How Bookmakers Work

A lot of people will bet on sporting events, however not many actually know, or understand how bookmaking actually works. If you are likely to bet at bookmakers a lot in the future, then it is certainly beneficial for you to know what they are, and how they work.

The bookmaker sets odds for each and every event they take bets on, and will do so, so that in the long term, they are guaranteed to make a profit, no matter what the outcome is. If we were to look at a football game, on the head to head betting market, then we know there are three outcomes. These are, a home win, a draw, or an away win.

If the chance of each outcome winning was equal, then the odds would be as follows.

Home – 2/1 (3.0) – 33.33% chance
Draw – 2/1 (3.0) – 33.33% chance
Away – 2/1 (3.0) – 33.33% chance

This would add up to 100%, if we were to add all the percentages together. However, it is hardly ever the case that every single outcome is equally as likely as the others. So, bookmakers will exam the previous form of each team in this case, and judge the likely outcome of the game, and then price each outcome accordingly through the setting of the odds.

With varied chance of winning, the odds could look more like this.

Home – 1/1 (2.0) – 50% chance
Draw – 3/2 (2.5) – 40% chance
Away – 9/1 (10) – 10% chance

Once again when they’re all added up, these outcomes add to 100%.

In both of these books, as they add up to 100%, if you were to hypothetically bet on all three of them, you wouldn’t win, but you wouldn’t lose either! In the first example, if you bet £33.33 on all three of the outcomes, regardless of which one won, you would receive 3 x £33.33, which is £99.99, 100% of the amount you bet.

However, in the second example, as the odds and chance are varied, your stakes would need to be varied too. For instance, if you bet on the home team, you’d need to place a bet of £49.99. This gives you a return of £99.99 (£49.99 * odds of 2.0). If you bet on the draw, you would need to place a bet of £39.99, giving you a return of £99.99 (£39.99 * 2.5). Or, if you were to bet on the Away team, you’d place a bet of £9.99, to receive the return of £99.99 (£9.99 * 10). As you’ll see, the amount you stand to receive, regardless of the outcome, is exactly the same as the amount you’ve staked.

Now, one thing that is worth pointing out is that both of these examples are totally pointless for the bookmaker, as he or she would make no profit whatsoever.

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A more realistic example, may look a little like this

Home – 4/1 (5.0) – 20%
Draw – 2/3 (1.67) – 60%
Away – 3/2 (2.5) – 40%

Now, when we add up these outcomes, the total is no longer 100%, it is now 120%.

This would become known as an over round book, and the over round is the 20%. This difference is the amount the bookmaker stands to make in profit, so for every £120 that punters bet, the bookmaker only has to pay-out £100, this is regardless of what the outcome is. If a book is over round, it is impossible to back every single outcome and make a profit.

The idea is that by achieving this as above, the bookmaker then pays out less to winners, than they receive in bets. Some larger, more established bookmakers will have a much lower difference or margin, and by doing so they can also offer better value odds, thus attracting more punters and custom.

Sometimes, the bookmaker may adjust their odds as the event start time gets near. However they will still always make a margin, though it might not necessarily be as high as it was when the market opened. The main reasons for this, particularly online, is that other bookmakers will try and out price each other, thus lowering their margin, by pricing their odds higher.