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How Bookmakers Set Odds
We know what you’re wondering: How does a bookie work? Bookmakers want to make money just like everyone else, so they need to ensure that the odds are in their favor. To do so, they often employ professional statisticians or use complex equations to determine the odds of winning any given sporting event.
While these statisticians can use advanced software to inform their decisions, they still must be extremely knowledgeable in mathematics. Such teams are responsible for setting odds and lines that affect not only player outcomes but whether or not the bookmaker will profit.
To explain odds in the most simple terms, bookmakers assign probabilities to all possible outcomes, with the total adding up to 100%. For example, in a football game, the two possible outcomes of the game could be a 35% chance of Team A winning and a 65% chance of Team B winning.
Understanding Odds and Their Calculation
To calculate odds, bookmakers and their teams usually underscore whichever team they believe may win the event. In general, higher odds suggest a lower likelihood that that team will win, meaning you could receive a higher payout for betting on the underdog team.
Bookmakers have access to rich databases filled with sports data to help them inform their calculations. As the event comes closer, they can adjust their spreads based on the bets they receive.
You’ll find that odds for the same sporting events are usually about the same across bookmaker websites. This typically occurs because bookmakers follow the same formulas for calculating their odds.
It might seem strange when you notice that odds can change within the minutes leading up to the game, so let’s discuss the different factors that can influence these calculations at any given time.
Factors Influencing Odds Setting
Bookmakers don’t just look at raw data when setting odds and spreads. Many factors affect how humans perform during sporting events, so bookies consider all of these factors when setting odds.
First off, bookmakers look at the team’s recent performance and historical data to determine whether or not they’re favored to win. Then, they look more closely at individual players and how they may match up against each other during the game. If they discover sudden injuries or suspensions, this can greatly sway the odds of one team winning versus the other.
Bookmakers also consider which team has the home-court advantage and how well the weather will favor them in this location. Statisticians can also look at which team the general public typically favors when they play head-to-head.
As game day approaches, bookmakers keep their eyes on market fluctuations and adjust the odds accordingly. During the game, bookmakers offer in-play bets, with the odds updating in real time. This fast-action movement typically reflects the bettor market rather than all the factors we just went over.
Profit Margin
Now that we’ve answered, “What is a bookmaker in gambling?” let’s go over how they make money. Bookmakers charge fees on all the bets they accept to ensure that they can take home commissions. The fee, also known as the vigorish (or vig), allows bookies to have higher incoming profits than outgoing payments for bets they owe to winners.
To achieve a successful profit margin, bookmakers have to adjust the odds in a way that balances the amount of people betting on losses versus wins. This calculation, on top of the vig, allows them to capitalize and turn a profit.
Most bookmakers take home around 10% in their profit margins. For big games, like the Super Bowl, though, bookmakers may charge higher fees of around 20% or more.
The Vigorish (Vig) Explained
To truly understand how bookies make their money, let’s look at a detailed example of the vig, which many refer to as the bookmaker’s juice. The main reason many struggle to make big earnings in sports betting is because of this overlooked premium that all players must pay.
Let’s say you’re betting on a hockey match between teams A and B. For the sake of this example, we’ll say the teams have perfectly even odds of winning. Team A and B’s odds would be 50/50, 2.00, or +100, depending on which model you prefer to follow.
While these odds seem fair, the actual odds that the bookmakers set won’t appear nearly as forgiving. Rather than seeing 2.00 decimal odds for each team, you’d likely see something around 1.91 for both Teams A and B. So if you wagered $10 on Team A, for example, you’d stand to win $9.10.
