Weighing the Odds: How to Calculate Bookmaker Commission
Sports betting can be a lucrative business for those who know how to do it properly, but there is always one player for who it’s the most lucrative, and that’s the bookmaker. While many people think that bookmakers only make money when people lose their bets, this isn’t entirely true. After all, this would be far too risky for them, as they could just as easily lose as win.
Instead bookmakers hedge their bets by offering inflated odds, which ensure that they are guaranteed to get their piece of the action—their commission or cut—no matter of what the final outcome is. This affects gamblers because it means you’re never likely to get even or fair odds. However, what you can do is learn how to calculate bookmaker’s commission so that you can place your bets with whoever offers the fairest odds.
How Odds are Made
When a bookmaker calculates the odds for a specific match or event, they try to offer favourable enough odds on all bets to attract bettors instead of simply selecting who they think will win. In essence, the bookmaker wants to attract equal numbers of people to bet on all of the possible outcomes, as too many bets on one outcome could cost them lots of money if that outcome happens—and bookmakers are famous for not taking too many risks.
If the bookmaker offered the exact odds for a match as they see them, they would basically be equally liable for all the possible outcomes and would therefore not make a profit according to the law of probability. However, by offering inflated odds—that is, odds that equal more than 100%—they ensure they should always turn a profit.
Calculating Commission Based on the Odds
Commissions can vary quite a bit depending on the specific event and bookmaker, so it’s important to understand exactly how they work to find who is giving the best odds. There are a number of websites where you can quickly calculate the commission based on the odds, while some gambling sites list it directly. Still, it’s always a good idea to know how to do it, plus it doesn’t require any difficult math.
If the real world, probabilities are fact. So, if there’s a 50% or 1 in 2 chance of something happening—say of drawing a red card out of a standard deck—then that event will statistically occur approximately half the time. Therefore, if a bookmaker was offering the real odds on this event, they would be 1/2 or 2.00 in decimal odds, but again, this will never happen. Instead, most bookmakers would be more likely to offer odds below 1.99 on each side, which gives the bookmaker an advantage and ensures that they get their cut.
Whether you’re dealing with decimal or fractional odds, the first step in calculating the commission is to convert all of the possible odds into their respective implied probabilities.
- Calculating Probability from Decimal Odds
Converting decimal odds into implied probabilities couldn’t be easier, as you simply divide 1 by the odds. So if your odds were 1.90, the equation would be:
1 / 1.90 = 0.526 or 52.6%
- Calculating Probability from Fractional Odds
Fractional odds use just a slightly more complicated equation, which involves dividing the denominator by the sum of the numerator and denominator added together. So for odds of 7/8, the equation would be:
8 / (7 + 8) = 8 / 15 = 0.533 or 53.4%
After calculating all of the implied probabilities for the odds of a specific match, calculating the commission is as simple as adding all of the probabilities together. This number is known as the over round and will always be equal to more than 100%. So the trick is to look for bookmakers whose over round is closest to 100%, as this means they are offering the most even odds.
Let’s look at a real life example to see how this operates. For instance, there’s an upcoming Premier League match between Chelsea and Manchester United. By most accounts Chelsea is favourites for the win, but you think United might pull off the upset and you want to bet on them to win. After looking at two different websites, you find the odds as such:
- Chelsea: 7/5 odds = 41.7%
- Draw: 12/5 = 29.4%
- United: 9/5 = 31.8%
- Total: 41.7 + 29.4 + 31.8 = 102.9%
- Chelsea: 7/5 odds = 41.7%
- Draw: 7/3 odds = 30.0%
- United: 9/5 odds = 31.8%
- Total: 41.7 + 30.0 + 31.8 = 103.5%
So, judging the two sites together, you can see that Website A is actually offering you more even odds—despite the fact that both sites are offering you the same odds on Manchester United to win. This means that Website B is charging a higher commission, so in this case you’d be better off with A as they only charge 2.9% commission compared to B’s 3.5%.
Of course, it’s not always as simple as that, because there’s a good likelihood that different websites will also offer different odds for a match, meaning you’ll also need to weigh up the value of a bet along with how much commission a specific bookmaker is charging. Basically, even though one bookmaker might be charging a higher commission , it doesn’t necessarily mean you can’t find a good bet if they are offering better odds on your preferred outcome. It’s all about weighing up the implied probabilities compared to what you think the chances are for a specific outcome.
The biggest trait of any successful gambler is being able to judge the value of a bet, of which being able to calculate probabilities, over round and commission percentages plays a huge part.