Bookmaker's margin

Every bookmaker builds a small mark-up into its odds. This mark-up is called the margin or overround. It is why the implied probabilities from all the odds in a match add up to more than 100 percent. For you, that means the odds are slightly lower than pure probability would suggest.

The implied probability of a price is 1 divided by the decimal odds. Add these figures up across every outcome of a match and, in a fair market, you land on exactly 100 percent. In practice, the total comes out higher. The difference is the margin.

margin = sum of all implied probabilities - 100 percent

You can also express the same thing through the payout percentage. A payout percentage of 95 percent matches a margin of 5 percent. The higher the payout percentage, the lower the margin and the higher the odds. The margin is normal and shows up with every provider. It is how the provider funds its operation. Its size varies from bet to bet.

Take a football match with three outcomes: home win, draw and away win. The provider offers the following odds. For each price, you divide 1 by the odds to get the implied probability:

The total comes to around 104.5 percent, so the margin is about 4.5 percent. The payout percentage of this market is around 95.7 percent, that is 100 divided by 104.5. The lower the total, the higher the odds. All you need for the sum is the displayed odds and a simple calculator. How to read odds in general is covered in the guide Reading and understanding betting odds.

With the formula above you can work out the margin of any market yourself. These points help you put it in context:

• Check the total: add up the implied probabilities of every outcome in a market
• Look for the payout percentage: some providers state it directly
• Tell top matches from niches: on big, popular matches the margin is often lower than on niche bets
• Tell markets apart: a match-winner bet often carries a different margin from a special bet on the same match

A lower margin means slightly higher odds. On a single bet the difference is small. On big football matches the margin is often low, while on small leagues or unusual bets the mark-up is usually higher.

The margin is part of every betting offer. This is how to weigh it up:

• Advantage for the provider: the margin gives it a calculable basis
• Advantage for you: with the formula you can work out the margin yourself
• Advantage for you: on top matches the margin is often low and the odds fair
• Disadvantage for you: the margin lowers your payout compared with the fair odds
• Disadvantage: the margin is often not shown directly and has to be worked out
• Disadvantage: on niche bets the margin is usually much higher

With two equally likely outcomes, fair odds would be 2.00. With the margin, they are often only 1.90. The provider keeps that difference. The margin explains why odds sit below their calculated fair value.

A few points about the margin trip many people up:

• Check niche bets: on rare markets the margin is usually higher
• The margin is not a bonus: high odds can still carry a high margin
• Read the odds correctly: high odds mainly mean the outcome is seen as unlikely

A common error is to treat high odds as a good offer straight away. The odds alone tell you nothing about the margin, because they also depend on how likely the outcome is. Only the sum of the implied probabilities shows you the margin of a market. Sports betting is permitted from the age of 18 (21 in Bremen). Check odds at your own pace and only stake money you can afford to lose.