Bookmaker Margin for Dummies

It should be clear that if bookmakers did not earn money, they would not distribute their services across the whole world. Thus, there are no doubts that there exist some strategies for oddsmakers to guarantee their profits, with the margins being among them.

Also known as the Juice, the Take, the Cut, and others, this phenomenon is an obligatory thing for any bookmaker to act as a part of the betting industry. Not only can different bookmakers set different margins, one and the same bookmaker may set different margins on various events. As a result, there emerge leagues or tournaments offering so-called reduced juice. As a rule, it is done in order to entice more representatives of the target audience from competing offices.

Thus, the main task of the given article is to describe what the bookmaker margins are, how they can influence the betting process, and how it is possible to calculate them.

Bookmaker Margins Explained

Beginner gamblers believe that bookmakers earn money because they perfectly know who will win in this or that event. In other words, it means that bookmakers always have a preferred winner and take the full risk concerning a given event. If the event finishes differently from what has been expected, the bookmaker is thought to suffer serious losses.

The truth, however, is a bit different. As a rule, bookmakers are not interested in any outcome. That is why they try to do all their best in order to make gamblers place approximately the same amount of money on all the possible outcomes in order to balance a book. Of course, odds are the only possible way to achieve the result.

With this in mind, there arises a question of how bookmakers can earn money if all the books are balanced. It is this situation where we should mention the margin. In short, the margin is an amount of money charged by bookmakers in order to obtain some profits when all the books are perfectly balanced. On the other hand, when bookmakers fail to ideally balance the books, which happens rather frequently because of huge volumes of information that is to be covered by oddsmakers, it is the margin that can be considered as a certain kind of insurance in order to cover possible expenses caused by unexpected results of various events.

Likelihood of a Fair Market

Of course, it can be rather difficult to puzzle out what the given phenomenon is by ear. The best way to cope with it is to look at an even money event or a fair market. Simply put, these are events with two outcomes having the same winning probability of 50/50, which results in the fact that ordinary gamblers will place their money proportionally.

A coin toss is the best example of this situation. From a statistical point of view, there is the equal probability that heads and tails will land the same number of times over a significant number of tries. In this case, if bookmakers applied such a practice as the fair market, both heads and tails would be priced at 2.00 by them. In other words, this situation would mean that long-term betting would not result in any losses for gamblers, while bookmakers would also have no returns because stakes of some gamblers would be used to pay for the stakes of others.

Paying attention to this fact, bookmakers would never let such a fair market exist. Instead, they publish the odds between 1.85 and 1.99. By no offering the full price, bookmakers for sure obtain certain benefits.

How to Calculate Bookmaker Margin?

As we have just learned, a 100% market is a senseless situation in the betting industry because neither bookmakers nor bettors can obtain some benefits in a long perspective. When a market is calculated as less than 100%, this situation is rather advantageous for gamblers because the value of the event is assessed higher than the real probability is. Nevertheless, if the market is assessed greater than 100%, it denotes that a bookmaker has changed the odds to its favor. To tell the truth, the latter case is the most frequent in the world of gambling.

In order to find the margin, it is not necessary to make complex or long calculations. Everything is quite simple. Firstly, it is necessary to figure out the percentage probabilities for each possible outcome, which can be done easily by dividing 1 by decimal odds offered by a bookmaker. Secondly, we should add all the results together and multiply them by 100%. Everything that is above 100% is said to be the bookmaker margin.

Just to understand it more precisely, let us consider an actual example that can be illustrated by a football match between Real Madrid and Barcelona. Let us imagine that a bookmaker prices Real Madrid win at 2.55, Barcelona win at 2.80, and the likelihood of the draw is estimated as 3.25. Now, let us do what we have just learned to find the percentage probability.

• Real Madrid win = 1 / 2.55 = 0.392
• Barcelona win = 1 / 2.80 = 0.357
• Draw = 1 / 3.25 = 0.308

So, the total probability for the given example is 0.392 + 0.357 + 0.308 = 1.057. By multiplying the result by 100%, we will see that the given market is assessed by a bookmaker as 105.7%. So, 5.7% is the margin imposed by the bookmaker.

Paying attention to what we have just found, it is possible to calculate a commission that is paid by a gambler for every wager he places with the given bookmaker. Here, there are a lot of formulas to obtain the figure, but the easiest way is as follows:

(1 – (1 / Margin)) * 100%

As for our example, the commission is 5%. In other words, this commission means that for every $100 you pay approximately $5 directly to the bookmaker. It is the money that is said to be guaranteed profits of oddsmakers.

Of course, it is not necessary to make the calculations above every time you intend to place a wager. Moreover, you should not forget that there can be such events where more than three outcomes are possible. For instance, it refers to horse races with 12 runners. In this situation, there are two possible solutions. Firstly, you can find online calculators that will present the margin as soon as you insert the odds offered on all the possible outcomes. Secondly, it is also possible to find bookmakers that display their margin by themselves.

Summary

In conclusion, we can say that it is quite important to pay attention to the bookmaker margin. It is of great significance to know how to calculate it in order to understand how much money your bookmaker charges from you. Finally, it should be mentioned that the lower the margin is, the more honest and reliable the bookmaker is.