When you need to buy a new car or TV, what variables do you consider before handing over your money?
There’s a strong chance you have a preferred brand in mind, or you may have decided to purchase the item from a shop or seller that you trust.
How important is price in your purchasing decision? The likely answer is very important indeed.
To butcher a phrase from a 90s TV gameshow; “the price needs to be right” – and that is especially the case in betting.
Remember, betting odds represent the bookmakers’ probability of an event occurring, but they also represent the value you are getting from a particular bet.
Quite simply, the better the odds you take, the more money you will win in the long run.
Why Do Betting Odds Matter?
Let’s say that you have an account with two bookmakers, and one is offering 2/1 on Liverpool to win the Premier League and another is offering 5/2. You want to bet £10, so here is the maths to consider:
- Bookmaker A – £10 at 2/1 = return of £30
- Bookmaker B – £10 at 5/2 = return of £35
So, in this isolated example, we have made an extra £5 simply by placing our bet with bookmaker B.
Let’s say you place 100 bets a year at better odds, winning an extra £5 in profit for each. The outcome? You could make an extra £500 a year on your bets, simply by shopping around for the best prices. Of course all of those bets would need to win, but that is for a different article.
Like we say, the price really does need to be right in sports betting.
How Do Bookies Decide Their Odds?
In the old days (and, to some extent this is still true), bookmakers would employ their own odds compilers who would set their prices for all of the betting markets that they offer.
That has changed somewhat these days, with more and more bookies deploying algorithms and bots to set their prices based on human input and machine learning.
We know that odds represent probability though, so shouldn’t all bookies’ prices be the same across the board?
They would certainly all be very close if their odds compilers were good, but that’s before we consider the addition of their ‘vig’ or overround.
What is the Bookmakers’ Vig?
Let’s go back to the example of buying a car and think about the business model of a used car salesman.
If he buys a car from a seller for £2000, would he then sell it on his forecourt for £2000 as well? Of course not. That’s not how businesses make money. Instead, he might sell it for £2500, thus applying his profit margin or ‘overround’ of £500.
And that, essentially, is what the bookmakers’ vig is. This is how betting firms make their money.
It’s known by many names: vig, juice, overround, margin, cut, the list goes on. In basic terms it is a profit percentage that the bookmaker wants to build into their prices, ensuring a profit on each market whatever the outcome.
Let’s use a coin toss as an example as it is binary and easy to follow. With a perfect book of 100%, the bookmaker might offer odds of even money on heads and the same on tails – but in this scenario they cannot expect to turn a profit in the long run.
So what is more likely is that they would offer 10/11 on heads and 10/11 on tails – that way, if 500 bets were placed on ether side of the coin they would still expect to make a profit on the losing bets while paying out slightly under the true odds to all winning bets, leaving them with their margin.
So Bookies with Lower Vig Have Better Odds, Right?
In theory at least, the bookies with the lowest vig offer the best odds on the whole.
However, there is much more to it than that, and in some cases you will not always get the best odds on certain markets with low vig bookmakers. So, just because a firm offers generous prices on particular sports and events, they may increase their margin for other market types.
And don’t forget that this variance can occur within a single race or football match. Take a look at the teams or horses on an odds comparison site – you will see that one bookie may be best priced for the favourite but be well below-par for the rest of the field.
We can actually file sportsbooks into two camps: sharp and soft. Sharp bookmakers are very quick to react to market sentiment – meaning that their odds tend to reflect the ‘true’ probability of something happening. Their aim is to attract serious punters looking for a slice of value.
It would be wrong to suggest that all soft bookmakers have higher vig; it’s just that they aren’t so sharp and on-the-ball in their pricing because they are aimed at more casual bettors who tend not to be as price sensitive.
How Do You Calculate the Bookies’ Overround?
To calculate a bookies’ vig or overround, let’s again use the coin toss example and consider the possibility of an outcome occurring:
- Probability of heads = 50%, thus true odds would be Evens.
- Probability of tails = 50%, thus true odds would be Evens.
- Market = 100%, so the bookies’ profit margin is 0%.
Now, let’s tweak the numbers a bit to reflect how a bookmaker can turn a profit in a basic example like this:
- Odds for Heads = 10/11 (probability of 52.4%)
- Odds for Heads = 10/11 (probability of 52.4%)
Add those overrounds together and the bookie has created a 104.8% market, meaning that they will make 4.8% profit on all wagers that they accept. Clever, eh?
You never see a bookmaker begging for loose change, and this principle helps to explain why.
Which Bookies Have the Lowest Vig?
To close, we thought we’d publish some vig charts for sporting events of note. Remember, this is just a small sample of sports and markets, but it gives you an idea of perhaps where you might want to place your bets. Remember, the smaller the percentage the better value for money you are getting (generally speaking).
Manchester City vs Liverpool (Match Odds)
Manchester City vs Liverpool (Both Teams to Score)
The Investec Derby (top four in the market only)
The Masters Golf (top six in the market only)
As you can see, those bookmakers all move around in the rankings proving that you can never blindly rely on your usual bookie to provide the very best value.