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A Complete Guide - How do Bookmakers Set the Odds?

Bookmakers7 Minute Read

how bookmakers set odds

Have you ever wondered how bookmakers make money? Or how do they calculate odds? If you're curious about how betting sites have an advantage over the bettor, then you've come to the right place.

In this article, we'll be covering how to choose the right sportsbook and understand how these sites make their margins. This way, you'll know which odds that'll work in your favour when you register at multiple betting sites.

How Bookmakers Calculate Their Odds

Not long after the days of Las Vegas sportsbooks and backroom bookmakers, bookmakers began to employ odds compilers and analysts to help them create an online market with the help of modern technology.

Today, betting odds are all about number crunching with databases of information that helps to set the market. They'll analyze any sports to develop the probabilities of every outcome, which ultimately helps set the bookmaker's price.

This can be as simple as analyzing the home team's past results and comparing them to the away team's form. Once they have the numbers and run them through mathematical models, odds makers can set the odds in real-time.

Bookmakers primarily outsource compiling odds with the help of specialist companies who collect odds for the markets. This means that some betting sites offer identical odds to rival other sportsbooks. This is why it's essential to do your research as a sports bettor and find value. If you want to find the best bookies, here's the guide on how to compare online bookmakers.

Why Do Odds Change Before Events?

If you want to know how bookies make money, you need to understand how these odds change in real-time.

If you're familiar with online betting sites, you'll see that the betting odds are constantly changing to reflect the mass of money that's moving around. For example, when an underdog suddenly attracts a bundle of cash, then the betting site would quickly reduce the odds to protect the margin.

And conversely, when a popular team attracts more money, the underdog's odds will likely increase. The smart bookmakers will get analysts to help them set their odds by looking into every market. This includes things like injuries in key players or unique team selections.

Additionally, experienced bettors will use in-play markets, so they'll have the winning edge over the sportsbook. They'll place their bets before the websites have a chance to adjust their odds.

For example, a football player has a 3.00 to score the next goal but only has four shots to score a goal in the last 10 minutes. A smart bettor would get the quick value before the bookie has time to reduce the odds.

Details in How Sportsbooks Make Money

All betting sites aim to make money. Therefore, they need to calculate odds correctly so they can make long-term profits.

The sportsbook will always try to pump up a game's price so they'll have a fundamental advantage over you. This is known as the 'vigorish' or 'vig' which is also called juice or margin. It's how these bookies try to balance their wagers and end up making money, whatever the outcome.

You need to know two numbers when looking at how sports betting sites make money, and they are vig and overround. Vig is the profit a site will make as the percentage of the bets, while the overround is the total "book" over 100% they've covered.

Let's say a football match has an odds of 1.8 for the home team, 3 for the draw, and 4 for the away team to win.

For example, the implied probability of the odds is:

1 / 1.8 = 56%

1 / 3 = 33%

1 / 4 = 25%

If we sum all the probabilities, we get 114%. Therefore, for every $100 the sportsbook receives in bets, it's taking a commission of $14.

Sportsbooks also usually offer parlay betting, which is a mix of bets with more than one outcome. Every leg of the parlay has to come in for you to win your bet.

For example, the overround is 10% on one leg of the parlay, with five legs total. Therefore, the total overround is 61%, as it’s the 10% margin for 5 matches. This gives a winning edge for the sportsbook.

How Options Have Levelled the Playing Field

If you want to look at how betting odds work and how they're calculated, check out how many betting companies are operating. The levelled field and sportsbooks follow the money. However, sportsbooks don't usually overexpose themselves, especially when they have a $10 while others have the same result at $7 or $5.

There are thousands of mobile and online sportsbooks waiting for your bets, and regulated sports betting has only been around for a few years with the number of operators slowly climbing. In addition, more states and countries will likely legalize sports betting in the next few years.

This will bring many more betting opportunities and more standardized odds within the market. You must do your homework and find great value by shopping around for the best point spread or Moneyline odds. You can also check sports news sites or find out on Twitter for the latest injury and reports.

Final Thoughts

With many sportsbook markets and new bettors coming every day, we expect bookmakers' odds to become more regulated. There are also some facts about bookmakers you should know about bookmakers before betting.

Prices will become more similar across multiple sports betting sites and may even be copied. Bookmakers will follow the general market when they calculate the odds.

So how can you take advantage and maximize your profits as a sports bettor? Sign up to multiple bookmakers and find value in two of your favourite sites. You should also try looking for special offers or bonuses from bookmakers such as enhanced odds and free bets that give an edge for the player. Don't forget to check the difference between betting exchange & bookmakers.

Published on 01 November 2021 Last updated on 15 July 2022
Author: Martim Roll

Martim Roll

Author

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

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