How Do Bookmakers Set Odds? Decoding the Game (2024)

Ever wondered how bookmakers set odds for every match? Is it solely based on their whims and fancies, or is there any math behind the whole process? In this article, we’ll explain what betting odds are, the basics of how online bookmakers set odds, and how much bookmakers make in the process!

What Are Betting Odds?

Betting odds indicate the bookmaker's stance on how a particular event will unfold in numerical terms. The odds represent the returns you will get on your bet should you win.

So, let's say the odds of Virat Kohli scoring a century are 1.40. This means that for every ₹100 that you bet on him, you will get ₹140 (₹100 stake + ₹40 profit) if he scores a century or more.

Which eventually begs the question: How do bookies calculate odds?

How Betting Odds Work

With the probability in hand, here’s how you can calculate the odds using it:

True Odds (O) = 1/ P. So, in this case, the true odds of Team A winning the toss are 2 (1/0.5).

Please note: In decimal terms, betting odds (O) for an event can never be less than 1. The reason being that for odds to be 1, the probability (P) of the event should be 1 (or 100%) — which is not possible in any sport.

Voilà! So, is that it? Not quite — the odds we all see on the betting site while placing bets are not true odds!

True Odds vs Implied Odds

True odds do not factor in the profit margins of the bookmaker. Hence, betting sites adjust the true odds by pricing in their profit margins, which are called implied odds. And it is these implied odds that are visible to you when you go to a bookmaker to bet on any event.

This video is an easy guide to understanding betting odds.

How Do Bookmakers Set Odds?

The best cricket betting sites have dedicated teams of experts called ‘odds compilers’ to help them set betting odds for each match. The compilers are experts of the game who use their experience and knowledge, along with tons of past data, to make future predictions and calculate the odds.

Every bookie has their own algorithms and technique for calculating odds. Below you will find a rundown of the same:

Looking at Performances

Regularly tracking team and individual player performance is critical for online bookmakers to set odds. As a rule of thumb, the teams with a higher chance of winning are given lower odds than the teams not expected to win.

Similarly, studying historical betting data and H2H records will help identify trends and make high-value odds to generate more wagering activity.

Factoring in Injuries/Suspensions

Key players who may have been benched or injured directly impact their teams' ability to win. Hence, analysts always look for such news before bookmakers set odds for a particular match.

Considering Home/Away Conditions

Home teams almost always have the upper hand in a match. They are the more fancied side, and consequently, will likely be assigned lower odds. However, this may not always hold true. For instance, Bangladesh taking on Australia in Chittagong doesn't necessarily mean that the hosts will be fancied to beat the mighty Aussies, despite playing at home.

Monitoring Other Bookmakers

While betting sites' odds will vary, they typically fall within a similar range, especially for popular markets like match-winner and top runscorer. Therefore, keeping track of how other bookies are valuing their betting odds offers much-needed insights.

Accepting Bets on All Outcomes

Bookmakers aim to cover as many markets as possible to spread risk. By attracting substantial bets for and against various outcomes of the match, they mitigate the possibility of paying out large sums from their own funds.

After checking these factors, betting sites add their margin and publish their betting odds. But how do the bookmakers set odds with margins? Let’s find out!

How Do Bookies Make Money: Understanding Vigorish

So, what does a bookie do in this scenario? They try to maintain as close a balance as possible in generating betting interest “for” or “against” each event. The closer this balance, the better the chances of bookmakers staying profitable and solvent in the long run.

How Do Bookies Make Money: Continuing With the Coin Toss Example

The profit margin decided by the bookies for each of their markets is called “vigorish” (or “vig”, or “juice”). The profit can also be considered the fee that bookmakers charge for allowing you to place bets with them.

In the coin toss example, the true odds for a coin toss are 2.0. That said, if you check out the toss-winner market at any bookie, you’ll never find the odds to be 2.0. It will always be lower, 1.85 to 1.95 in most cases. That’s because bookies add their profit margins to it.

Let’s understand this with an example:

When True Odds Are Used

Now, suppose the bookmaker receives total bets of ₹1,000 on Team A winning the toss and another ₹1,000 on Team B winning the toss. Team B wins the toss.

So, of the total ₹2,000 received from all punters, the bookie has to pay out ₹2,000 (₹1,000 x 2.00) to those who bet on Team B winning the toss. Therefore, this is a no-profit-no-loss situation.

When Implied Odds Are Used

Now, let’s consider the exact same situation as above, with Team B winning the toss. So, of the total ₹2,000 received from all bettors, the bookie now has to pay out ₹1,900 (₹1,000 x 1.90) to those who bet on Team B winning the toss. In this scenario, the bookmaker is left with ₹100 (₹2000-1900), which is their profit.

What Percentage Do Bookies Take?

The vig may differ from match to match and even for different betting markets in the same match. Bookies never openly disclose the vig, but you can find it using the odds.

Consider the following odds for an India vs. Australia match:

To find the vigorish, you need to find the probability of these implied odds and then subtract it by the probability of true odds (the probability of true odds always remains 1 or 100%).

Which then follows as:

(1/1.90 + 1/2.30 + 1/11.50) – 1 *100 = (0.53 + 0.43+ 0.09) -1 *100 = 1.05 -1 *100 = 5%

However, if you know the true odds, you can simply calculate the vig as: true odds minus implied odds.

Watch this video to understand the concept of “juice” or “vig” in sports betting.

Why Betting Odds Change Before Events

Types of Betting Odds

European Odds

Also known as decimal odds, these are popular in India and represent the original stake plus the returns. For example, with odds of 1.80, for every ₹100 you bet, you will get a total of ₹180 in return (₹100 initial stake + ₹80 profit) if you win.

British Odds

Also called fractional odds, such as 3/1, this shows the potential profit relative to the stake. So, a bet of £200 at odds of 3/1 would yield a profit of £600 (200*3) plus the original stake of £200.

American or Moneyline Odds

American odds, like +200 or -150, display either the amount won on a $100 bet for positive odds or the amount needed to bet to win $100 for negative odds. For instance, +200 means a $100 bet would win $200, whereas -150 means one needs to bet $150 to win $100.

Indonesian Odds

Indonesian odds are American odds divided by 100. The absence of the ‘+' sign implies that it’s a positive odd. So, if you see Indonesian odds of 1.25, it means you need to place an IDR100 bet to win IDR125, while -200 means you need to bet IDR200 to win IDR100.

Why Comparing Betting Odds Is Crucial

Bookmakers set odds in a way that makes them money, and that’s understandable — it's a business after all, and one cannot expect good service for free. However, it’s important that you compare odds across different bookies by considering their vig to ensure you're getting maximum value (betting returns and service quality) for what you are paying.

So, if you bet with ₹5,000, you end up saving ₹50 with this one simple comparison. Now, imagine the savings over the long term if you are betting in thousands or lakhs!

CricketBettingAdvice Final Say

Bookmakers set odds using various factors, such as team performance, player injuries, and betting patterns. They adjust these odds to include their profit margins, and it’s important that you regularly check and compare whether the services your bookie provides is worth the vig! If not, consider switching!