Taking a look at how bookmakers operate

Bookmakers, betting markets, etc.

There are many factors in why and how bookmakers find their prices and some of them even short cut the process by copying other bookmakers or at least keeping a very close eye on what certain firms are doing. This can be even more so when certain other firms are known to be well respected in certain sports and whose odds compilers have a definite edge in that area.

The underlying role of a bookmaker is to compile a book on a certain sporting event or horse race in such a way as to guarantee a profit no matter what the result. If we took a coin flip as an example then the chances of a fair coin flip coming up heads or tails would be 50/50. So if we converted this to odds then the odds for heads or tails would be Even money.

But if a bookmaker wanted to compile a book and offer odds on this event then he wouldn’t offer Evens for both heads or tails to the general public as he could not possibly make any money with this situation. He would offer something like 10/11 both heads and tails and then try to take equal amounts of money on each to ensure a profit.

Now of course the general public wouldn’t go for such a bet for the simple reason being that it is all too easy for them to know what the true and fair price should be. Although having said that then I wouldn’t be surprised if punters took those prices even then as they often knowingly take inferior prices anyway in other types of gambling.

So in this example, the serious punter and the professional simply would not bet in this instance. The concept of finding value is very difficult and it has become a whole lot more difficult recently as bookmakers and odds compilers are far more sophisticated in how they compile odds for areas like sports betting and also football betting.

Of course we cannot criticize a bookmaker for offering odds that are not the same as the actual probability of the event actually happening. They are running a business and have overheads which are the same as any other gambling industry. Online card rooms charge rake, casinos offer games that have built in house edges and bookmakers are no different.

Quite often bookmakers are left with liabilities that they don’t want. A surge of money at a certain time may make an unfortunate situation for them where if a certain competitor wins then they are standing to lose an awful lot of money. Many bookmakers counter this by off setting the risk by going in the opposite direction and will look to hedge it with other betting firms.

The use of betting exchanges and specifically Betfair is often used for this very activity. Like I said previously, bookmakers want smaller amounts of secured profit and not large profits that have come as a result of taking huge risks. This is certainly the case with the smaller bookmakers anyway.


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