Like any other business, bookmakers have to make money to make their bookies sustainable. They use obvious and direct principles to achieve this. They take money from punters once they bet and payout money to them whenever they win. Simply put, bookies gain what the bettor loses. That is why bookmakers try to make sure they pay out less than they take.
Since bookmakers do not have any control of the game outcome, they try to control the amount of money they are likely to gain or lose. There are different tactics they use to do this. First, they try to set the right prices for the bets to make sure they make money out of the bets. They also try to set and keep on changing the betting lines to make sure their books are balanced. This means that they stand to make the same amount of money regardless of the outcome. They also depend on the punter's lack of knowledge about the games and the odds as well as their emotions.
So, What Bookmaker Margins are?
Bookmaker margins are the profits that the bookmakers make in any game based on the outcome. They are the difference between the probability and the odds that bookies are offering and it is how they make a significant part of their income. Bookmaker margins are also transaction costs that bettors incur that are hidden. These profits make bookmakers sustainable as they fund their services.
Punters would prefer lower margins. However, over time, those margins become significant as they bet repeatedly. Regardless of the size of the margin per bettor, bookmakers stand to make a significant amount of money as many bettors place their bets repeatedly.
It is not exactly true that bookmakers offer odds based on who is likely to win or lose. In most cases, bookmakers try to set balanced odds to attract betting on both sides to make sure the risk is absorbed regardless of the outcome. Therefore, before they set any game odds, they first estimate all the outcomes probabilities.
Why Bookmaker Margins are Important?
- To Bookmakers
Simply put, margins allow bookmakers to remain profitable and keep their businesses going.
- To Bettors
For punters, bookmaker margins are important because they can get bigger winnings by betting when the bookmaker margins are small and avoid betting when they are high. Bookmaker margins are small when the bookies feel that they don’t need to make a lot of money from the bet since they are sure of their probabilities.
How Margins Affect Bookmaker Odds and the Size of the Possible Prize
As we already know, bookmaker margins are the percentage of profits from every punter’s bet on any game outcome. This means that if bookies offer higher odds for any particular bet, they are likely to make less money since the punters have higher chances of winning the bet. The reverse is also true, which means that the bookies will have high margins if they have low odds for any particular games. Low odds reduce the payouts to the punters and increase the margins to the bookies. Therefore bookies with low margins will attract a high number of gamblers since for them, the odds are very important and they will always go for high odds
Understanding how Bookie Margins are Calculated
When bookies set odds for any bet, they estimate the probability of each outcome to occur. For instance, assume that the game is tossing a coin. The bookie will assume that a punter has a 50% chance of winning. When you use decimals, the odd of this game are reciprocal of the assumed punters chance of winning which is 2. To make a profit in this game, the bookie will put the odds lower than 2, say 1.90. So the odds of the punter winning the game will be 1.90. The bookmaker margin is given by the difference between the fair or actual odds and the bookmaker’s calculated odds. Therefore, from the gambler’s viewpoint, the lower the bookmaker margin, the better.
It is important to know that sports and tournaments do not have the same margins. As you have seen, bookmakers cannot influence the outcomes of the game but the can to some extent set the odds to influence their margins. It is also important to note that bookies with the lowest margins offer the best odds since the odds are closer to the probability of the outcome happening.
It is important to notice that some bookmakers may offer their clients bets on certain games or even tournaments with no margins whatsoever. This does not mean that you automatically stand a chance of winning the bet.
However, since gambling is a game of chance, it all up to you to exercise caution whenever you are want to gamble. This is because you can never be sure of the outcome regardless of the size of bookie margins.