How and why to calculate bookmaker’s margin?

While many of you might be familiar with the term, there are still those who are not! Please, read it with caution!

Online bookmakers are not charity institutions, they are profit-oriented organisations. Have you ever wondered how do they actually make their money? Lots of inexperienced punters think that the primary source of income is coming from the lost bets, which is complete nonsense.

The truth is that bookmakers are making money on every single bet regardless of whether it’s a winning or losing one. We would try to explain more about the margin concept down below. The higher it is, the shorter are the odds, and the more money bookmakers make.

Sports Betting Guide - How to beat a bookie? Secrets of the world's best punters.

So, what exactly is this margin? Simply saying it is a fee or commission that is taken by the online bookmaker for providing betting service. The coin flip is a perfect example. Let’s say, there’s an online betting operator that takes bets on coin flips. It’s giving 2.00 (1/1) for heads and 2.00 (1/1) for tails. Saying that there is around a 50% chance for getting either side, the bookmaker’s profit will be very low, with a high chance of facing loses. Why?

The odds for such a bet will be directly corresponding to the likelihood of the event occurring. In such a case neither the bookmaker will make a profit nor the punter have any advantage (so-called zero value bet).

Even if you would ever find a bookmaker offering such a bet, be sure, its odds will be around 1.90 (9/10) in the best case. 

At the end of a day, the margin and then odds are what distinguishes good bookmakers from those, whose only way to attract clients is a huge, generous welcome bonus with a ridiculous rollover.

Finding out the margin imposed on the bet is an ABC for every decent bettor. Despite our huge surprise that most of you think the way you do when betting, we are never betting against a team or a player (like Barcelona, for example), but only against the bookmaker and its offered odds.

So, how do you calculate the margin? It is very simple. It’s enough just to follow the example down below.

The example of how to calculate the margin for the 2-way event: (1 / decimal odds for A option) + (1 / decimal odds for B option) - 1

Seems complicated? We promise, it only looks like this at first sight. Let’s try to calculate Over/Under 2.5 goals bet in any match where odds on Over 2.5 are 1.77 (77/100) and Under 2.5 has 1.84 (21/25). Our calculations will look the following way:

(1 / 1.77) + (1 / 1.84) - 1⇒
(0.5650 + 0.5435) - 1⇒
1.1085 - 1⇒
0.1085 ⇒
10.85%

As it shows the margin imposed on this particular bet is around 11%, which isn’t too good and tipsters should rather stay away from it.

Tax haven

The example of how to calculate the margin for the 1X2 type of bet:

(1 / decimal odds for A option) + (1 / decimal odds for B option) + (1 / decimal odds for C option) - 1

Let’s try to calculate the margin for a random football match, where Home team victory odds are 1.80 (4/5), draw - 3.75 (11/4) and Away team victory - 4.20 (16/5). Our calculations will look the following way:

(1 / 1.80) + (1 / 3.75) + (1 / 4.20) -1 ⇒
(0.5556 + 0.2667 + 0.2381) -1 ⇒
1.0604 - 1 ⇒
0.0604 ⇒
6.04%

In this case, the margin is a little over 6%, which might not be the lowest on the market but surely the most common one.

The size of the margin depends on a lot of things. However, most importantly, on a bookmaker’s policy. Some companies offer really competitive prices, which make clients stick with them for longer, while others offer a modest welcome bonus but have a margin that is often lower than 5%. That is exactly the reason why the best punters only register with such recommended online bookmakers.

The next factor the margin depends on is the market’s popularity. It’s obvious that bookmakers do not have as much knowledge about the Croatian 2nd ice hockey league than about the Champions League. Therefore, offering odds for the theoretical hockey match is riskier and requires something to minimise or mitigate the risk, which a higher margin does well. 

Yield in sports betting

Classic Champions League matches, NBA or top European football leagues’ fixtures are being bet on by thousands of punters around the world and are excellently verified by the market. This, in return, brings the risk to its minimum, thanks to what we can get better odds.