Here Is How Bookmakers Rip You Off
One of the most attractive characteristics of betting with a bookmaker is the possibility of making a stable income. You certainly need to know what you are doing; furthermore, it is essential that you apply the strategy that corresponds to your personality and have the right psychological attitude.
However, in real life a large number of bettors lose money in the long run. There are several reasons for that but in this article I am going to focus on the techniques bookmakers use to gain an edge over bettors.
Professional sports bettors have developed the right personality traits and have learned how to overcome this advantage. That way they have become profitable.
To get down to brass tacks, every bookmaker is your adversary so you should learn how to beat them even though they set the rules of the game.
Hence, it is vital to figure out from the start how bookmakers operate.
This article discusses the methods bookmakers use to gain an advantage over bettors and guarantee a profit.
It also outlines a few more reasons why bookies make money.
A Major Principle Underpinning the Work of Bookmakers
While bookmakers cannot control the outcome of a certain sporting event (at least not legally!), they can control how much they are going to win or lose on any particular result.
Hence, they can set such odds that will guarantee them a profit regardless of what happens in the match.
The main technique everyone uses to put the odds in their favor is the inclusion of margin. I will illustrate what I mean through the cliché example of the coin toss.
The toss of a coin has two possible outcomes: heads/tails, and the probability of occurrence of either of these is 50%. If bookmakers offered the true odds, then these would be 2.00 for heads and 2.00 for tails.
- 1000 players bet on
- odd 2.00
- 500 bet 10€ on heads
- 500 bet 10€ on tails
The bets will come to a total of £10,000 but the winnings that have to be paid out to fifty percent of the players will also amount to £10,000. That leaves the bookmaker without a single penny.
Hence, they would add margin when setting the odds. That way they make sure they will make money regardless of the final outcome.
When a given sporting event has two outcomes that are equally likely, for instance, who will take the next throw-in or kick off the match, it is common practice to set the odds for both outcomes in the region of 1.90, or even lower.
Let’s go back to the coin toss example. This time, instead of the 2.00 odds which would have been fair, we will use the 1.90 odds that includes the bookmaker’s margin.
- 1000 players bet on
- odd 1.90
- 500 bet 10€ on heads
- 500 bet 10€ on tails
Once again, the bets come to a total of £10,000 but the lower odds yields £9,500 in winnings to be paid out. This results in a £500 net profit for the bookmaker regardless of the outcome of the sporting event.
This example is rather simplified but it successfully illustrates how bookies set the odds to give them an advantage over bettors.
Things get a bit more complicated when it comes to betting on events that are not equally likely. There are a number of markets featuring more than two possible outcomes, which means bookmakers are not going to end up with the same amount of profit on all possible outcomes.
Due to these reasons, making money as a bookmaker isn’t as simple as charging margin. Another technique commonly used by bookies is a traders’ department: people responsible for setting the odds for a given event.
The Role of Traders
Traders set the odds so their role is vital to the operations of any bookie. These odds determine the total amount the bookmaker will receive in bets, as well as how much their profit will be.
The trader must make sure the odds reflect the likelihood of a certain event as accurately as possible, and that there’s margin incorporated.
Determining the likelihood of an event is mostly based on statistics and profound knowledge of the respective sport. Hence, traders are very knowledgeable about the particular sport for which they forecast prices, and usually specialise in one or two sports.
In addition, traders have a good grasp of variation, and are well-versed in statistics and mathematics.
Let’s look at how a trader might set the odds for a tennis match between Novak Djokovic and Andy Murray.
Given that these players are similar in ability, the trader has to take several factors into consideration.
- Current form
- Performance based on the effect of the playing surface
- Past meetings
- as well as a lot more details
Based on this analysis, the trader might reach the conclusion that the chance of Djokovic winning is around 60%, while Murray’s is around 40%. Respectively, the odds are 1.67 for Djokovic and 2.50 for Murray. These numbers do not yet include margin.
Traders mostly have target margins. For our example, we assume the figure is 5%. Reducing the odds for Djokovic and Murray by 5% yields 1.59 and 2.38, respectively.
Margin is calculated by dividing 1 to the odds for all possible incomes, and then adding the fractions.
As demonstrated by our example, the trader has achieved a 5% margin with the odds they offered. However, setting the odds is just the first step in the process. Next, traders need to ensure a balanced book so as to guarantee a profit.
Building a Balanced Book
With a balanced book, a bookmaker will make approximately the same amount of profit regardless of the outcome. However, in case of a book imbalance, the outcome will play a decisive role in determining how much money the bookie will make, and whether there will be any profit at all.
In the Djokovic-Murray match, a balanced book would look like this:
- The bookmaker takes a total of £10,000 in bets
- £6,000 is wagered on Djokovic at an odds of 1.59
- £4,000 is wagered on Murray at an odds of 2.38
£9,540 is paid out in winnings if Djokovic triumphs, which results in a net profit of £460
£9,520 is paid out in winnings if Murray emerges victorious, which makes a net profit of £480
As you can see, £10,000 in bets and a balanced book roughly yield a £500 (5%) profit for the bookmaker.
Let’s see what the result would be if the £10,000 in bets was spread evenly between both players:
- The bookmaker takes in a total of £10,000 in bets
- £5,000 on Djokovic at 1.59
- £5,000 on Murray at 2.38
£7,950 paid out in winnings if Djokovic triumphs, or a net profit of £2,050
£11,900 paid out in winnings if Murray gains a victory, or a loss of -£1,900
This scenario entails an imbalanced book so the outcome directly affects the amount of profit.
That is exactly the reason odds go up and down in the course of time before an event.
Traders constantly have to adjust them in order to ensure their book is balanced. In our example, a trader might increase the odds on Djokovic to attract more bets on his victory, or reduce the odds on Murray to prevent further bets on his winning.
Yet another option would be to do both.
There’s no guarantee that adjusting the odds will balance the book but generally it helps. That is why the volume of bets is so important for bookmakers.
The more money is wagered by bettors, the more likely bookmakers are to strike the right balance. However, complete balance is a very rare occurrence so the target is to get as close to the ideal situation as possible.
Sometimes traders will create an imbalanced book on purpose. If they are certain on a particular outcome, they might want to create a situation in which they will make more money if it happens. If traders are convinced that Djokovic will win the match against Murray, they might decide to increase the odds on Murray and thus encourage more bets on him.
I hope it should have become clearer how bookmakers guarantee a mathematical edge over their customers. While they don’t always win money on each market they price, this edge guarantees them stable profit in the long term.
The good news is this advantage could be overcome. Unlike casino gambling where the odds are generally against you no matter what you do, sports betting gives you a real chance to win money.
The one thing you need to remember is that the mathematical advantage isn’t the sole reason why bookies make money.
Their success is actually due to the simple fact that most wagerers place more bad than good bets.