How to calculate the odds?14th Nov 2016 |
The calculation of odds is perhaps one of the most interesting, if somewhat complicated, subjects in the world of online sportsbooking. Odds are calculated by bookies whose job is to essentially balance the books; hence the name. To be able to do this, bookies use a number of different tools and strategies to determine the actual odds which you will find at your favourite sportsbook to bet on. Odds will also need to be updated and maintained and this is why bookmaking can be such an exciting field.
Although odds calculation can be a pretty complicated subject, we have worked hard to lay down the law of the land for you. What it ultimately boils down to, at the end of the day, is one question; how do I make a profit when the outcome is unknown? Regardless of how good a bookmaker is, they still have to start with an event (like a football or a boxing match) for which the outcome is unknown and this is why betting on sports can be an attractive proposition for both bookies and gamblers alike.
Setting the actual probabilities
When bookies start out to calculate their odds, they first need to determine the actual probabilities of each outcome on which bettors can wager on. This is referred to as the real probability. There are a number of different ways to achieve this including algorithms that can essentially predict the future. Algorithms are software programs that take key data to work out possibilities. We see algorithms everywhere from weather predictions to stock prices. Bookies, however, can also use other formulas to work out the real probabilities of each event.
Regardless of whether the bookies use algorithms or not, they need to take into account several factors (key data) including historical data, expert opinions, and any other variables that might affect the outcome of the event. If the event does not have a rich set of historical data available, say perhaps who will win a song contest, then a different set of factors needs to be taken into account. Such events will also lead to higher margins to always ensure the books are as balanced as they can ever be.
Once the real probabilities have been determined by the bookie, then initial adjustments need to be made. These adjustments have to account for a.) profit margin and b.) the expected bets on each outcome. Both profit and expected bets need to be taken into account to make sure that the books remain balanced. This limits exposure and essentially spreads the variance to ensure there’s always profit to be made. How the profit is worked out on each bet can vary widely and it might not always be a simple 5% across the board for example.
The profit variance is called the vigorish, or vig for short, and will reflect the exposure a certain bookmaker has in any given market. This exposure can also be offset through betting exchanges which gives the bookmaker yet another tool to balance the odds whilst still keeping them attractive enough to ensure people place bets on them. Once everything is taken into account, the odds are offered to the general public; however like markets, odds are subject to change as events get closer to the date and news comes to light.
As we already established, the probability of the published odds is only the starting point in the odds making. Once they are published, there can be further adjustments. The easiest way to understand it is to think of sports betting as we think of financial markets. Stock prices of a particular company depend on the interest buyers show; the more people want to buy, the higher the price. The same goes for the odds, when more people are betting on a particular outcome, the higher the margin will be adjusted for that odd.
Bookmakers don’t usually wait around to see which bets will prove to be more popular than others. In most cases, they will try to predict that well in advance with some help from statistics and other data, such as which team has the most supporters. Having said that, in certain cases, odds can be updated well after they have been released to ensure they are not too skewed to one side by encouraging people to bet on a particular outcome over another and thus balancing the books once again.
Live in-play odds are much more complicated and obviously changing much faster than pre-game odds. Bookmakers don’t have the luxury of time to calculate the probabilities of all outcomes in real-time to be able to adjust the odds as fast as they are changing. Therefore, these odds are mostly calculated by algorithms. There are so many options of in-play bets, that to be safe and not to lose money, bookmakers tend to put the margins a bit higher on these kinds of odds when compared to the pre-game odds.
How to choose the best odds
When it comes to choosing the best odds to bet on, knowledge of the sport which you are betting on will always help as this can help you spot a wrong premise and thus an opportunity to win big. Boosted odds can also be another great way to increase your chances as they can offer a lower return for the sportsbook and a higher return for you. Live odds can also present a great opportunity however more consideration is due here. Always take the time to check around and try to spot opportunities for some exciting wins.