• The Vig
• The Juice or
• The percentage
It’s the cut the bookie takes on each bet you make.
It’s how they stay in business.
But, their cut or margin can affect your end pay-out.
And each bookie has a different cut to attract more bettors.
In today’s article I want to show you why the bookie takes a margin, how it affects your profits and how to calculate it.
Let’s get started…
What are bookmaker margins?
You might assume that the odds the bookies send out would equal 100%.
This would be true if we operated in a fair market.
And a fair market is easily explained with a flip of a coin.
We can expect that a coin would land on heads or tails 50% of the time.
Meaning we have a 50% chance of either heads or tails.
Now in a fair market without the bookmaker’s margin, the odds for both heads and tails would be 2.00. Meaning you bet 1.00 to win 1.00.
This is what’s known as a fair market or a 100% market.
You’re getting full value for your return.
However, the bookmaker wants a piece of the pie. After all, they are in business to make money.
This piece of the pie is what we call the margin and each and every bookie places a margin. This margin is the percentage of money taken from bettors should they balance their liability correctly.
With hundreds of markets being offered each and every day on a wide variety of sports, they can be confident that their overall liability will be met should they have to pay out a large sum of money.
This brings me to the next part of the conversation.
Calculating the margin the bookies place on each bet, you’ll be able to see which bookie is better value for your buck.
Calculating the bookmakers margin
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Converting Decimal odds to implied probability
Decimal odds are a simple reflection of the return you will receive for each unit you stake.
For example if the decimal odds are 1.7, this means that for every R100 you bet, you will receive R70 in profit.
To convert these odds use this simple equation:
Implied Probability=1/ Decimal Odds
Implied Probability=1 / 1.7=0.588
0.588 x 100=58.82%
Your implied probability would be 58.82%.
Do this for all the odds represented.
For a soccer game, there are three odds represented, home, draw and away.
Lets take this weekend’s English Premier League game between Newcastle Utd vs Watford Fc.
• Newcastle Utd: 2.65
• Watford Fc: 2.85
• Draw: 3.2
Converting them into implied probability:
• Newcastle Utd: (1 / 2.65) = 0.377
• Watford Fc: (1 / 2.85) = 0.350
• Draw: (1 / 3.2) = 0.312
The total of all three equals = 1.039
Total Market = 103.9%
Now we can calculate the commission.
Commission = (1 – (1 / Total Market)) x 100
Commission = (1 – (1 / 1.039)) x 100
Commission = 3.75%
So for every R100 you bet, you are paying an average of R3.75 to the bookmaker.
It’s up to you to calculate the commission each and every bookmaker applies to their odds, once done you will be able to decide on which bookie best suits your needs and your back pocket.
Until next time,