How to calculate betting margins
Every betting player sooner or later comes across the term "margin". What is it? In betting, the margin is the commission that the bookmaker takes from any player's bet, whether it is lost, won, or refunded. Its secret is that it is already built into every odds. Margin in betting comes from big business. It is correctly called a percentage of the accepted amount, which is a stable average bookmaker's income, regardless of the outcome of the event.
How can bookmakers make money on margin?
A trivial example will help us understand it. From the theory of probability course, we know that the total odds of all possible outcomes of an event is 100%. When it comes to winning a tennis game, either the first or the second tennis player can win. If the odds are equal, each will have a 50% chance of winning but skews like 40% vs. 60%, 78% vs. 22%, etc. are also possible.
The difference between 100% and the bookmaker's total probability of the outcomes just represents the margin. If the total bookmaker's probability is 107.5%, then the margin of this office is 7.5%, and this is still a modest figure. Some bookmakers manage to lower the odds so much that the margin is 30-40%, but they still have more customers every day. Such betting companies often bribe with various dubious bonuses and promotions.
What is the bookmaker's margin?
To date, we can distinguish the following types of offices with regard to margin:
- low margin;
The first type includes bookmakers who focus on losing players. They earn in 95% of cases from the lost bets, as they practically do not underestimate the odds. The margin of such bookmakers rarely exceeds 2-3%, and this refers only to the highest-rated events. There are almost no low-margin betting companies left today. Basically, these are reputable British bookmakers with a century-old history. They are suitable for professional players who use high maximums and do not pay attention to the width of the line of events.
A distinctive feature of low-margin bookmakers is the lack of live betting options. In rare cases, they are available for rated events. But an experienced player will always find in the line a number of outcomes with favorable odds. However, do not think that such bookmakers operate at a loss. Due to the narrow listings, they force the players to bet on the major markets, which helps BK to balance the money they take.
As for the fundamental bookmakers, most of the modern bookmakers can be attributed to this group. They set the margin at their own discretion so that its size depends only on the greed of the owners of the office. Such betting companies do earn more than low-margin ones, but professional bookmakers will never play in them. Firstly, their odds are always heavily undervalued. Secondly, they cut the maximums. The margin of such offices is more than 5%.
How is the margin calculated?
The formula for calculating the margin for the market with two outcomes is as follows: Margin = (1 / Odds #1 + 1 / Odds #2 - 1) x 100%.
If a bookmaker's office offers odds 1.85 and 1.85 for a prediction for two equally likely mutually exclusive outcomes, the amount of its commission in percentage equivalent will be equal to:(1 / 1.85 + 1 / 1.85 - 1) x 100 = (0.54 + 0.54 - 1) x 100 = 0.08 x 100 = 8%.
In this case the bookmaker's margin would be 8%. Net odds would be 2.00, but it makes no sense for the bookmakers to give them mutually exclusive outcomes, as it increases the risk of loss.
If in the case of equal odds of two outcomes it is quite easy to determine the commission of the BK, then with three outcomes with different probabilities things are much more complicated. Beginner players are not able to immediately recognize the trick with the underestimation of odds. Calculate the margin of the office for three outcomes will help the following formula:Margin = (1 / Odds #1 + 1 / Odds #2 + 1 / Odds #3 - 1) x 100%.
If the bookmaker gives odds 1.45, 2.50 and 6.87, his commission will be: (1 / 1.45 + 1 / 2.50 + 1 / 6.87 - 1) x 100 = (0.69 + 0.4 + 0.15 - 1) x 100 = 0.24 x 100 = 24%. It turns out that this office on average has an additional 24% profit from each player's bet, and this is not the highest margin. That's why it is important for beginners to learn how to calculate the commission of a bookmaker so that they don't end up at a loss and don’t overpay the bookmakers for anything.
It should be noted that similarly, you can calculate the margin for any number of outcomes. Classic variants are 2 and 3 outcomes, but today BKs accept bets for the winner of the tournament long before it starts. If 32 participants are declared in it, the total probability of the rivals' victory is 100%. In this case, you should divide 1 by the odds of each of 32 outcomes, then add up the results of division, take 1 from the sum and multiply the result by 100.