Understanding Overround & Margin: How Bookmakers Make Money

Here at Campeonbet, we’re committed to providing you with clear knowledge and insights into betting markets. In this chapter, we’ll explain what overround and margin are, and how bookmakers use them to build markets.

What Is the Overround? 

The “overround”, also commonly referred to as the vig, house margin, house edge, or juice, is a key concept in betting. Simply put, it represents the built-in profit margin that a bookmaker includes in the odds offered to bettors. Its primary function is to ensure that the bookmaker can generate a profit regardless of the event’s outcome by adjusting the odds in such a way that the total implied probability of all possible outcomes exceeds 100%.

Many people overlook the fact that betting involves a significant amount of mathematics. Every set of odds offered by a bookmaker is the result of careful calculations designed to ensure a net profit, or in other words, a house edge. Ideally, bookmakers would offer truly fair odds and take their chances alongside the betting public, accepting potential losses if many favorites win. Nevertheless, bookmakers cannot rely on luck for profitability. Instead, they strategically structure their odds to maintain a consistent edge over bettors.

However, οverround isn’t just useful for online bookmakers but also the bettors. It helps assess the expected value of bets and identify bookmakers with lower margins, which offer better odds and more favorable payouts. Bettors can use this knowledge to seek out markets with smaller overrounds, improving their chances of positive expected value and spotting opportunities for arbitrage betting, where differences in odds across bookmakers allow guaranteed profits regardless of the outcome.

Calculating Margin in Different Odds Formats

As mentioned, the overround is the mechanism by which bookmakers build their profit into the odds. By setting odds that add up to more than 100% in implied probability, they create a built-in advantage. This margin helps bookmakers cover their costs and stay profitable across thousands of markets. 

In a fair betting market with no profit margin, the odds would reflect the true probabilities of all possible outcomes, summing to exactly 100%. Even if bettors place equal amounts on every possible outcome, the bookmaker still guarantees a profit because the payouts are slightly lower than what truly fair odds would offer. This careful balancing act allows bookmakers to manage risk and operate successfully regardless of the event’s result.

In sports betting, odds come in various formats, primarily decimal and fractional, each representing the likelihood of an outcome in a slightly different way. Understanding how to convert these odds into implied probabilities is essential because it reveals the bookmaker’s assessment of each outcome’s chance. Once you know the implied probabilities for all possible outcomes, you can calculate the bookmaker’s margin.

Decimal Odds

Here is the formula to calculate implied probability and overround from decimal odds:

Implied Probability = ( 1Decimal Odds ) × 100 

Overround = (∑ All Implied Probabilities) −100  

This converts the odds into a percentage that represents how likely the bookmaker thinks each outcome is.

Let’s take a closer look at a football match between Arsenal and Chelsea, as an example,  with three possible outcomes:

Step 1: Calculate each implied probability

Arsenal Win: 

• 1÷2.10=0.4762×100=47.62%
• 1÷2.10=0.4762×100=47.62%

Draw: 

• 1÷3.40=0.2941×100=29.41%
• 1÷3.40=0.2941×100=29.41%

Chelsea Win: 

• 1÷3.60=0.2778×100=27.78%
• 1÷3.60=0.2778×100=27.78%

Step 2: Add all implied probabilities

47.62%+29.41%+27.78%=104.81%

Step 3: Calculate the overround

104.81%−100%=4.81%

This is how we interpret these numbers:

• The total implied probability is 104.81%, which is greater than 100%. This extra 4.81% is the bookmaker’s margin or overround.
• This means the bookmaker has built in a 4.81% profit margin into the odds.
• For bettors, this margin represents the bookmaker’s edge and slightly reduces the potential payout compared to “fair” odds.

This knowledge can help players make smarter bets and spot opportunities for expected value or even arbitrage betting.

Fractional Odds 

Fractional odds are a traditional way of expressing betting odds, especially popular in the UK. Just like decimal odds, fractional odds can be converted into implied probabilities to understand how likely an outcome is according to the bookmaker. Additionally, by calculating the total implied probabilities for all outcomes, bettors can determine the overround.

Here is the formula to calculate implied probability and overround from fractional odds  (expressed as A/B) :

Implied Probability = (BA+B​) × 100

Overround = (All Implied Probabilities)−100

Where:

• A = the numerator of the fractional odds
• B = denominator of the fractional odds

Imagine a match with three possible outcomes and the following fractional odds:

Step 1: Calculate each implied probability

• Enyimba Win:
  2 ÷ (3 + 2) × 100 = 40.00%
• Draw:
  1 ÷ (2 + 1) × 100 = 33.33%
• Kano Pillars Win:
  2 ÷ (5 + 2) × 100 = 28.57%

Step 2: Add all implied probabilities

40.00%+33.33%+28.57%=101.90%

Step 3: Calculate the overround

101.90%−100%=1.90%

This is how we interpret these numbers:

• The total implied probability is 101.90%, which is slightly above 100%. This excess of 1.90% is the bookmaker’s overround or margin.
• This margin guarantees the bookmaker a profit regardless of the outcome.
• For bettors, a smaller overround (like 1.90%) means better value compared to markets with higher margins.
• Markets with lower overrounds offer better odds and more favorable betting conditions.

Impact on Expected Value

In the world of sports betting, every bettor who wants to be successful knows that long-term profitability depends on identifying value. However, there are some aspects that even the sharpest players could potentially overlook and underestimate, and that is the bookmaker’s overround and margin. These two components directly influence the Expected Value of any given bet, thus creating a built-in disadvantage for the bettors.

The way overround works is by adjusting the implied probabilities of all possible outcomes in an event, so that their total exceeds 100%, which essentially reflects the bookmaker’s margin. This overround means that the actual returns offered are slightly worse than would be ideally offered in an actual “fair market”, and as a result, bets that seem evenly matched tend to be subject to a real increase in value.

It’s also important to note that the existence of the margin is not a sign of manipulation or unfairness but rather constitutes a normal part of betting markets. However, the ability to understand its impact is crucial in empowering bettors to make smarter and more informed decisions. This way, bettors can seek out more competitive odds, use multiple sportsbooks, or even calculate their own implied probabilities to identify real value.

Overround in Parlays (Accumulators)

For bettors who seek high potential payouts, parlay bets, also known as accumulators, can be very appealing, even though they come with some hidden drawbacks that tend to be overlooked. That is, once again, the overround.

Each selection in a parlay carries its own built-in edge for the bookmaker, so when you place a parlay bet, each leg of a parlay includes a bookmaker’s margin. As a result, when more legs are combined, these margins don’t just stack up on top of each other – they multiply. This is also the reason why parlays are so attractive to bookmakers, as these bets can feel like a shortcut to large payouts, but the math rarely favors the bettor

This side effect often makes this type of bet less favorable than placing individual wagers, however, that doesn’t mean they should be avoided entirely. Blindly stacking legs is actually a common pitfall, but there are certain instances, like promotional offers, where parlays can serve as a boost by offering value. The key thing to remember is that understanding how overround works can lead to more carefully selected combinations, thus allowing for better long-term betting outcomes.

How You Can Use Overround For Arbitrage Betting

The principle of arbitrage betting is rather simple and that is to place a bet on all of the possible outcomes, however likely or unlikely to happen, using odds from different bookmakers. What makes arbitrage betting stand out is that the combined implied probabilities across those bets must total less than 100%, which means that we are now looking at a reverse overround, or even better, a negative margin. When this happens, the one who now holds the edge is the bettor.

We should also note that arbitrage betting works best with sports events where there are only two potential outcomes. Because of this, one-versus-one games where one of the two opponents must win, such as tennis, are particularly well suited to this method. Generally speaking, this type of betting may require discipline and quick action, but it still remains one of the few risk-free strategies. 

Tips on betting margins for beginners

Learn to Spot High-Vig Markets

For those that have just started stepping into the world of sports betting, one of the things that can turn into a valuable habit is to learn to recognize high-vig (or high margin) markets. All that glitters is not gold, and that is exactly the case with sportsbook odds. While they might seem appealing on the surface, the hidden margin can vary widely depending on the type of bet or sport.

Something you should always keep in mind going forward in betting with Campeonbet is that some markets are simply more expensive to bet than others. For example, same-game parlays or niche sports often carry significantly higher margins than mainstream bets on major events. So, the question is, why are these markets more expensive? The answer lies like these markets and sports. Less popular sports or more complex markets equal less data for the bookmakers, which in turn equals fewer bets to balance.

As a beginner, a good way to protect your bankroll is to exercise caution by looking beyond the odds and examining the implied probabilities. This will gradually turn you into a savvy bettor who makes more informed decisions. So, the more you understand about high margins, the more you will be able to spot high-vig markets.

Utilize Bonuses and  Promotions 

While being a rookie may seem like you have to climb mountains, there are cases where you can actually benefit from it. One of the smartest ways to reduce the impact of the bookmaker’s margin is by taking full advantage of bonuses and promotions.

At Campeonbet, offers like welcome bonuses and cashbacks are often used to attract new customers or reward existing ones, but they can also present a real opportunity for bettors, as some bookmakers offer enhanced odds, reducing the margin, and potentially giving you the sports betting edge.

However, it’s important to approach these promotions wisely in order to have the best possible results in enhancing the Expected Value. Bonuses should be treated like tools, and like all tools they come with a manual. Reading the terms and conditions and specifically checking the rollover conditions can prove to be a valuable asset in maximizing your long-term potential.

Learn to identify Real Value Betting Opportunities 

The world of sports betting is filled with probabilities, so it is also probable that there are instances where the odds offered by bookmakers are higher than the actual odds of the event happening. After all, the essence of real value betting is about finding odds that are higher than the true probability of an outcome, even after accounting for the bookmaker’s margin.

Real value betting is not easy, as it requires research, discipline, and knowing how to move around probabilities. Developing such an ability can be a long process, but it’s probably the most important step toward becoming a profitable bettor.