Learn the truth about bookies margins and overrounds, explained in 4 minutes
Having an awareness of how the bookies margins and overrounds are calculated is a key tool for any serious bettor. Once you have this knowledge you can determine where the best value lies and who to place your bets with.
In this post, I’ll explain what the bookies margin is, how the overround is calculated and how you can use this information to make your betting more profitable.
The perfect market and the built in profit margin
In a perfect betting market, the odds would add up to 100% (more of what this means and how it is calculated later). bookies build a profit margin into the prices they offer, this is fair enough they are a business and are out to make money.
Say we have a market that adds up to 110%, the bookies have built-in 10% to their prices. In betting terms this is known as the overround. The margin they build into their prices covers their overheads and more so they can operate at a profit.
In recent years the traditional bookies model has been challenged with new entrants into the industry who can operate with a leaner cost base. In reducing their overheads they can offer greater value to the punter through bigger prices. As long as you know where to look, the value to the bettor has never been greater.
How is margin and overround calculated?
As an example of how the bookies margin and overround is calculated, let’s take an event with just 2 participants. On all known ability both participants are exactly matched. Each has a 50% chance of winning.
In a perfect market where there is no bookies margin built in, the odds of either participant winning would be even money – expressed as 1/1 in fractions or 2.0 in decimals. At these prices, you could bet on both outcomes and whatever the result, you’d break even.
£100 on each participant at 1/1 returns you £200, whatever the outcome you get your entire stake of £200 back. This is a 100% book.
Let’s look at the same event where the bookies have built in a profit margin and are offering odds of 4/5 on each participant.
This time you layout £100 on each selection, whichever wins your return is £180 (£100 at 4/5) and you have lost £20. The overround for 2 selections priced at 4/5 is 111%, a profit margin of 11% in favour of the bookie.
How to convert fractional and decimal odds into a percentage of the book
We’ll look at this in 2 stages, both decimal odds and fractional odds as the calculation varies slightly.
1- Fractional Odds
Firstly, for a book where the prices are expressed in fractions. Take the price of a participant, add 1 to their price then divide into 100.
100/(price +1) = percentage of book.
For example, say you have a runner priced at 2/1. 100/(2+1)= 33.33%
To calculate the total market overround you need to add up the percentage for each participant in the event. For ease of explanation, if you have a 4 runner event with all runners priced at 2/1, the overround equals 133% (4 x 33.33%)
2 – Decimal Odds
The calculation is slightly more straightforward as the “+1” is already factored into the decimal price.
So in a book with prices expressed as decimals. 100/price = percentage of the book.
For the same 2/1 shot, 100/3.0 = 33.3%
I’ve added the table below as a quick reference for fractional and decimal expressed as a percentage.
Odds conversion table
Converts decimal and fractional odds into the percentage of the book.
|Fractional Odds||Decimal Odds||Percentage Chance||Fractional Odds||Decimal Odds||Percentage Chance|
Why is knowing the betting overround important?
Once you have this information you’re in a position to search the marketplace for the lowest betting overrounds, those closest to 100%. Where you find these, you’ll find the better prices.
It’s worth noting at this stage that Betting Exchanges, in general charge between 2 – 5% commission on winnings, whereas bookies don’t. This needs to be factored in when you’re comparing prices.
Overrounds vary quite dramatically. This can be dependant on who you bet with and what sport you are betting on.
As a rough rule of thumb, on-course and retail bookmakers price horse races up at up to 2% per runner. In 10 runner race, you may be betting into a book with an overround of 120%. Alternatively, on Betting Exchanges you can bet into overrounds that regularly fluctuate between 100 – 102%. There are even occasions where you can bet to less than 100%, though automated bots are quicker than a human and take advantage of any under-round. The market quickly moves back to over 100%.
Does anyone display betting overrounds?
Most results services show the overround for each race after the event when they publish the results. Betting Exchanges display live overrounds on markets pre-event and in running. Odds comparison sites like Oddschecker show you the overround taking the best prices from all the companies that they collate prices from.
I’ve never come across a Bookmaker or online Sportsbook that show overrounds before the off of an event. There’s a very good reason for that.
Probably the example that highlights this variance the best is the Grand National. The overrounds returned for the starting prices by the on-course bookmakers for the past 5 running’s of the Grand National are:
I’m sure that the majority of casual punters who turn out once a year to bet on the Grand National have absolutely no idea what terrible value they are getting. If they knew, and knew where to look then they could be betting on the Grand National with a Betting Exchange to a near 100% book.
Bookies margins and overrounds - to conclude
Give yourself a chance, know the overround of the market your betting into.
This doesn’t guarantee that you will win long term, but betting into a 102% book is better than a 120% book. You’ll still need an edge, but it won’t need to be as great to be long term profitable. It’s easier to be 2% better than the market than 20%.