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Bookmaker Margin - How to Calculate & Use It for Your Advantage

11 Minute Read
calculate bookmaker margin

If you’ve been in the betting space for a while, you should know that experienced bettors always try to find bookies with the lowest betting margin. Even though it may directly affect long-term profits, it also tells you a lot about the market you’re betting on. Let’s look at the secrets you can find from bookmaker margins and how to use them to your advantage.

Introduction to Bookmaker Margins

Football fans who want to learn more about the bookmaker's commission need to know that bettors refer to it in many different ways. The commission bookies take away is called the vig, margin takes or cut, depending on your region. No matter which one of these terms you'll come across, remember that they all refer to the same thing – the commissions that bookies take away on every stake you make.

These values don't coincide with the bookies; sometimes, the margin can differ for one event. Besides that, to bait the fancy football lovers, bookies may even offer what's called the "reduced juice" on particular events. This means that they have more favourable odds. Many football bettors mistakenly consider that the odd's value is set by the bookie's assessments which is related to the team that's more likely to win the game. This is true, but not entirely.

Even though bookmakers are constantly adjusting every matchup, their primary goal is to ensure that their value will win bettors over so that they can make bets on both sides of the market. This is because bookies aim to even their liability following the possible outcomes. So as long as the liability is entirely even, the bookies won't make any money. This is why they usually set a margin to ensure that even liabilities, they'll still enjoy some profit.

Knowing the Fair Market

If you're a football bettor, you should know what a bookies' margin is by looking at a coin toss. You know that the probability of each possible outcome is 50%, which means the odds' value is in the order of 2.0. So, let's say that a friend of yours decided to bet $1 with you. You've decided to bet for tails, which, if you've guessed right, will grant you $1. However, if heads come up, you'll lose $1.

Here, you can see that neither you nor your friend will benefit from an edge, as the odds show the probability of each possible outcome. This is also known as the 100% market, which means the bettor and the bookie don't receive any advantage. Therefore, these markets don't have a margin whatsoever.

However, we need to presume that if the bookmaker you're using lets you make a stake on a coin toss but still needs to make money, then the market percentage will exceed 100%. Thus, the value over 100% reflects the bookie's margin or the commission you need to pay for its services.

This coin toss situation is a simple way to show how bookies work. One thing you should check as a sports bettor is the margin of the bookmaker they've signed up for. This is crucial as the margin will directly relate to the odd's value they're opting for and the profit that the bookies may gain.

Returning to our example of the coin toss, let's assume that the odds you get are 1.90. This means that for every $1 you put in, the profit you can potentially gain will be $1.9. So, your average loss should be 1 cent, which is how bookies make money.

How to Calculate the Market Margins

You should know that bookmakers don't offer the true probability of an event occurring simply because they won't enjoy any profit. Instead, they need to provide odds with the value that exceeds the actual likelihood of a specific outcome to come about. Therefore, guarantees that they'll have the winning edge. As we've mentioned, this shift from the actual price represents the bookmaker's margin.

One thing that separates experienced football bettors from newbies is that seasoned bettors are aware of all the variations that might be seen in the margins of various bookies. Therefore, if you've just started out betting, you should also figure out how to calculate margins. Doing this will help you find the interdependence between margins, the odds value and the potential profit you can receive.

Now, let's get started with calculating the margin. You can rest easy as you don't need to have advanced mathematical skills to calculate them, so if maths isn't your thing, there's no need to worry.

The first thing to do is estimate the implied probability of every possible outcome. We'll use a match from the 2021 UEFA Championship League matchup as an example between Chelsea and Zenit. One of the popular bookies offered the prices below:

  • Chelsea – 2.30
  • Zenit – 3.10
  • Draw – 3.30

Next, you need to divide 1 by every one of these values. So, you should get the result of 0.430, 0.322 and 0.303. Now, just add up these numbers, which means we'll receive a total of 1.055. Therefore, the margin stands at 5.5% and the exposure at 105.5%. This way, you can calculate the margin of a 1x2 market that offers bettors the opportunity to bet on each team to win and also draw.

To calculate the bookie's margin on two-way markets like Over and Under 2.5, you need to simply divide 1 by the value of the odds of the first team to win, then divide the value of the second team's odds to become victorious. Next, you need to add the numbers and multiply them by 100. You'll then receive the value of the margin.

High Margin and Low Margin

A low bookmaker margin generally has higher limits where people attract high stake bettors with better market knowledge. This approach allows the sportsbooks to have a highly accurate price. On the other hand, high-margin bookies focus on recreational bettors who are only betting for pleasure and excitement and don’t have extensive knowledge about the market. Therefore, these betting operators usually provide more bonuses and promotions to keep your attention away from margins.

Generally, we consider a margin of less than 2% as low and above 5% as high. Indeed, we recommend betting only with a low-margin bookie as they positively affect your profits in the long term. However, high margins don’t always mean that you can’t find any value in it. Whenever you can find an arbitrage opportunity or if your calculations show that there is more value, try placing a bet on a high-margin market. Remember that getting more value from your bets is more important than only betting with low-margin operators.

To understand them a little better, let’s visualise these margins. An excellent way to do this is by drawing two circles and making one inside another. The smaller circle represents a low margin bookie, while the bigger one represents a high-margin sportsbook.

The smaller circle obviously has less space inside it. This means there’s less room for re-adjustments on the market, with the margins becoming more static. This offers equal synchronicity when both sides attract more action. On the contrary, the bigger circle has way more room, which causes the price to fluctuate more often. In this case, more action on one side doesn’t always have to be followed by the other’s response. This situation is where the margins can widen even further, allowing worse prices for bettors.

As a bettor, your goal is not only to know these trends but also to find occasions when low and high bookies’ price ranges cut across. The only way for this to happen is when a low-margin bookie manages to find out about the influential money flow. This money may come from betting syndicates, top-ranked bettors or other third parties.

Whenever this happens, bookies have no choice but to move their handicaps to protect themselves from further losses. The simplest way to find something like this is by comparing favourite market odds, as any market favourites shouldn’t have the best prices on the market. Therefore, when you find something similar, you should take the opportunity without question. Besides that, low-margin bookies also dictate how the betting market behaves in general. They are the ones that adjust the odds first, while most of the margin bookmakers (especially the bigger ones) follow.

Conclusion - Using Bookmaker Margin

In the end, bettors should be happy that something like betting margins actually exists. If you’re looking to earn some extra profits while betting on your favourite sports, you can try putting in a little more effort and exploit the bookie margin to gain the edge over the online bookie.

Every strategic bettor who bets for the long term is looking to maximise their returns by finding the highest possible odds. The higher the margin, the lower the odds will be; to compensate, you need to choose the right outcome to obtain break-even.

This is essentially the increase of rounding up of margin multiplied by the break even if the margin is at zero. For example, during a coin toss, the break-even is fifty guesses if the margin is zero. When a 3% margin is applied, we rise 3% of 50, which equals 1.5. However, we need to round the number up to 2. This means that 52 guesses are needed if the margin is indeed at 3%.

This article looks at how vital margins are in sports betting and how you can use them to your advantage. Remember that the bigger the margin, the more accurate your bets should get to win in the long run.

Published on 31 July 2022 Last updated on 30 September 2022
Author: Martim Roll

Martim Roll

Author

Martim is the Founder of APWin, Passionate about football, statistics and analytics connected to sport. Connect on LinkedIn

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