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How do Bookies Set Odds? | How do Bookies Calculate Odds?

Have you ever wondered how do bookies set odds? When you visit the websites of bookmakers, you will see that each one offers different odds for the same event. What is the reason for this? Where do they get these numbers and how are betting odds set? More importantly, how do bookies make money, is it possible for them to “lose” too?

These are all normal questions and believe us, every bettor has asked the how do bookmakers set odds question at least once. Well, we are here to answer all these questions and more: First, we will explain how do bookies set the odds, and then, we will give you a list of the best odds bookmakers.

After reading this guide, you will learn how do bookmakers generate odds and how to find the bookmakers with the best odds margins!

Best Online Bookmakers in 22 October 2021 – Updated List

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Rating 9.35 out of 10
10
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Rating 9.30 out of 10

How do bookies calculate odds?

Let’s start with the obvious question: How do bookies set lines? Actually, they just repeat the same things you do on a larger scale. What do you do before placing a bet? You track the performances of the teams and players throughout the season, do research, and try to predict the winning probability of each team to win a match, right? Bookmakers do the same, but they have access to bigger resources than you.

  • Big bookmakers have specialized software and odds compiler platforms that they only use for this job. These platforms collect data 24/7, analyze it, and calculate probabilities for any outcome that can happen. This is a much more complex task than you might think, because they even take into account factors such as weather and motivation. In other words, computer software determines what the closing odds and starting price (SP) values ​​will be for an event, for example.
  • Medium-sized bookmakers rent odds compiler platforms offered by third parties. In other words, they get service from companies whose only job is to calculate these odds – they do not have their own software.
  • Small-scale bookmakers simply copy the odds of large and medium-sized bookies. This is the reason why you see the same odds on most bookmaker sites.

Odds calculations start weeks before the match and continue until the match starts. In some cases, odds calculations can be made even for an event that will happen one year later (e.g. FIFA 2022). However, as we will explain below, these numbers will change as the event date approaches.

How are sports odds calculated with bookmaker margins?

We explained how do bookmakers calculate odds but this does not answer how they make money. Is it possible for a bookmaker to “lose” an event? The answer is no: As long as there is not a push bet situation (which is pretty rare), the bookmaker never loses and always makes a profit no matter what the outcome of that event is. And they even won’t lose any money in a push bet situation, they just don’t make a profit. So, how is this possible? 

To answer this question, we must first talk about the “house edge” concept. Bookmakers have a house edge just like casinos, and this value indicates the profit they will get from your bets. For example, if this value is 3%, the bookmaker will make a 3 EUR profit from every 100 EUR bet, regardless of the outcome of the match.

  • Let’s say we are playing a heads/tails game. We bet 1 EUR before each throw.
  • If we win, the payout will be 2 EUR: 1 EUR bet + 1 EUR win.
  • The house edge rate of such a game is zero. There are only two outcomes in this game and the chances of both occurring are equal (50%).
  • If you were to play this game on a betting site, you would be offered the following: “If you win, the payout will be 2.10 EUR, but in order to play the game, you must pay 2.20 EUR.” So if you win, the bookmaker will pay you a total of 4.30 EUR (2.20 bet + 2.10 win).
  • Sounds good right? Instead of winning 2 EUR, you have a chance to win 4.30 EUR. More money!

Let’s talk about how do bookmakers set football odds so you can understand this concept better. Imagine that there is a match between Team A and Team B. We explained how do bookies set odds for matches like this: They simply calculate the probabilities of all outcomes. Let’s say that the software they use produced a result like this, after all these calculations:

OUTCOME

PROBABILITY

ODDS (*)

Team A Wins
PROBABILITY
35.45%
ODDS (*)
1.75
Draw
PROBABILITY
29.10%
ODDS (*)
2.60
Team B Wins
PROBABILITY
35.45%
ODDS (*)
1.75

(*) We recommend reading our how to read soccer odds article to understand what these figures actually mean.

The most important thing in this table is that when you add up the probability percentages, the result is 100 (35.45 + 29.10 + 35.45). Therefore, the house edge rate is zero: this figure must be over 100 for the bookmaker to make a profit. Therefore, the bookie sets the rates offered to the end-user, aka bettors, as follows:

OUTCOME

PROBABILITY

ODDS (*)

Team A Wins
PROBABILITY
37.00%
ODDS (*)
1.50
Draw
PROBABILITY
31.00%
ODDS (*)
2.40
Team B Wins
PROBABILITY
37.00%
ODDS (*)
1.50

When you add the probability percentages in this table, the result is 105 (37.00 + 31.00 + 37.00). This figure means that the house edge is 5%, which means that the bookmaker will make a profit of 5 EUR from each 100 EUR bet no matter which of these outcomes occur. In other words:

  • Bookmaker first finds the actual probability values for a given event, totaling 100. It calculates the true odds using implied probability.
  • However, it offers bettors these values by putting its own margin on top of them: So bettors do not see the real values.
  • The more the bookmaker goes above 100, the more it increases its profit margin.

Why do bookmakers keep changing the odds?

Why do you sometimes get dropping odds or enhanced odds as the match date approaches? What is the actual difference between low odds vs high odds? The bookmakers set the odds of a specific match one week earlier, for example. If you track these odds, you will see that they constantly change: Sometimes you have odds lengthen or drift and sometimes you have odds shortening. There are two reasons for this: 

1. The first odds determined by the bookmaker show the situation at that moment

So for example, if Team A is shown as the “favorite” one week before the match starts, the bookmaker determines the odds accordingly. But a week is a long time: Team A can lose this position, for example, due to a player change. In other words, developments that may affect the outcome of the match also cause changes in odds.

2. The bookmaker tries to make all bets as equal as possible for the outcomes it offers

  • It is not good for the bookmaker to have too many people bet on the favorites or betting on the underdog: Ideally, every outcome should have an equal number of bettors.
  • For example, if the proposed bet is “who wins the match”, there are only two outcomes, Team A and Team B. The bookmaker wants an equal number of bettors to place a bet for both. By doing that, it can simplify things and reach a higher profit margin.
  • In real life, of course, it is not possible to achieve full equality, but if, for example, the number of people betting for the underdog is too low compared to the favorite team, the bookmaker tries to encourage new bettors by raising the underdog odds to level the bettor numbers as much as possible.
  • In other words, one of the reasons for the odds changes is that bookmakers try to obtain the same number of bettors for different outcomes.

How are odds set in sports betting exchanges?

So, how are odds set in exchanges? Unlike bookmakers, sports betting exchanges do not set any odds. Each and every member of the exchange can offer odds for a specific event and you can purchase that offer. Likewise, you can offer your odds for any event too. In other words, exchanges are like farmer markets: The exchange itself is there just to supervise (*) and each member is free to create their own bets & odds. As can be guessed, this is an advantage: Usually, the odds at exchanges are much better than traditional bookmakers. 

(*) Sports betting exchanges do not have a house edge: In order to make a profit, they charge a small commission from each winning bet. Betfair exchange, for example, usually charges a commission of 5%. But this may vary according to your accumulated Betfair Points, which can offer you discount rates on the commission.

The “value” bet: Finding the best odds

Value bet (for example, value football betting) is the name given to the bets that offer the lowest house edge values and best possible odds. In other words, you can make an actual profit by choosing these bets. In order to find value bets when betting on sports, we recommend the following:

Tip

👉 Stick with popular sports such as football, basketball, and tennis. In exotic sports, the bookmaker margin (house edge) can be very high. 

👉 Instead of the “accept all odds movement”, prefer “best odds guaranteed”. The first one says you are ok with any kind of odds changes until the event starts, whether it is an increase or a drop. The second one says “if your odds drop after placing the bet, we will change them with higher odds –if this is the case- at the start of the event”. 

👉 The house edge is very low at even odds. This means the payout is equal to the wager amount, i.e. if you wager 10 EUR, the payout is also 10 EUR. 

👉 As always, do your research and compare odds from different bookmakers for a particular event.

FAQ about how do bookmakers make odds

The general rules do not change: A software running in the background analyzes the developments during the match and determines what the probabilities are for the various outcomes. According to these results, different odds are offered for different outcomes: All of these calculations are done in seconds.

The explanations we made above are also valid for horse racing: They use software that tracks and analyzes the performance of horses and jockeys throughout the season and determines their winning probabilities accordingly.

They can and they do. By changing the odds, the bookmakers try to guarantee a profit and increase its rate. They are free to offer any odds they like until the event starts.

Small-scale bookmakers often do not have the budget to do odds analysis, so they either get their odds from a source that serves multiple clients or copy them from other bookmakers.

None. As we explained above, favorite and underdog bets should be as equal as possible in order for the bookmaker to profit. If there are too many bets on a particular side, the bookmaker cannot make a profit, so it tries to equalize all bets.

You learned how do bookies make odds: Start practicing today

We explained how do bookmakers set their odds with examples: You know now why they always win no matter what the actual outcome is. You can use this info to your advantage: Since you learned how bookmakers create odds, you also understood how to find the best offers. Check the bookmakers to find the value bets or simply pick one of our recommended top 100 bookmakers: We already reviewed all of the biggest betting companies out there. In any case, your next step after learning how do bookies set odds is to make some practice: Place your first bet today!