Today we want to write a little about how bookies make their odds. We’re sure you’ll all have heard of Sun Tzu’s The Art of War by now, he was the first person to coin the phrase ‘know your enemy.’ It might be a little drastic to call bookies ‘the enemy’, they aren’t really, they’re just businesses making money from people gambling, but the more we know about how they come up with their prices then the better informed we are and the better our betting decisions can be. It’s that old adage of ‘the more you know, the further you’ll go’.

Bookies aren’t particularly interested in how a football match ends; home win, bore draw or 3-4 win to the away side after a dodgy penalty in the 94th minute, other than the people working in the offices watching and enjoying a good match it shouldn’t make a bit of difference what the result of a match is. Bookies are only interested in making sure they make their profit regardless of the results.

They make their profit thanks to something called the ‘overround’ or in America called ‘juice’ or ‘vig’. Strange terms yes, but regardless, there’s two ways to work it out, one is by doing some long-winded maths, but we can take the easy option here and look at a certain website. Let’s take an example from this weekend’s football where Germany take on the Netherlands in a Euro 2020 qualification match. Let’s go to oddsportal.com (Click Here) and check out the Over/Under 2.5 goals market:

What we want to focus on is the figure of 94.7%. On oddsportal they call this ‘payout’, this means that on average the bookies are making 5.3% commission in this market. Let’s go further into the market: Click on Over/Under and then click on Payout and you’ll see this:

How Betting Odds are Calculated

By clicking on Payout we can sort the bookies by which one earns the lowest commission. This basically means they are the ones offering the fairest odds. As you can see the usual highstreet bookies don’t figure anywhere close to the top of the list. Why do certain bookies have worse overrounds? Well, it’s a volume issue really, the ones at the top of this list have such a huge share of the market that they don’t have to command a large overround to ensure a profit. While a UK bookie might have thousands of customers every weekend, these large Asian sportsbooks have hundreds of thousands of customers, so they can ‘charge’ less and still make a tidy profit.

How do they make their odds then? Well, first of all they’ll work out how much of a commission they want to make, the big guys usually only want about 3-4% commission, the large UK ones prefer to be around 8-10%. Then they work out the probability of events occurring in a match, Over 2.5 goals, Home/Draw/Away etc. and then take their commission away and then they’ll give out the odds.

Let’s give a simple example: Liverpool play Man United today, the bookies have worked out that the likelihood of Over 2.5 goals is 50%, in probability terms that’s 2.0, so fair odds would be 2.0. However, the bookies commission is 5% so you’ll be offered odds of 1.95. This is a simplified example though, in reality bookies will set their odds with other factors involved too.

Thanks to gathering years and years of data on sports as well as customers, bookies can come up with customer profiles in different countries, cities, even across different age profiles and it’s thanks to this knowledge that they don’t actually set their odds based on the actual probabilities of an event occurring but rather on how likely they think their customers will bet on each outcome. By doing this this can better balance their books and earn their commission regardless of the result.

To get the fairest odds shop around and use odds comparison sites to find the bookies who consistently offer the best odds on events occurring. Keep an eye too on how odds move, this is a key element to finding value bets.