The Bookmaker Margin - How Much Are You Actually Paying Per Bet?

[SharpEddie47]

The overround is the most important number in sports betting and most recreational bettors have never calculated it for a single market they've bet on.

The calculation is simple. Take the implied probability of each outcome from the available odds. Add them together. The total exceeds 100%. The excess is the overround. The overround divided by the total is approximately the bookmaker's margin.

A Premier League match. Home win at 2.10, draw at 3.40, away win at 3.60.

Implied probabilities: 47.6% plus 29.4% plus 27.8% equals 104.8%.

The overround is 4.8%. The margin is approximately 4.6%.

That's a reasonable market. It means for every dollar you bet on that market, across a large enough sample at random, you'd expect to return approximately 95.4 cents.

Now do the same calculation on a correct score market. Add up the implied probabilities across all possible scorelines including a catch-all for other results.

The total will often be between 115% and 130%. The margin is between 13% and 23%.

Now do it on a same-game parlay. The margins on each leg compound multiplicatively.

A five-leg same-game parlay at an average of 6% margin per leg: the compound margin is approximately 26.5%. You're returning approximately 73.5 cents per dollar in expected value.

These are not the same product priced at the same rate with different payouts. They're fundamentally different economic propositions.

Most bettors don't know which product they're buying at what effective price.

 

[Klaus]

The margin calculation is the first thing the Bundesliga model applies to any market before any other analysis.

A market with a margin above 7% requires a correspondingly larger edge to be worth betting.

My minimum edge threshold: 4.5% above fair probability. At a market with 4% margin this produces a genuine expected positive return. At a market with 8% margin the same edge doesn't overcome the cost.

The specific numbers for common Bundesliga markets.

Match result 1X2 at most soft bookmakers: 6.2 to 8.4% margin.

Asian handicap at Pinnacle: 2.1 to 2.8% margin.

Correct score at soft bookmakers: 18.3% average margin in my dataset.

These are not slight differences. A bet on the correct score market requires an edge approximately four times larger than a Pinnacle Asian handicap bet to have the same expected return.

Most bettors comparing their results across market types are comparing performances in markets with fundamentally different cost structures and don't know it.

 

[FadeThePublic]

The margin isn't uniform and the non-uniformity is designed rather than accidental.

The markets that attract the most casual volume: match result, the big game moneyline, the popular team to win. These are the markets operators price most competitively because they know sophisticated bettors are watching and will go elsewhere if the price is bad.

The markets that attract volume from bettors who aren't comparing: correct score, same-game parlays, first goalscorer, prop combinations. These carry significantly higher margins because the casual bettor isn't doing the overround calculation and the sophisticated bettor largely isn't in these markets anyway.

The operator's pricing strategy: compete hard on the markets that attract scrutiny, extract margin on the markets that don't.

The casual bettor who sees a decent price on the match result and then builds a same-game parlay on top of it: they're buying one product at a reasonable price and immediately using that relationship to buy a second product at a much worse one.

The decent price on the match result is partly a funnel into the higher-margin products built around it.

 

[oli_sussex]

Pinnacle's margin on major European football: 2.1 to 2.8%.

Betfair exchange commission on profits: 2 to 5% depending on premium charge status.

UK high street bookmaker match result margin: 8 to 12%.

Same-game parlay typical margin: 20 to 35%.

These are different industries using the same word to describe different products.

 

[ParlayPrincess_88]

I've never done this calculation for a single bet I've placed.

Going to try it right now on a parlay I built last Sunday.

Four legs. I'm looking at what each individual game's odds implied.

Adding up the implied probabilities for each game's market: 106.1%, 107.4%, 108.2%, 105.8%.

So the margins on the individual games were roughly 5.8%, 6.9%, 7.7%, 5.5%.

Then these compound in the parlay.

I'm doing this calculation and I feel like someone just told me something I can't unknow.

The parlay I built last Sunday: I was paying something like 28% margin on it in expected value terms.

I thought I was being smart building it around games I'd analyzed.

The analysis was fine. The product I put the analysis into was taking 28 cents of every dollar before the sports even started.