How bookmakers set odds and build in their margin
One Premier League match, 18 bookmakers and three exchanges: how odds become chances, where the margin hides and what it costs a £100 stake.
Part of our guide to how bookmakers set odds; the running figures are in our bookmaker margins tables.
Decimal odds of 3.0 mean one chance in three, an implied probability of 33.3%.
Bookmakers publish prices, but every price is also a probability. Divide one by the decimal odds and you get the chance the price implies. Ipswich Town at 3.0 to beat Nottingham Forest means one chance in three, or 33.3%. In one daily snapshot of our odds record, 8 of the 18 bookmakers quoted exactly that price for a home win.
A fair book: home, draw and away together cover every result, exactly 100%.
If a bookmaker took no cut, the implied chances of a home win, a draw and an away win would add up to exactly 100%, because one of those results has to happen. Scaling a mid-table set of prices down to a fair book gives Ipswich 31.1%, the draw 27.4% and Forest 41.5%, which sum to 100% with nothing left over.
Trim each price a little and the three chances add up to 107.2%: a 7.2% margin.
Real prices are a little shorter than fair ones. Ipswich's fair 3.22 becomes 3.0, the draw's 3.64 becomes 3.4 and Forest's 2.41 becomes 2.25. Shorter odds mean bigger implied chances, so the three now add up to 107.2%. The 7.2% excess is the margin, also called the overround. Paddy Power, Sky Bet and Betfair Sportsbook all quoted this exact set of prices.
LiveScore Bet, the dearest book here: its prices imply 110.7%, a 10.7% margin.
LiveScore Bet priced the match at 2.95, 3.3 and 2.15. Those prices imply 33.9% for Ipswich, 30.3% for the draw and 46.5% for Forest, a total of 110.7%. That is a margin of 10.7%, the widest of the 18 bookmakers on this fixture in this snapshot, and well above the 107.2% of the mid-table book shown as a dashed outline.
18 bookmakers price the same match with margins from 4.9% to 10.7%.
Every bookmaker sees the same teams and the same team news, yet the margins differ. Across the 18 bookmakers in this snapshot they run from 4.9% at Casumo to 10.7% at LiveScore Bet. One fixture is an illustration rather than a ranking: margins move as prices change, which is why our margin tables are built from many matches.
Spread £100 to return the same on any result: LiveScore Bet pays back £90.32.
Back all three results with £100, split so that every result pays the same: £30.62 on Ipswich, £27.37 on the draw and £42.01 on Forest at LiveScore Bet's prices. Whatever the score, the bets return £90.32, so £9.68 of the £100 is gone. That is the margin at work. At Casumo's prices the same split returns £95.35.
After commission, the three exchanges price this match at 102.5% to 104.6%.
Exchanges do not shorten prices; they take commission from net winnings instead. Quoted as they stand, Betfair, Smarkets and Matchbook all sum to 101.2%. Taking the commission off the winnings part of each price lifts the totals to 102.5% at Smarkets and Matchbook, which charge 2%, and 104.6% at Betfair, which charges 5%. That is the same method our exchange table uses.
Take each result's best bookmaker price and the book shrinks to 103.5%.
No single bookmaker had the best price on every result. Taking the best of the 18 for each outcome, 3.1 for Ipswich at Casumo, 3.6 for the draw at Betfred and 2.3 for Forest at Unibet, brings the total down to 103.5%, a margin of 3.5%. The £100 split from earlier would return £96.61 instead of £90.32.
Sources: Betting Insider odds record: 21 UK betting sites, match-result prices, one daily snapshot, via The Odds API · Betting Insider: how we measure margins · Smarkets commission FAQ (2% on net winnings) · Betfair Exchange commission (Market Base Rate 5%) · Matchbook net-win commission (2%)