The betting margin is an important term in the betting industry, and you need to know how it works. The margin can also be named “vig” or “juice” but essentially, it’s the bookmakers cut for that market. They price all their markets in a way that means they will come out on top.
What you will find is that each bookmaker will differ in terms of the margin that they offer. In fact, they are going to differ from each betting market, which means that just because a bookmaker has a low margin on one market, does not mean they are going to have a low margin across the board.
It’s also worth noting that these margins are something you have to pay. You can find bookmakers and markets that keep them to a minimum, but you rarely find a market that has their margin in the players favour. People often get outraged about this, saying that there should be no margin, but it would then mean that the whole industry would fall apart given that bookies weren’t making money.
Throughout this article we will be looking at how margins are worked and how you can calculate these margins for yourself.
What is Implied Probability?
The first place that we want to start with this is learning about and understanding what implied probability is. Basically, it’s a way of expressing the odds of something in a manner that is often easier to those not from a betting background to understand.
The bookmakers use this to signify the chances of a certain event happening. For example, if Manchester United were playing Chelsea, they might have the both teams to score market (a simple yes or no bet) be priced at 60% chance for yes and 40% chance for no.
You then can convert those percentages into odds. So, 60% would be 1.67 and 40% would be 2.50. Conversely, you can divide one by the decimal odds and multiply by 100 to get the implied probability percentage. So 1/1.67 multiplied by 100 equals 60%. Also, 1/2.5 multiplied by 100 is 40%.
This is the basics of how implied probability works in betting. Now that you know, we can move on and we will jump back to this throughout the article.
Calculating Margins: The Coin Toss
A simple coin toss is the easiest way that we can explain how margins might work in the betting industry. It’s been covered a lot, but once you grasp this basic concept, then we can then apply it to real world bets a lot easier.
For a coin toss we know we have two outcomes; heads or tails. There is a 50% chance (implied probability) of hitting either a head or a tail with each toss. This means that the true odds would be 2.0 or even money and there would be a 100% cover (50% + 50%) which has no margin for the bookmaker
In order for the bookmaker to create their margin, they need to adjust the odds or the implied probability for each. If they wanted to create a 5% margin on the book, then the odds of the coin toss would be adjusted to around 1.90 for each result (actual margin for this would be 5.26%).
They do this on all markets so the price that you see is never the “true” odds that you should be getting if there was no margin. As we stated earlier, this is how the bookmakers earn a living, so it’s a small price to pay really.
2-Way Market & Calculations: A Real World Example
We wanted to first target the margin on a 2-way betting market and for this we chose the Both Teams to Score market from an upcoming Europa League game bet between Arsenal and Standard Liege.
As you can see the odd for yes are 1.7 and the odds for no are 2.15. These odds are taken from BetVictor by the way, but the same process can be applied to all bookmakers.
First process that we need to run is the implies probability of each. To do this we just divide 1 by the price and then multiple this number by 100.
- 1/1.7 = 58.82%
- 1/2.15 = 46.51%
All we then do is add up the implied probability percentages to get our margin. In this case it would be 105.33%. You then take the number over 100% to see that the margin on this market from BetVictor is that of 5.33%.
You can also work out the commission that the bookmaker takes from each bet that you place. This is will be close to the margin, but not quite the same. For this we simply divide 1 by our market margin, subtract 1 by that number and then multiply by 100. It should look something like this
- (1 – (1/1.053) * 100
- (1 – 0.95) * 100
The commission rate shows the amount that paying on average to the bookmaker for each bet that you place. So, regardless if you bet on the BTTS yes or no bet in this example, the bookmaker will get a commission of £5 for every £100 that you stake.
The commission is also referred to as the payout amount and this represented as a number that is sub 100%. The payout is basically how much the bookies will pay the punter, so in this case for a 5% commission, it would be a 95% payout on all bets on this market.
3-Way Market & Calculations: A Real World Example
We wanted to include both 2 way and 3-way market examples here as they do work slightly differently in terms of how they are calculated. You can extend this even further if you like, but these are likely going to be the most common bet types of its kind.
We will stick with the same game here and take on the win-draw-win market from the Arsenal v Standard Liege match.
The first step in the process to get the implied probability for each of the prices that we see.
- Arsenal to win = (1/1.33) * 100 = 75.18%
- Draw = (1/5.5) * 100 = 18.18%
- Standard Liege to win = (1/9.0) * 100 = 11.11%
- Total = 104.47%
Here we can see that we have a bookmaker’s margin of 104.47%. Now let’s look at the commission that is charged:
- (1 – (1/1.0447) * 100
- (1 – 0.96) * 100
The 4% commission on all bets means that for every £100 that we stake, the bookmaker is making £4 in commission on all bets within this market.
How Do Margins Vary from Bookmaker to Bookmaker?
Margins can play a huge role in the amount they vary from each bookmaker and whilst it’s always best to take the best odds, you want to be wary of what each bookmaker is charging.
In the above chart you can see how the payout percentages vary for 13 bookmakers, we’ve called them A to M, on the same market for the same game. The match again is Arsenal versus Standard Liege in the Europa League. The best margin is that of bookmaker A with a payout of 97.9% and the lowest is bookmaker M, with a measly 92.7% margin.
If you were to bet with the best worst vs the best, you would be paying £5.2 more per £100 staked to the bookmaker. This is a big difference here, so it’s one that you need to take note of.
The margin will affect the odds on offer as well. A bigger margin generally means that you will get slightly worse odds than that of a bookmaker with a smaller margin.
If we jump back to the coin toss, we know that we should be getting 2.0 on each bet of heads or tails. But after the 5% margin has been applied, then we are now getting around 1.90 in terms of our price. It’s a noticeable drop off in an industry where winning and losing bettors are often separated by the finest of margins.
Always Take Best Odds Over Best Margin
We should be at a point where we understand how the odds will reflect the margin hat the bookmaker take. But from a betting perspective, you need to be aware that you should always be looking to take the best odds over the best margin.
Let’s take a look at 5 bookmakers from the above Arsenal v Standard Liege game and see how that might work. We will include the best and worst margin, along with three more bookies:
|Arsenal to win||1.36||1.38||1.36||1.32||1.33|
|Standard Liege to win||9.2||7.8||8.4||9.0||7.64|
As you can see, if we were taking just one bookmaker here, then bookmaker A would take it with an impressively low 2.1% commission. But, given that we have the ability to bet anywhere we like, let’s run the numbers here to see what the best possible margin that we could get would be:
|Arsenal to win||1.38||F||72.5%|
|Standard Liege to win||9.2||A||10.9%|
As you can see, by taking the best possible price from all of this, we are able to reduce our margin to just 1%, which is amazing really. These margins may seem small but, if you better than half the money that you would usually be paying the bookie, which we have in this case, simply by shopping around for the best odds, then your margins are going to drastically improve.
It’s worth noting as well that we don’t have a full list of bookmakers here as well, so it’s reasonable to suggest that we can get this number even lower than the 1% we’ve achieved from a sample of about a dozen bookies.
We wanted to move away from football betting to highlight how this would work for multi-way markets, but more specifically, how it works for horse racing. The principles are just the same, but with more variables (horses in the race) the margins can fluctuate even more.
Above we have a look at the 14:10 from Lingfield and the process to check out the margin is just the same. We just divide the odds by 1 and then multiply this number by 100 to get our implied probability.
For this race we have a market margin of 113.12% and a commission of 11.6%.
As you can see, the numbers are much bigger than both our 2-way and 3-way betting markets and this is basically because it’s a much more unpredictable market. There are lots of horses that can win this race and given the price between the favourite and the lowest priced horse is not that much, relatively speaking for horse racing, it means the bookies need to take more precautions when creating their market.
How Do Margins Work With Betting Exchanges?
It’s all a little different on the betting exchange than it is with a traditional bookmaker. With an exchange you are betting person to person, so this means that the odds are really of no interest to an exchange as they don’t need to earn anything from that.
Instead, they charge a commission on all winnings. This means that margins aren’t calculated, but the commission will be.
The rate of commission that you will pay will vary with each exchange you that bet with. The biggest exchange is that of Betfair and they charge a base 5% commission on everything made. It’s worth noting, if you lose, you don’t pay a commission.
So, if you were to win £100, then Betfair would take 5% of that money as commission, in that case that would be £5.
This is often why you see betting exchanges offering much larger odds that traditional bookies as the commission is only taken off after the bet. A base rate of 5%, as we have seen from the above examples is a lot, so if the odds are the same or even remotely close, it’s likely you will find a better deal with the bookmaker once you factor in commission.
In fact, we’ve written a full article on working out if the exchange or the bookmaker offers a better deal, with some interesting findings.
Can You Work Out the Margin on All Markets?
There are actually some markets where it’s impossible to work out a margin on. The bookmakers are guessing for a chunk of it and therefore it makes all the calculations and formulas that we put in earlier in the article, almost redundant.
The reason that these markets are exist is usually because the bookmaker does not know the exact line up for that bet. Markets the relate to include first goalscorer markets with football, scorecasts and ante post markets in horse racing.
Let’s take the first goalscorer as an example. The bookmaker has to guess hours before the game which players are likely going to start. They also need to take into account those that won’t start, but then may come off the bench and have a chance of grabbing that first goal.
So, where you should have a list of 22 players that could score first, you actually have a much bigger list. It may be 30 or even 40 players that included in the 1st goalscorer market, with many having next to no chance at all. It would be impossible then work out an implied probability for each player so they can’t work out a fixed margin.
The same sort of deal would happen in horse racing for ante post markets. A lot of the time the bookies are guessing as to the horses that will take part, especially for races like the Grand National which you can bet on a year in advance. There is no way to make a margin for this, so they have to best price it in a way that does not leave them exposed.
It’s tough to really offer advice on what to do with these markets in terms of margins, other than note that they don’t offer good value generally for punters. You just need to work out of the implied probability from the price that you are getting offers good value from the market. If it works in your favour, then go for it, but if not, generally we would advise to avoid these bets.