Overround Explained & Betting Margin Calculator (2020)
In this article we explain all you need to know about overround including what it is, our easy-to-use betting calculator how it is calculated and how it is important from a punter’s perspective in the quest for value and profitable betting.
Overround, Betting Margin and Payout Calculator
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Table of Content:
Overround & Margin Explained
It's no secret that bookmakers are here to make profit and one of the big reasons they are highly successful at doing so is because of something called ‘overround'.
So, what exactly is overround and how can we use it to be better bettors?
What Is Overround?
The term overround (also known as ‘margin’, ‘vigorish’ (vig) and ‘juice’), refers to a bookie’s inbuilt profit margin on any of its betting markets and is based on all possible outcomes. For example, if a book is 110%, then the overround is 10%.
This inbuilt profit margin is an integral component of how bookmakers operate, which, once understood, can help identify value.
Why Does A Bookie Need Overround?
When a bookmaker lays odds on a particular outcome, essentially what they are doing is offering a statistical probability of that outcome happening.
Let's use a coin toss as an example.
With just two outcomes on an individual coin toss – either heads or tails – the statistical probability of either is 50%. Adding both probabilities together gives 100%. These ‘even money’ probabilities, expressed as odds, would be 2.00 in decimal or 1/1 as a fraction.
Odds such as these, which accurately represent the statistical probability of the outcome, are known as ‘true’ odds. However, you will rarely (if ever) be offered true odds on any market.
For anyone serious about making the transition from a recreational punter (the bookie’s friend) to a profitable bettor (the bookie’s enemy), it is vitally important to understand this.
The term ‘bookmaker' comes from balancing the book. In the coin toss example above, the bookie has to take an even amount of money on each outcome to balance the book – hence the term ‘even money’.
Taking £50 on heads and £50 on tails at true odds of 2.00 gives the bookie a ‘rounded’ book, meaning they will be guaranteed to break even no matter what the outcome is.
On the one hand this is good for the bookie, as there is no risk involved in a balanced book. However, bookies, like any business, exist solely to make a profit, so this would ultimately be a pointless exercise. There is no risk, but nor is there any reward or profit. It’s this need to build in a profit, whilst minimising the risk that explains why the bookie’s overround exists
So that’s the what and the why covered. Now we need to know the how. How do bookies achieve an overround?
How Does A Bookie Achieve Overround?
We’ve seen what a ‘perfect’ or ‘rounded’ book looks like for two potential outcomes (the coin toss) with true odds of Evens offered:
- Heads = Probability 50% = (True) Odds 2.00
- Stake £50
- Tails = Probability 50% = (True) Odds 2.00
- Stake £50
- Total staked = £100
- Total Payout = £100
- Profit/loss = £0
It’s important to note at this point that a ‘rounded’ book does not rely on two (or more) outcomes having an equal probability as with the above example.
If we look at a football match, ignoring the possibility of a draw, we may rate the two teams differently.
So, for example, Team A is a 6/4 shot versus Team B at 4/6.
The implied probabilities are thus:
- Team A: 6/4 = 2.50 = 40%
- Team B: 4/6 = 1.67 = 60%
Remember, this is for illustrative purposes only. It does not yet include any overround and is therefore unlikely to ever be found in a real life market.
If £50 was again staked on each outcome at these odds and Team A wins at 6/4, the bookie’s liability would be £25.
- Total staked = £100
- Total payout = £125
- Liability = -£25
If Team B wins at 4/6, then the bookie’ would make a profit of £16.67.
- Total staked = £100
- Total payout = £83.33
- Profit = £16.67
In the above scenario, the bookie may make a profit of £16.67. However, they may make a loss of £25. This is quite clearly an unacceptable level of potential exposure or ‘risk’. It would also be an ‘imperfect’ book.
As we have seen, the absolute minimum requirement is to balance the book to ensure that the bookie at least breaks even, no matter the outcome. To achieve this, the bookie is therefore required to take different amounts of stakes on either side of the market.
In this case, the bookie would have to limit the amount of stakes they take on Team A, relative to Team B in order to balance the book. That would look something like this:
- 6/4 = 2.50 = 40%
- Total stakes on A = £40
- Total payout if A wins = £100
- 4/6 = 1.67 = 60%
- Total stakes on B = £60
- Total payout if B wins = £100
So no matter the outcome here, the total staked would be £100 and the total liability would be £100. That gives the bookie a ‘rounded’ book and guarantees they break even. It is, however, also pointless as they have to build in a profit.
That’s where overround comes in, so here’s a simple illustration of how the bookie engineers this.
As we’ve seen, ‘true’ odds require the sum of all possible probabilities to add up to 100%. A straightforward Win/Draw/Win market looks like this with the following odds and implied probability:
- Team A: 23/10 = 3.30 = 30.3%
- Draw: 23/10 = 3.30 = 30.3%
- Team B: 6/5 = 2.20 = 45.5%
The sum of all three implied probabilities is therefore:
- 30.3% + 30.3% + 45.5% = 106%
As you can see, the sum is over the rounded book figure by 6%. It is this additional percentage that is the overround. As a general rule, anything below 10% is considered a good betting opportunity.
So, using the example above, for every £100 staked on this market, the bookmaker is guaranteed a profit of £6 no matter the outcome. They protect this margin by ensuring that they keep a rounded book by sticking to the appropriate ratio of stakes on each of the three possible outcomes based on the implied probabilities above.
Of course this is all (hopefully) a fairly simplistic way of introducing the concept of overround. The bookies themselves rely on complex models and technology. It’s not always possible to follow the original ratios; for example, if a large amount of money is wagered on one of the outcomes.
This is when market movement will be triggered, as the bookie offers more attractive (longer) odds on the opposing sides of the market in order to tempt more punters in to re-balance the book. The technicalities are not so important to understand, however the underlying principle is.
So, that’s the what, why, and how of the bookie’s overround covered. However, there are still a number of other important points to note.
Calculate The Overround & Shop Around
The overround is not always the same. In the previous example the overround was 6%. That’s not set in stone though, and can vary wildly between different firms and markets.
Generally, the overround will be lower on peer-to-peer betting exchanges than it is with the high street bookies.
It’s also important to note that for multiple selections and accumulators, the overround is compounded by each additional selection. It’s not 6% of the whole, but rather is added for each of the selections individually.
In a double (assuming that the overround of each component selection remains the same 6%) that becomes 6% + 6% = 12%.
In a treble, 6% + 6% + 6% = 18%, and so on. With this in mind, it's no wonder bookies love accumulators (take it from us – they're not worth it).
It’s also vital to compare prices (and thus overround) on different markets that offer the same bet. The overround can be, and frequently is, different, so this is an important consideration in order to stay on the right side of the value and avoid leaving money in the bookies’ pocket.
Consider the following examples of different markets offering different prices with varying levels of overround on essentially the same bet.
If we break these bets down to calculate the overround, with the help of our odds converter calculator, we see the following:
Draw No Bet
- Team A: 5/4 = 2.25 = 44.4%
- Team B: 4/7 = 1.571 = 63.6%
- Sum of implied probabilities = 108%
- Overround = 8%
Alternative Asian Handicap
- Team A: 0.0: 13/10 = 2.30 = 43.5%
- Team B 0.0: 3/5 = 1.60 = 62.5%
- Sum of implied probabilities = 106%
- Overround = 6%
As you can see the Draw No Bet market comes with an overround of 8%.
The overround on the Alternative Asian Handicap market is a more favourable 6% in this case. The difference can be seen more clearly however if we compare the potential returns on a £10 wager.
Team A – Draw No Bet
Wins if Team A win, returns your stake in the case of a draw and loses if Team B win. £10 staked on Team A DNB at 5/4 returns £22.50, a profit of £12.50.
Team A 0.0, Alternative Asian Handicap
Wins if Team A win, returns your stake in the case of a draw and loses if Team B win (ie the same bet). This time you’ve staked £10 on Team A 0.0 at odds of 2.30. If this bet wins, your return is £23.00, a profit of £13.00.
So £10 staked on different bets, but with the same outcome, will either return you a profit of £12.50 or £13.00. Only a 50p difference, granted, but that 50p is still 5% of your initial stake and is always better in your pocket rather than the bookies’. Plus, imagine that 5% on all of your stakes. It soon mounts up, so be aware.
Overround is merely a tool used by the bookies in order to give them a built-in, risk-free profit margin.
By knowing the what, why, and how of overround, you will have a greater understanding of how the odds of your chosen bet relate to the ‘true’ odds of your predicted outcome.
An informed punter is a better punter, and has a far greater chance of becoming a profitable punter over time. ThePuntersPage.com is your friend in this quest – helping you differentiate yourself from the recreational punter who is the bookies’ friend. So look out for the bookies overround on your next selection and good luck!