The odds that you see on virtually all betting sites are, essentially, approximations of chance, but with an added layer on top of the actual probability. This is called the vig, juice, or bookmaker’s edge, and it’s generally the way in which it makes money from virtually every bet.
Another highly popular name for it is the overround. This denomination stems from the fact that, when you turn the odds into actual probabilities, you’ll realise that they don’t add up to 100%, but to more than that. What surpassed the 100% mark is the overround that we’re talking about.
Not all vigs are the same, which is nothing more than a symptom of competition among bookmakers. Some are adding more to a set of odds than others, while certain bookmakers may simply have the vig placed in less-than-competitive settings because of misplaced trust in certain scenarios. It happens.
This article will teach you how to interact with this mathematical reality at sportsbooks. We’ll tell you how you can turn odds into probabilities, why the result signifies a price’s fairness, and how to actually use this price to find out the real probability based on the applied vig.
It can help you find a more suitable price to bet on, so all the info here can be instrumental in traversing the market carefully!
Turning odds into implied probability is how you identify the total overround
Given that we’re dealing with three types of odds, you’d need to know that each of them has its own formula for determining the same implied probability. That’s how you find out the likelihood that a certain scenario happens based on the odds that the bookmaker provides for that outcome.
The formulas that you need to know, applied to a case when the probability is 25%, are the following:
- Decimal odds → 1 ÷ odds → 1 ÷ 4.00;
- Fractional odds → Denominator ÷ (Numerator + Denominator) → 1 ÷ (3+1) → 1/4;
- American odds → 100 ÷ (Odds + 100) → 100 ÷ (300 + 100) → +300.
Now, let’s use a theoretical case with odds that are closer to what you’ll find on the market; we’ll use the 3-outcome scenario found in sports like association football.
- Favorite has 1.91 odds of winning, which translates into about 52.43% implied probability.
- The draw has 4.07 odds, which is about 24.57%.
- The underdog has 3.69 odds, or about 27.12% impliedblem probabilities.
Add them up, and you find out that the total is 104.12%, so what’s above 100% is the overround.
The sum of the overall probabilities also tells you how fair the bookmaker’s prices are
There’s no direct threshold that would tell you exactly how fair a price offering is, but you can use comparison for it. Without naming the bookmakers, analyzing the several series of odds sourced from betbrain.com tells us that a sharp bookie adds about 2-3% to the overround when it comes to the winner market.
Sharp bookies are those that usually set the tone, showcasing the closest odds to the actual probability rather than the vigged ones. The winner market is the type of result (win or loss in two-way result sports, like tennis or basketball), but also in sports where a draw is possible, so it comes with three outcomes.
For more niche or pinpointing-heavy markets, like player proposition bets, correct scores or future bets (outrights), the vig can surpass 10% even for these.
Commercial bookies basically take the sharp odds and add a layer on top of them, which is why you’ll see them with double the vig. That’s why 4% is usually the floor for such a bookmaker, so the example given above is pretty indicative of a fair, but still commercial sportsbook.
The vig for 3-way sports like association football can go as high as 8%, whereas props can go as high as 10, 20, or even 30% higher, depending on how well-paying the odds would be for a correct guess.
You want to use these calculations to give yourself the chance to bet on odds that have the least amount of overround, but why is that?
Explaining the overround’s role and real value for the bookie
The overround in sports betting is a margin added to each result. Regardless of the outcome that hits, you pay the overround since the bookmaker distributed it across each result, hence across each set of odds. It serves as a balancing scale, even if a bookie’s role is to settle probabilities, so it never loses too much.
What you need to know is that the overround isn’t automatic profit. It would be truly profitable if it leaned on a result, which would basically mean that the sportsbook itself gambled by relying on a certain competitor to win. The bookie’s role is to win regardless of who gains on-field victory.
This reality hits the hardest when you consider parlays (accumulator bets). Each market you add as a bet to your slip will be a set of odds that comes with its own vig. That vig compounds over the course of your betting slip, and more legs to your parlay mean a bigger vig that the sportsbook placed on your bet, so it’s a proportional take on what can be a really big payout if you win.
How can you find out what odds without vig are?
To find out the actual probabilities that each set of odds suggests, you need to use arithmetic to strip out the vig and find the approximate set. The multiplicative method is the simplest to use: you calculate the implied probabilities, then the devigged probabilities, and then convert them into fair odds.
Let’s work the example given above with the association football match:
- We already know the implied probabilities and the total that already has an overround (104.12%).
- For the favorite to win, we have 52.43% ÷ 104.12% = 0.5027. That’s 50.27%, which translates as 1.99 in decimal odds. On a $100 bet, you’d get $8 more if you win.
- Draw: 24.57% ÷ 104.12% = 0.2359, so 23.59%, so it’s 4.24.
- An underdog’s chances would be around 26.14%, so it’s a 3.83 price.
Each devigged set of odds would provide a slightly bigger win if there’s no edge. What this tells you is that, basically, the real implied probability of each outcome can give you a closer look at a price without this edge that goes toward the sportsbook.
Why using odds comparison tools can help you
Odds comparison tools allow you to put prices side by side, and that saves you time if you’re looking to bet on odds that have the lowest overround. On a practical level, it allows you to pick the best offering and maximize the profit you make.
However, there are two major caveats that you need to remember:
- You need to separate the process win from the actual win. The former is to decide to go for the best set of odds considering the market (i.e., you went for the best option you had), while the latter is when you simply are right and win the bet.
- This win is in the margins specifically because bookmakers are very close to each other. Many of those you could go for may have the same odds. However, if at least one of them has different odds, and it shows that they have a smaller overround, or that their price is virtually close to what a devigged price would look like at other bookmakers, then it’s a better deal.
Naturally, for this to work, you need accounts at most of these sportsbooks, which takes time and, let’s face it, money. Moreover, you have to dedicate quite a lot of time to studying the market, which may not be the easiest or most convenient thing in the world. As for the upside, these margin wins are incremental.
Conclusion
The key takeaway from the bookmaker margin is that it’s like the air that we breathe, only applied to sports betting. Every sportsbook has it, and that’s the way that it is because that’s how bookmakers add an edge for themselves. It’s a normal practice. So, if you decide to bet, remember this fact and don’t forget about responsible gambling!