Odds

These are the kind of odds that most of us grew up with. Go into any bookmakers and the odds will be in factional form. Everyone seems to talk about their selection being 6-4 rather than ‘oh it’s 2.5.’

So how do you understand factional odds? Well, if a selection is priced up at 5-2 then the figure on the left indicates how much you’ll win and the one on the right refers to the stake. Therefore, if you place £2 you will win £5 plus your stake back. This is described as being odds against. However, a lot of favourites can be odds-on. That means the figure on the left will be smaller than the one on the right. If it’s 10-11 you have to bet £11 to win £10 plus your stake back.

There’s a whole range of fractional prices available, for example, 2-1, 9-4, 5-2, 11-4. In that example, each of the odds is slightly higher than the previous one. Recent years have seen more fractional odds appearing such as 11-5 and 85-40.

Learning the fractional odds is really important if you want to be able to successfully gauge how the market is moving.  For example, which of these odds is the shortest? Is it 7-5 or 11-8?  It’s simply a case of dividing the figure on the left by the one on the right. 7-5 is 1.4 and 11-8 is 1.375-1 so 7-5 is slightly higher.

Decimal Odds

With the decimal odds one big difference is that the odds include the fact your stake money will be returned. For example, 6-4 in fractional odds simply explains that if you stake £4 then you’ll win £6. Now, 6-4 is calculated as 1.5-1 (they say 6-4 as that looks better and fractional odds always used whole numbers). So 1.5-1 in decimal terms is 2.5. This means for a £1 stake you will receive £2.50 back if your bet is a winner. 2-1 in fractional odds is 3.0 in decimal, £1 on receives £3 back.

The key figure in decimal odds is 2.0, the equivalent of evens in fractional betting. If the decimal odds are less than 2.0 then this is the equivalent of an odds-on shot in fractional odds. For example, 1-2 in fractional odds is 1.5 in decimal, as £1 wins you 50p so your return is £1.50.

American Odds

With this form of odds, it’s again a bit of a different calculation. American odds are also sometimes called lines or money line odds. These do take a bit of getting used to from my experience. You’ll see a + sign and this tells you how much you’d win with a stake of £100 units. If it’s a – sign, then that shows how much you’ll need to win £100.

For example, if the fractional odds are 4-1, the decimal odds would be 5.0 (as it includes the return of the stake) and in US odds it would be given as +400 as a stake of £100

Again the odds are different when using American odds and it is important that you fully understand them before placing a bet. American odds are also known as lines or money line odds.  The odds shown when there is a + sign are how much you will win for a stake of 100 units. If, however there is a – sign then the odds are showing you how much you will need to stake in order to win 100.

Odds Conversions

Once you get used to it, conversions between these different form of odds is fairly straightforward. 4.0 in decimal means £1 will see a return of £4, a profit of £3 so it’s 3/1 in decimal. For the US Odds £100 would win £300 so it’s +300.

When you bet online you are given the choice of how you want the odds to be represented. Just click on the one you want and feel most comfortable with.

Bookmaker Margins Explained

A bookmaker will offer their customer odds for each event they cover. However, this is a business after all so they will ensure that the odds that are produced will contain a bit of profit for themselves. Whatever the result, there will be a profit made by the bookmaker.

How is this achieved? Well, the odds that they offer will be slightly less than the true odds. The difference is the profit margin. Again it’s down to probability that aid the calculation of odds. If a selection has betting odds of 9-1 of winning, then this means the bookmakers believe there is a 10% chance of that happening. This is calculated thus:  If 9 is represented as A and 1 as B then probability (%) is B/ (A+B) therefore, 1/9+1 = 1/10 = 10%. If I’d thought of probability in betting terms I might have passed that economics exam.

Say you want to bet on Ronnie O’Sullivan winning a tournament, if his odds were 5/4 that means the probability of his winning is calculated as 4/5+4 = 4/9 which is 44%.

A match between two teams has three possible results. Either a win for the home team, victory for the away side or the game ends in a draw. Say it’s Southampton at home to Sunderland, the odds may be evens on Southampton to win, 2-1 on the draw and 5-1 on the away side being victorious. In terms of probability this means there is a 50% chance of Southampton getting the three points, 33.33% chance on a draw and 16.66% on Sunderland winning. Add those three percentages together and you end up with 100%.

Making a Profit

Those three percentages may equal 100% but the bookmaker wants to be able to make a profit. In order to do this, they offered slightly reduced odds. For example, they may decide that Southampton will be 4-6 to win, the draw 6-4 and Sunderland on offer at 4-1. That means the percentages work out as 60% on Southampton (3/5), 40% on the draw (2/5) and 20% on Sunderland (1/5). Those three percentages now add up to 120%. That additional 20% is known as the bookmaker margin, edge or overround.

If £60 was placed on Southampton to win, £40 on the draw and £20 on Sunderland then even though £120 was placed, the pay-out for all three options would be £100 and the bookmaker counts some more profits.

That’s a simple way of looking at the way bookmakers ensure profits are made, there are far more complicated methods available.

The Southampton v Sunderland example looks at just one match, how does the overround be achieved with multiple bets? If you place a treble (three selections), then the overround in the book that applies to each of your selections will be compounded. So again the gambler receives lesser odds in order for the bookmaker to make sure their profit is made. A bet on two selections that are calculated as both being even money shots would be offered to the punter at 5-6 ensuring an overround book is created. By combining the two selections that overround increases by just over double. That might sound really unfair but by doing this it allows the bookmaker to offer some bonuses for successful accumulators and enticing more custom.

Guide to Beating the Odds

It’s not easy of course to get one up on the bookmakers but there will be some times when in setting their odds they haven’t quite taken everything into account. It won’t happen as bookmakers employ experts to set their odds and not much gets past them especially with the main sporting events.

Novelty Events

With smaller events and novelty bets, bookmaker mistakes are possible with those experts not always in use here. There may well be some prices that are a bit larger than they should be if you really know lots about that reality show you never miss.

Obscure Markets

When it does come to the larger events, look at some of the more obscure markets out there such as how the next goal might be scored or how many goals in the game. A bit of research is really useful here and there’s plenty available online but rather than looking at the stats, look at any news stories. For example, a player whose partner has just given birth might not be getting all the sleep they want. Andy Murray’s form dipped a bit after he became a father. Does the bookie know that obscure player on the Challenger circuit just became a father? Might a player have a bad record in some tournaments, all that research might just get you a winner at a better price.

Look at the odds the bookmaker has set and consider what odds you’d have set. If a player is 2/1 and you think he should be 6/4, then pounce on that 2/1 that’s being offered. It’s your prediction against theirs and you might just be right.

Human Error

Human errors can occur and there will be some odds that in hindsight look too good to be true. Betting on elections can be profitable as the opinion polls aren’t always to be trusted, take the 2015 UK General Election for example. The close vote predicted wasn’t what eventually happened.

The Hunch

If you believe a horse about to make its racecourse debut may be a future superstar, then some good odds, particularly in ante-post betting markets may be available. Also in horse racing, some selections can drift in the market. If that happens and you don’t believe that should be the case, then you can get a better priced winner. After all, that horse doesn’t know he’s gone out from 8-1 to 12-1 and most people think it won’t win.

Look Around for Better Odds

Make sure you look around for prices so open a few accounts. One bookmaker might just have your selection available at a slightly higher price, so take advantage. Betfair offer the best prices on live TV horse races with special offers so go for those.

Search for the enhanced odds that bookmakers offer, they often exist to get your initial custom in what is a highly competitive market but do some research just in case there’s another reason for the higher price, injury for example.

Conclusion

There’s a lot to learn about odds and margins but once the basics are understood you should be OK. Just make sure you know how they work and that will aid you when placing bets.