Money and safety · Intermediate · Updated
How bookmakers make money, in rupees and percentages.
A bookmaker makes money from its margin, a small edge built into every price. Bookmakers set their odds so the implied chances of every outcome add up to more than 100%. The extra is called the overround, and it's their margin. When the money is spread evenly across the outcomes, the bookmaker keeps that share of everything staked, whichever side wins.
The 5.3% past the line is the overround. It's why both sides pay 1.90 instead of 2.00.
At a glance
Key takeaways
- Bookmakers set odds so the implied chances of every outcome add up to more than 100%. The extra is the overround.
- If both sides of a 50/50 match are priced at 1.90, the total is 105.3%, so the overround is 5.3%.
- With money split evenly, a bookmaker keeps that share of everything staked, whichever side wins.
- On an exchange, the cost sits in the gap between the back and lay prices.
- King Exchange bets settle at the price you took, with no commission on winnings.
The basics
What is the overround?
Every decimal price implies a chance: divide 1 by the odds. In a fair market those chances add up to exactly 100%. A bookmaker trims every price slightly, so the chances add up to more. That surplus is the overround, sometimes called the vig or the juice.
- 1
Divide 1 by each price
This gives the implied probability of each outcome. 1 ÷ 1.90 = 0.526, or 52.6%.
- 2
Add them up
In a fair market the total would be exactly 100%. Bookmaker prices always add up to more.
- 3
Subtract 100
What's left over is the overround. 52.6% + 52.6% = 105.3%, so the overround is 5.3%.
Worked example
How much does a bookmaker keep on one match?
On a two-way market priced at 1.90 on both sides, a bookmaker keeps about 5% of everything staked. If ₹1,00,000 comes in, ₹50,000 on each team, it pays ₹95,000 to the winners and keeps ₹5,000, whichever team wins. That 5% is the margin built into the prices.
Total staked
₹1,00,000
₹50,000 on each team, both at 1.90
Paid to winners
₹95,000
₹50,000 × 1.90, whichever team wins
Bookmaker keeps
₹5,000
5% of the money staked
The result of the match doesn't matter to the bookmaker here. When more money comes in on one side, it shortens that side's price and lengthens the other to even things out again.
Three outcomes
What about a market with a draw?
In a three-way market such as a football result, add the implied chance of all three outcomes to find the margin. With a home win at 2.10, the draw at 3.40 and an away win at 3.60, the chances add up to 104.8%, so the bookmaker's margin is 4.8%.
| Outcome | Bookmaker odds | Implied chance | Fair odds |
|---|---|---|---|
| Home win | 2.10 | 47.6% | 2.20 |
| Draw | 3.40 | 29.4% | 3.56 |
| Away win | 3.60 | 27.8% | 3.77 |
| Total | 104.8% | Margin 4.8% |
Margin calculator
Check the margin on any market
Type in the decimal odds for each outcome. The calculator adds up the implied chances and shows the fair odds with the margin taken out.
Enter decimal odds above 1.00.
- Prices add up to
- 105.3%
- Overround
- 5.3%
| Outcome | Implied | Fair odds |
|---|---|---|
| Outcome A | 52.6% | 2.00 |
| Outcome B | 52.6% | 2.00 |
Fair odds are what each price would be with the margin removed.
Compared
How is an exchange priced differently?
On an exchange, other players set the price through back and lay offers, and you bet against another player rather than the bookmaker. The cost sits in the gap between the back and lay prices, plus any commission, instead of an overround built into every price. You can also lay, betting that something won't happen.
| Topic | Bookmaker | Exchange |
|---|---|---|
| Who sets the price | The bookmaker | Other players, through back and lay offers |
| Where the cost sits | The overround built into every price | The gap between back and lay prices, and any commission |
| Who you bet against | The bookmaker | Another player taking the opposite side |
| Can you lay? | No, you can only back | Yes, you can bet that something won't happen |
The back-lay gap. With back 1.90 and lay 1.92, backing and immediately laying the same team costs you the difference. The narrower the gap, the cheaper the market.
Commission. Some exchanges take around 2% of your winnings, which turns a 1.90 back bet into about 1.88. King Exchange bets settle at the price you took.
What it means for you
Can you beat the margin?
Not over the long run. Across many bets, the average bettor gets back roughly their stake minus the margin. Knowing the margin won't make you win, but it helps you pick cheaper markets: margins are tighter on busy markets such as IPL match odds, and on an exchange you should check the back-lay gap.
- Margins tend to be tighter on big, busy markets such as IPL match odds, and wider on niche ones.
- Compare the total of the implied chances before you bet. Lower is cheaper.
- On an exchange, look at the gap between back and lay, not just the back price.
- Treat what's left as the cost of entertainment, and set a budget for it.
Keep reading
Related guides
Answers
Bookmaker margins: your questions
Short answers on the overround, working out a margin, exchanges and commission. Search, or tap a question to open it.
6 questions
The overround is the amount by which a bookmaker's implied probabilities add up to more than 100%. If both sides of a 50/50 match are priced at 1.90, the total is 105.3%, so the overround is 5.3%.
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