How Do Bookmakers Calculate Sports Betting Odds

Sports betting is a massive industry that keeps on getting bigger as this gambling activity is getting more popular among bettors. On the internet, you will find countless sports betting sites that are offering different odds for the same betting options on featured sporting events.

The odds are the most important thing when it comes to sports betting as they determine how much money a player would win. If you are wondering how bookmakers calculate those sports betting odds then we recommend you to read this article, as we will explain everything there is to know.

Calculating the Odds

Oddsmakers are setting up odds in a way that reduces variance and ensures them a decent profit while still reflecting the real probability of a certain event occurring.

This is the perfect balance for making a profit and ensuring that the bettors are still attracted to place a bet on a featured outcome in a sporting event. Bookmakers are always setting their margin, also known as Vig before they go on and set the odds for various outcomes whilst incorporating this commission.

A bookmaker will calculate the probability of each outcome occurring in a sporting event and subtract the margin. Let's say that the real probability is 2/1 then the bookmakers will subtract their margin (let's say 5%), which will result in the real odds of 19/10.

Bookmakers are calculating the real probabilities of something occurring based on history, statistics, form, and ultimately human opinion. The more data there is, the more likely that the bookmaker's odds will reflect on the real probability.

If the event has never happened before or there is very little data available, then the bookmakers will be more cautious and the given odds will be lower when compared to the real probability.

For instance, the top betting sites tend to have good value when setting the odds for football matches as there is a lot of data available. But, setting the odds for the winner of an entertainment show such as X-factor is far less certain, which is why they come with a higher margin in them.

The easiest way to understand the odds pricing is to set an example of an event with just two possible outcomes. There are 50/50 chances of correctly guessing the outcome of a football team to kick off a match, which is based on a flip of a coin.

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Many think that the odds should be even for each outcome, but in reality, there aren't and this is where the bookmakers will build in their margin.

In this case, the bookmakers might give 10/11 odds for each of the teams to kick off. If a player places a £50 bet on each outcome that would cost them £100, but the maximum return will be £95.

The bookmakers’ margin there is 4.5% (100 – 95.50) and if they offer equal amounts one each team to kick off the match then the bookmakers will be guaranteed to make £4.50 for every £100 wager.

Why Are the Odds Changing Before the Start of a Sporting Event?

If you are a sports bettor then you've surely noticed that the odds for sporting events change in real time. The odds at the sports betting sites are changing all the time to reflect the weight of money that is moving around.

If an underdog in a sporting match is suddenly attracting a lot of money, then the bookmakers will move quickly and reduce the featured odds to protect their profit margin.

On the other hand, if the favourite in the match is attracting a lot of money, then the odds on the underdog will be slightly increased.

But, the most reputable bookmakers will also acquire analysts to look into every market as a way to help them set the best odds. Some of the information that can be decisive are things like injuries on key players or strange team selections.

Some smart bettors will use the in-play markets to get an edge over the bookmakers, where they try to place a bet before the bookmakers have had an opportunity to change the odds.

For instance, a football player might have 2/1 odds of scoring the next goal in a match, where he/she already had five shots on goal in the last 20 minutes. A smart bettor might make some quick evaluations of the situation before the bookmakers can go on and reduce the odds.