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How Bookies Create the Odds

How Bookies Create Odds

In this article we’re going to take a look at perhaps the most important part of the gambling industry, the odds.

It is extremely important that punters understand how the bookmakers come up with their pricing so you know whether you are getting good value from them or not.

Those of you who wish to develop a strategy around laying on the betting exchanges will also need a deep understanding of these methods to ensure you don’t find yourself taking on bets that just may not make sense financially.

What are odds?

Betting odds define how much money you will receive should your bet come in as a winner.

Odds are displayed on the bookmakers website to let you know the probability (in their opinion) of the result coming in e.g Tiger Roll being 2/1 to win at Grand National.

If you placed a £50 stake on that particular bet they would pay you £100 plus return your £50 stake — a total of £150 will be paid out.

How do Bookies make the odds?

Bookmakers are, first and foremost, a business. You need to understand this before jumping headlong into the gambling industry.

All of them have a team of people at their head office called “compilers”. Compilers shift through months of past data, comparing form, likely team selections (if applicable) and approach to various situations.

Once they are done crunching the numbers they come up with the probability of the possible outcomes e.g Home win, away win or draw — if we use football as an example.

Let’s say the home team has a 65% chance of victory, while the away team has a mere 15%, leaving a 20% chance for a draw.

If the bookie published these odds in their various formats (for example a 65% chance is just over 2/3) then they would not make any money, so they need to shave the odds they offer and create what is known as “margin”.

By putting a margin of 6% in place they guarantee themselves a profit of 6% on all outcomes (this might vary from 2% to 7% — they’ll never tell you their true profit margin).

So after the margin is applied (in this example 6%) the home team now has a 63% chance to win, the away team have a 13% chance and the odds for the draw are 18%.

This reduces the odds on a home team win to 3/5, which cuts your potential winnings to ensure they are guaranteed a profit.

Conclusion

You’re going to find a variety of odds formats as you do the rounds of the bookies but every one of them will have made sure they have the advantage.

That’s just the nature of the beast. The intelligent punter research their bets and highlight a few that they feel will have false favourites.

They can then go where the odds for those particular bets are the best, maximizing their profits.

The “markup” that bookmakers place on their odds will always catch regular Johnny out, but to those that know what they are looking for it’s nothing more than a 5% for the privilege of taking their money.

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