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How the bookies calculate the odds?

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    How the bookies calculate the odds?

    hi,
    i always wonder if there is any formula that ude bookies to calculate the odds for betting. Very grateful. bye

    #2
    You need to know the probabilities (P) for the outcomes, and then you get each fair odd (O) from
    Code:
    O = 1/P
    Example:
    Norway plays Slovenia this week. Let's say that I'm a bookie who want to offer odds for this game and that I have estimated the probabilities as
    Code:
    P(Norway)   = 0.50 (50%)
    P(draw)     = 0.30 (30%)
    P(Slovenia) = 0.20 (20%)
    Then the fair odds are
    Code:
    O(Norway)   = 1/P(Norway)   = 1/0.50 = 2.00
    O(draw)     = 1/P(draw)     = 1/0.30 = 3.33
    O(Slovenia) = 1/P(Slovenia) = 1/0.20 = 5.00
    These are the fair odds, meaning that the odds are the true odds that correspond directly to the probabilities for each event. The bookmakers never offer the true odds, since then they wouldn't make money on average (when the odds are the true odds, neither the bookies or the punters make money in the long run). To get profit, the bookies scale down the odds to secure a certain percentage of profit.

    Let's assume that I want to make 5% profit from these odds. Then I multiply each odd with 0.95 (95%) and get:
    Code:
    O(Norway)   = 0.95*2.00 = 1.90
    O(draw)     = 0.95*3.33 = 3.17
    O(Slovenia) = 0.95*5.00 = 4.75
    By subtracting a few percent from the true odds the bookie will have profit on average. Maybe not profit from every game, but the sum of profits from all games the bookie offers will be positive.

    So you see that calculating the odds is straightforward when the probabilities are known. Estimating the probabilities accurately can be hard though, and there is no simple "algorithm" for doing that. But it involves statistics and math (the calculations can be quite complex) and of course a lot of experience and detailed knowledge about the teams.

    Bugs

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      #3
      a bookie may also adjust those odds if he thinks that more people will bet on a specific result than suspected...

      for example a bookie might lower the odds if more than 52,5% (1/1,90) of the money would go on Norway @ 1,90.

      It might be done while the odds are set if such behavior is expected from the punters or later on when the bets are taken.

      Comment


        #4
        Originally posted by Maycj
        a bookie may also adjust those odds if he thinks that more people will bet on a specific result than suspected...

        for example a bookie might lower the odds if more than 52,5% (1/1,90) of the money would go on Norway @ 1,90.

        It might be done while the odds are set if such behavior is expected from the punters or later on when the bets are taken.
        Yes, one bookie who does this very obviously, are B&W, their odds on favourites are always lower then average and their odds on outsiders are highest than the rest... it has advantages and disadvantages for us, I like searching for possible upsets (of course, not at any price) so it suits me sometimes...
        :wink:
        MacotBet follow me on BA http://forum.bettingadvice.com/showt...=39806&page=34

        Comment


          #5
          Interesting... Does anyone have an idea of how much does a particular bookie cut their odds? Eg. Gamebookers, bet365, etc...

          Comment


            #6
            It depends on the bookie,the sport, the championship etc.
            The margin profit is between 8% (EPL, Spanish, Italian) and 13% (less known championships).
            You can have a look at bethelp.com where there is a comparison of the odds. On the very right side there is a percent number (between 87 and 92% usually) which refers to the profit margin of each bookie.

            Comment


              #7
              Originally posted by robx
              Interesting... Does anyone have an idea of how much does a particular bookie cut their odds? Eg. Gamebookers, bet365, etc...
              The "pure" handicap bookies generally offer the best odds. An example from PinnacleSports' menu tonight:

              Brazil (-1.5) vs Columbia: 1.855 2.050

              The overround is
              Code:
              1/1.855 + 1/2.05 = 1.0269
              and so the payout is
              Code:
              1/1.0269 = 0.974
              Pinnacle's payout for this game is 97.4%, so they take 2.6%. This is much less than the average fixed-odds bookie. For example, Gameboookers' offer for this game is:

              Brazil (-1.5) vs Columbia: 1.70 2.10

              Overround:
              Code:
              1/1.70 + 1/2.10 = 1.0644
              Payout:
              Code:
              1/1.0644 = 0.939
              which gives a payout only 93.9%, meaning Gamebookers have taken 6.1%, more than twice of what PinnacleSports takes. This does not seeem to make much difference to most punters, but it roughly means that a punter betting at random, will lose his money twice as fast betting with Gamebookers' odds than with Pinnacle's odds. Even for a skilled punter, such a difference can eventually be the difference between overall profit and overall loss over the course of a season.

              Bugs

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