A successful bookmaker is one who knows how to build margins into odds and balances the sportsbook in such a way that any bettor that wins a bookie will make a profit. A bookmaker’s exposure is revealed through the kind of odds such a bookmaker provides. In this article, we would be discussing how bookmakers come up with their betting markets’ odds and how these odds vary among bookmakers. How are odds calculated and markets priced?
Table of content:
Odds Calculation And Market Pricing
The last thing every bookmaker would want to do is bet on one market over another. Market prices are set in such a way that reveals the probability of winning an outcome and at the same time ensures profit is being made. While creating odds, two things have to be taken into consideration;
- The profit that would be realized from the betting market
- The Customer’s thought about the betting market
A successful bookmaker will find a way to balance these two factors. Odds calculation is started off by setting margins. Let’s say a bookmaker decides to set its profit margin to 5%. With the odds margin, they now begin to set odds for the various markets. The probability of each outcome happening is calculated then subtracted from the profit margin. Assuming the real probability of an outcome happening is 2/1, the bookmaker would then subtract the 5% profit margin and the odds for the market would be 19/10.
The easiest way to understand market pricing and odds calculation is to think of an event with just only two possible outcomes. Take for example, in a football match between Bayern and Dortmund you want to bet on who would kick off the match. Match kick-off as we all know is determined by a coin flip and a coin flip holds a 50/50 chance of happening, that is, only two outcomes are expected. In this case, let’s say the bookmaker gives each team odds of 10/11 to kick off. As a bettor, you decide to stake $50 on each team, that is a total stake of $100, the maximum return on the $100 stake is $95.50 based on the odds given. From this return, the profit margin is calculated as (100-95.59= 4.5%).
Why Do Odds Vary Among Bookmakers?
It’s rare for two bookmakers to have the same odds for a particular market. Odds vary among bookmakers for several reasons. Some of these reasons include;
➔ Coefficient Disparities
If you are an experienced bettor that has worked with several bookmakers, coefficient disparity as one of the reasons for odds variance shouldn’t come as a surprise. This factor is unavoidable. There’s fierce competition among bookmakers in the betting industry now and this competition leads to convergence of coefficients. Bookmakers indirectly put each other under pressure due to fluctuations in profitability threshold. Overhead expenses are often incurred by bookmakers, and they need to cover these expenses. The expenses incurred by online bookmakers are lesser than the expenses incurred by betting shops. It’s for this reason that online bookmakers are able to feature more competitive offerings than betting shops.
➔ Different commissions and fees
This is one of the most obvious reasons for odds variation among bookies. Bookmakers don’t have the same cost structures, some have high-cost structures while others have average cost structures. The same thing goes for debt loads and revenue targets. Highly rated online bookmakers suffer high commissions and fee charges, and they need to pay these charges to remain solvent. This liability would definitely have an effect on the kind of odds such bookmakers provide for betting markets. Markets that are supposed to carry high odds generally might not have high odds on these bookmakers, this is where the variation sets in.
➔ Cut-throat competition
Another reason for odds variance among bookies is competition. This is rampant in high-profile events and beginners in betting are the main target. As these beginners go online to make their first bet, some bookmakers on the other hand try to capture that new business. In trying to do this, they tend to undercut each other. They try to lure these beginners by offering high odds on their markets and not minding the loss that they would incur on their end.
➔ Different assessment of odds
Odds variances are also caused by straight-up disagreements. Remember how odds are calculated using implied probability and real probability in the example above? Well, those were just mere calculations, in real life, there is no such thing as a general board of odds experts. Bookmakers have their own oddsmakers. They carefully study team statistics, injuries, weather conditions, team spirit, and other variables. Although small bookies tend to follow lines set by larger bookmakers, in the long run, there would still be disparities because different oddsmakers can’t interpret data the same way and therefore can’t come up with identical odds.
To succeed in sports betting, it’s advisable for you to have different betting accounts with many online bookies. This allows you to adequately compare odds and play at your best. You could also get more capital because most bookmakers offer first deposit bonuses.
Conclusion
Checking out different online bookmakers adds to your experience in sports betting. You would also have a better understanding of how markets and odds vary among bookies. Knowing these, you would be able to identify individual opportunities and make informed decisions.
