How do Bookmakers Make a Profit?
People who are new to gambling and betting are often unaware of the fact that every bookmaker has a system that will, in the end, make your playing profitable for them – and that’s okay. Many gambling websites, betting platforms, and casinos would have been closed if it weren’t for this system. Let’s take a look at what actually happens there.
The Statistics vs The Bookmakers
Let’s take a look at the coin example. If you were to toss a coin, you would have a 50/50 chance to win or lose. Now, when you place, say, $10 on heads, it is only logical to get $10 more in return. In other words, the odds are 2.0 on this one.
What bookmakers do is they offer slightly different odds since they cannot really affect the outcome of the coin. A bookmaker will offer the odds of, for example, 1.90 for your toss. This means that it is a small difference that will give them profit statistically. This is usually called the house edge, juice, margin, overround or vigorish.
Let’s take a look at the higher sum – $1000. When there is a betting event that gives you 50% chance to win, this means that the bookmaker would have to pay $1000 – but this will not work for them. The margin then acts as a guarantee that they will not lose the money theoretically.
What does the Odd Compiler Do?
Odd compilers are the people who create odds in the bookmaking companies. They are the most responsible individuals who hold the future of the companies at the hands. Simply, they must calculate the odds so that the bookmakers still earn regardless of the outcome of the event on which the bets are placed.
Now, their job is some heavy statistics, but not always. When they price the market, the odd compilers need to have a thorough understanding of the event that they are working on.
In other words, people who create odds for football (soccer) need to know a lot about the sport, the players, the teams, etc. This is what will determine the odds in the first place. To give a simple example, let’s say that you are about to bet on a match between Barcelona and a second-league Spanish club. Now, everyone knows that Barcelona is superior and this is certainly not an ideal 50/50 situation as with the coin. The odd compiler must make a thorough analysis and come up with such odds that they will still be able to earn.
What is a Balanced Book?
Having balanced books on a market means that the odd compilers managed to create odds which will be profitable for the bookmaker regardless of the outcome. Let’s say that there is a tennis match between two top-class players and people bet a total of $100,000. The balanced book will put a margin of, say, 6% and have to pay back a total of $94,000 since the remaining $6000 is their profit.
The math is simple if one player has an odd of 1.50 and the other 2.47, you can count the total by dividing 1 by these numbers:
- 1/1.5 = 0.66
- 0.66 + 0.4 = 1.06
Basically, it is the second decimal that made all the difference and we can convert the 1.06 to 106% of the total.
Betting is fun but it also involves being knowledgeable about the mechanisms and strategies used to find the bookmakers with the lowest margin.
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