Betting Profitability and Margins
About the best odds and margins
Also popularly referred to as market percentage or betting over-round, the sports betting margins are essentially additional amounts over and above 100% of the odds provided by the bookmakers, on all exclusive outcomes of a sports event.
Let’s understand these margins better with the example of a fair die toss. Every outcome of a die toss has exactly the same probability, which is 1/6, of its occurrence. Hence, for instance, every £ 1 bet that you place on number 3, should ideally return £ 6 to you, consisting of your original £ 1 stake.
The applicable decimal odds for this particular example are:
1 / probability = 1 / (1/6) = 6.00
The equivalent money line odds for this would be: +500
But the bookmaker or the betting company must make a profit to survive! Hence, it would provide odds of 5.00, instead of 6.00, which isn’t an accurate reflection of the implied probability. You can expect your number (3) to come up at least once in every 6 tosses of the die. Hence, if you bet £ 6 on that possibility, but receive only £ 5, you should know that the remaining £ 1 has gone to the bookmaker in the form of his profit.
However, it’s important to keep in mind that winning or losing streaks may also occur!
In this scenario, implied probability for every outcome would be 20% or 1/5. But, if you work out all possible 6 outcomes, the total sum of all probabilities would work out to 120% – 20% per outcome x 6 outcomes. The 20% difference between 100% and the sum of all these probabilities (120%), is actually the bookmaker’s margin.
How do these bookmaker margins impact your sports betting endeavours?
Basically, the higher is the margin charged by the bookmaker, the more impact it will have on your overall profitability from sports betting.
As per the example provided above, you should make correct predictions of the possible outcomes almost 20% of the times, at odds of 5.00. It means that in order to break even, at least 20 of your guesses would need to be correct from a total of 100 guesses.
Hence, the bookmaker will earn his margin of 20% at the cost of you making 3 extra correct guesses, as you’ll need to make 17 correct predictions, if no margin was under consideration.
Let’s now look at breakeven points using different margins, in order to better understand how such margin impacts your profitability from sports betting. We employed four different examples – tossing of a coin, roll of a die, an event having a 90% occurrence probability and a highly unlikely event having only a 10% chance, each one tested over a series of 100 simulations.
The odds would ideally be 2.00 for any outcome of a coin toss. In this scenario, a sports bettor would need to make at least 50 correct predictions in order to break even. But, if there was a 5% bookmaker margin, the provided odds would be 1.904. If that were the case, you’d need to make 53 correct predictions from the 100, in order to break even.
All long-term sports bettors seek maximisation of their profits by availing the best possible odds. The higher the margin of a bookmaker, the lower are the provided odds, and in order to compensate that, the sports bettor needs to make more number of correct guesses to break even.
Basically, this increase in the number of correct guesses is the rounded-off figure of the breakeven point multiplied by the margin (if it were 0). For instance, in case of a coin toss, if the margin was kept 0, the breakeven point would be 50 correct predictions. On the other hand, if the margin was kept at 3%, there’d be a corresponding increase of 3% of 50, which actually is 1.5, but gets rounded off to 2.00.
As a result, you’ll need to make 52 correct predictions in order to break even, if the margin was kept at 3%. When it comes to markets offered on popular sports events, the bookmaker margin is normally in the vicinity of 2% to 5%.
The point we’re trying to make in this write-up is that margins are very crucial when it comes to being consistently profitable in the field of sports betting. The higher the bookmaker margins are, the more accurate you’ll need to be when making betting predictions.