How Sportsbetting Works and How Bookies Make their Money

How Sportsbetting Works

Online bookmaker sites can often look pretty confusing, with lots of numbers that don’t seem to make much sense. However, you really shouldn’t let it put you off, as sportsbetting isn’t difficult or confusing at all – especially when you get the hang of it. The basics of it is that you think of a result or outcome in a sporting event; you put money on it happening and then if you win you get money back – if you don’t, you lose the money. When push comes to shove, it really couldn’t be any easier.

The Betting Selection

This is the easiest part of sportsbetting. You simply choose what you think will happen. If you think Man City will beat Liverpool then you have made your selection. You could go even further by betting on Manchester City beating Liverpool 1-0, but the simple fact is you decide how easy or complicated you make your bet. Obviously, the more obvious the outcome, the less money you’ll win, but that’s down to you and your confidence. When it comes to selection, there are all different choices you make and the risk you choose is all a matter of how you feel at the time.

Making Your Wager

Your wager, or your stake, is simply how much money you are going to place on your selection. You want to bet £10? Then that’s your chosen wager. Obviously, the wager you make is completely down to you. This very much depends on your confidence in the bet, the betting bankroll you have to play with and the odds. If you are entirely confident in a bet, and you truly believe it’s an odds on to win, then you may want to place a high wager / stake on it. Conversely, if there are really high odds on a selection and you think there’s a chance – even it’s just a minimal chance that it may come in; you may choose to put a lump of cash on it if you can afford to lose it. You may just win big.

Obviously online bookmakers do have some say, as they may apply maximum or minimum bets, but anywhere within the range they set, it’s entirely your call.

Odds

Fractional Odds

This is where some people can really get confused as it’s often the look of the odds that are off-putting to new bettors. The odds are the likelihood of that event happening. A certainty (which would never happen) would be 1 – there is only one possible outcome. However, if there are 20 horses in a race and you bet on one, and theoretically they are all exactly the same – all have an equal chance of winning, then if you were to bet 20 times, you would likely win 1 time and lose 19 times, so your odds would be 19/1. However, life and betting isn’t that easy because in no sport does each competitor have the same likelihood of winning. The odds that a team or competitor will win is worked out by each bookmaker based on past and present form.

Working out your winnings

So, if you bet on a team with odds of 3/1, the bookmaker is stating that it believes that if you were to bet 4 times on this outcome, you would lose 3 times and win 1 time. This is then what is reflected in your winnings. So, if you bet £1 on odds of 3/1, you will win £3 (plus get your £1 stake returned). If it is odds of 3/2, then you’ll win £3 if you bet £2 (plus get your £2 stake returned).

If the smaller number is on the left, for example 2/3, then if you were to stake £3, you would win £2. This implies that you are betting on a favourite, so your return won’t be as high as if you were betting on an underdog.

The good thing is that now you don’t have to work out how much you will win or lose as when you pick your selection and add your stake to the betting slip, the bookmaker will indicate what you stand to win automatically. The odds now just help you to see how much chance there is of winning your bet. If you can see your odds are 2/7 then you know it’s got a good chance of coming in. Also, you can compare the odds on different bookmakers to try for the best prices.

Different bookmakers offer different odds – so you can look around the different sites to see who will give you your best return. If bookmaker A offers odds of 2/3 for Manchester City beating Liverpool and bookmaker B offers odds of 3/8, then you are best off going with the first. For every £3 you bet, you’ll get a £2 win; with the other, for every £8 you get, you’ll win £3. If you were to bet £24 at bookmaker A you’ll get a return of £16, but if you bet £24 at bookmaker B your win would be just £9.

Decimal Odds

These aren’t as common in the UK, but are very easy to work out. They are, in fact, easier to work out than some fractional odds. It’s sometimes difficult to initially see whether 7/4 is better than 11/6. However, looking at decimal odds, it’s very easy to understand that 2.90 is bigger than 2.75. You don’t need to do any maths to figure that out.

Then, figuring out your winnings is even simpler. If you were to bet £10 of odds of 2.95 then your winnings would simply be £29.50 (2.95 x £10). Another point to note is that your stake is already included in your return. So, your entire return would be £29.50 and that includes your stake being returned.

Because of this, you will never find odds below 1.0 as if you win. You will always get your money back. They can, however, go as low as 1.01, which means that should you bet £10, you would get £10.10 back (including stake), so just a win of 10p. Not really worth it.

If you have fraction odds and you want to convert it into decimal odds, then this is pretty simple. All you have to do is divide the first number by the second and add 1. So, for odds of 9/2, you would divide 9 by 2 (4.5) then add 1 = 5.5. However, most bookmakers have odds converters so there’s no reason that you should have to work it out.

Moneyline Odds

This is generally more popular in US bookmakers. These are also very simple to understand. If the fractional bet is 10/1, then the moneyline bet would be +1000. This means that for every £100 you bet, you’d get a return of £1,000. Conversely, if your fractional odds were 1/10 then for every £1,000 you bet, you’d get a £100 return. Obviously, this is not as appealing. In general, moneyline odds are very simple to understand.

Comparison

Fractional 5/1
Decimal 6.0
Moneyline +500

 

A Simple Process

Betting is very simple. It’s a 3 step process that is easily mastered:

  • Choose what you are betting on
  • Decide how much you are going to bet
  • Understand the odds

The selection complexity you choose is completely up to you, but you can start simple, betting on match winners/losers/draws and then work your way up to more complex betting systems.

How do Bookmakers make a profit?

So, if you all put money on the favourite, how can a bookmaker make any money? If it’s possible to understand betting enough to consistently be making returns on your bet, then it begs the question – why aren’t the bookies broke? Simply because most bettors end up losing money in the end; most aren’t up to speed with all the winning strategies. Bookmakers aren’t stupid; they have their ways and techniques of making sure that they are always at an advantage – the house edge. The people who make most money out of sportsbetting are the people that understand how it works and how they can overcome the bookie’s advantage. The only way to understand how to beat them is to understand how they win.

The basics of how they work

It’s pretty simple really. A bookie takes in money whenever it lays / offers a bet to its punter. They then pay out to every punter that wins his/her bet. The bookies make money by taking in more money than they have to pay out. A successful bookmaker will make sure that this generally happens. Obviously, bookies are unable to control who wins or who doesn’t win, but they are able to control how much they stand to win or lose for the probable outcome. This is where the odds come in. They will ultimately set odds that are most likely going to see them making a profit.

What is an Overround?

What makes a bookmaker come out on top is essentially what is known as the ‘Overround’. This is built into the odds in order to get a profit; it’s essentially a ‘commission’ charge. Take, for example, you toss a coin. You have a 50% chance of heads and a 50% chance of tails. If a bookmaker was laying a bet on this, they should be offering 1/1 therefore, if you put a £10 bet on it and won, you’d win £10 and get your stake back. If you put this in a betting scenario, chances are the bookmaker would have around 50% of people betting on heads and 50% betting on tails. Whatever happens, whatever outcome, if the bookmaker were to give these true odds, it would make no money at all.

50 bets on tails at £10 £500
50 bets on heads at £10 £500
Heads/Tails win – 50 payouts at £10+£10 stake £1000
Total Profit £500 + £500 – £1000 = 0

 

This is where overrounds come into play. This is how they try to ensure a profit. So, instead of offering odds of 1/1 on bot outcomes for events that are equally likely, they will offer odds of around 10/11. So, if you made a £10 on the winner, you’d get £9.09 winnings plus your £10 stake back. This plays out differently for the bookmaker:

50 bets on tails at £10 £500
50 bets on heads at £10 £500
Heads/Tails win – 50 payouts at £9.09 +£10 stake £954.50
Total Profit £500 + £500 – £954.50 = £45.50

 

In this case, the bookmaker has built in a profit of £45.50, so its overround is approximately 4.5%. So, this just shows that bookmakers cannot necessarily offer true odds as they need to make some profit on the outcome. This is just one of the ways the bookmaker uses odds in its favour to better equip itself with the chance of a decent profit.

Who makes the odds?

Well, these guys are known as the odds compilers, or traders. This is one of the most important roles in any bookmakers. They are responsible for getting a perfect balance of offering competitive odds to attract punters but also have enough of a margin to ensure the bookmaker makes a profit. Because they must be very aware of the likelihood of any outcome, their knowledge of all sports has to be pretty spot on. They also have to be decent at maths as well – tough job.

Imagine Federer is playing a match against Nadal. They are pretty closely matched overall, so the trader would have to look at other factors. He/she would consider the current form of the player, how each player fares on the surface, also the outcome of recent head to heads.

Taking all of this information into account, the trader might come to the conclusion that Federer has a 60% chance of success with Nadal having a 40% chance. Based on this calculation the odds for victory would be about 4/6 for Federer and 6/4 for Nadal. However, this does not include any overround. Therefore, to get a margin for profit, the trader might want to reduce each player’s odds by around 5%, roughly giving odds of 3/5 for Federer and 11/8 for Nadal. You would then work pout the overround / profit as follows:

3/5 odds = 62.5%

11/8 odds = 42.11%

62.5 + 42.11 = 104.6%

Therefore the trader / odds compiler has managed to achieve a 4.6% margin; this is both competitive and offers decent returns.

Balancing the Bookies Books

Having a balanced book means that no matter what the outcome, the bookmaker should expect the same profit margin. If the books don’t balance, then this could see the bookie making a loss. All bookies ideally want those books balanced as much as possible. Taking our previous example:

Scenario 1

£6000 wagered on Federer at 3/5 £6000
£4000 wagered on Nadal £4000
Payout if Federer wins -£9600
Profit £400

 

Scenario 2

£6000 wagered on Federer at 3/5 £6000
£4000 wagered on Nadal £4000
Payout if Nadal wins -£9500
Profit £500

 

Although the profit isn’t perfectly equal, no matter what the outcome of the match, the bookmaker stands to make a profit of between £400 and £500.

However, this works if the betting goes hand in hand with the odds of the player winning – and 60% bet on Federer with 40% betting on Nadal. This could be very different if the betting was totally even – with half betting on Federer and half betting on Nadal:

Scenario 3

£5000 wagered on Federer at 3/5 £6000
£5000 wagered on Nadal £4000
Payout if Federer wins -£8000
Profit £2000

 

Scenario 4

£5000 wagered on Federer at 3/5 £6000
£5000 wagered on Nadal £4000
Payout if Nadal wins -£11875
Profit -£1875

 

This is a tough one for the bookmaker – if Federer wins, it’s quids in, but if Nadal wins, there’s a lot to lose. This is the reason that odds are constantly changing – to reflect how the market is betting. If more people were betting on Nadal than expected, the bookie might choose to increase Federer’s odds to encourage betting on him, or decrease Nadal’s odds to discourage punters betting on him. This may not create the perfectly balanced book it wants, but it will probably help. There are times the bookie may want an imbalanced book – if it believes that there is almost a certainty of one specific outcome – so it will get a bigger profit. However, all in all, the more balanced the book, the safer the bookmaker.

Beating your Bookie

As you can see, it is designed for bookies to have a mathematical advantage over punters. This means they might not profit on every outcome, but in the long run they surely will. However, you can still beat the bookie. The reason people lose bets is because they don’t research the bet or the odds. Therefore, to stand a chance of betting the bookmaker, you need to know how to pick a good bet. You need to find good value bets and this is the key to beating the bookie.

Check out our guide on the best way to make a bet

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