How to Calculate Betting Margins and Maximise Your Profits

In an ideal world, the odds offered by a bookmaker would accurately reflect the likelihood of the incident occurring, but unfortunately bookmaking is a business like any other and so the financial bottom line is the critical factor in how they price up their markets.

If you think about it, if a bookmaker quoted the same price for Player A and Player B in a tennis match, and they took the exact same amount of bets on each, then all they could do is break even. Where’s the commercial sense in that?

That is why the bookies build a margin into their prices. Think of that classic example set by the writer Damon Runyon, who explained that ‘happiness is a 6/4 chance.’ In playing Devil’s advocate, we note that the chances of being unhappy are 4/6 – not great odds. By Runyon’s reckoning, we could place a £60 bet on being happy and £40 wager on unhappy and break even no matter how our day went.

But the bookies aren’t interesting in breaking even, and so they skew their odds slightly as a result. So in this case they would probably offer 7/4 on happiness and 2/5 on having a bad day; in this way, they are able to limit their liability by building this margin of error into their pricing.

Know Thy Enemy

With each bookmaker adopting a different strategy when it comes to margins, it makes sense to calculate which bookie is best for you. And by that, we mean the one that adds the smallest margin (while covering the markets you love at great odds etc).

Happily, calculating margin isn’t as difficult as it might sound – certainly on 1X2 odds the maths is fairly straightforward – so it makes sense to work out how is offering you the ‘best deal’ before adding a selection to your betslip.

Here’s an example using two real-world teams and odds:

Manchester United (2.10), Draw (3.40), Arsenal (3.40)

First things first, we need to know the percentage probability of each outcome occurring. That’s easy to work out using the following equation: (1/Odds).

So Manchester United have a 47.6% chance of winning (1/2.10), and Arsenal and the draw both have a 29.4% chance (1/3.40).

Now, we know what you’re thinking, that doesn’t add up to 100%! You’re right, those figures add up to a grand total of 106.4%.

And this is how we work out the margin:

47.6 + 29.4 +29.4 = 106.4, and so this bookmaker’s margin is 6.4%.

You can play around with these calculations at a number of different bookmakers to work out their margin. Here’s the same fixture again but with a different bookie:

Manchester United (2.20), Draw (3.60), Arsenal (3.30)

So let’s do the same calculations again:

Manchester United 45% (1/2.20) + Arsenal 30% (1/3.30) + Draw 28% (1/3.60) = 103%

So this bookmakers’ margin is 3%, and they are a better option than the first bookmaker outlined above.

What Do The Numbers Mean?

Clearly margin is reflected in price, and so betting with the bookmaker with the lowest margin will more often than not ensure that you yield a greater return on your investment.

Using the example above, let’s see how flat £10 stakes compared across the two bookmakers:

Bookmaker 1: Manchester United (£10 returns £21), Arsenal (£34), Draw (£34)

Bookmaker 2: Manchester United (£10 returns £22), Arsenal (£33), Draw (£36)

In this example only £2 extra is in the kitty, but think about this: if you wager more than £10 then clearly this disparity between the two bookmakers will increase. And if you are placing multiple bets each week then again, clearly the difference in margin will add up to a significant amount over a long period of time.

Quite simply, the margin amount is how much the bookmaker expects to pay out, so if the margin is 106.4% then he will receive £106 for every £100 he takes. Multiply this across thousands of transactions each and every day, and you can see why there aren’t many bookies pleading poverty.

If you are betting with a bookmaker with a high margin then you are, quite probably, throwing money away unnecessarily. But don’t worry, you don’t even need to do the hard work and the maths yourself if you want to work out the margin of each bookmaker, as this information is readily available on the internet.

At the time of writing, here is how the current crop of UK bookmakers is shaping up:

For a list of the best bookmakers in the UK and Europe, click here.