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How does a bookmaker make money?

How does a bookmaker make money?

This article is likely to be interesting and useful for those, who don’t quite understand a bookmaker’s business.

Line formation

The first and the main important feature of bookmaker success is the right line formation, that is justified alignment of forces between competitors. This work is fulfilled by sports experts: they analyze the situation in detail and predict the outcome of events. On the basis of these predictions a bookmaker puts final line odds. By the way, the odds are formed inverse proportionally to the abilities of a player/a team (it means that if a player/a team is stronger, the odds on it will be lower). 

For example, the game between two tennis-players:
«Player 1» — takes leading positions in the main world ratings;
«Player 2» — a new player in the world tennis.

What do you think, who’ll win? Probably (90-95%), it rather will be «Player 1» and it’s quite understandable why.

According to the rule, the odds are formed inverse proportionally. Thus, for example, on win of «Player 1» the odds will be 1.1, and on its competitor – 10. Thereby, if you bet on the favorite of competition, you won’t get much money (100*1.1=110, net profit 10 EUR). If the second player wins, you’ll get net profit 900 EUR. But, unfortunately, «Player 2» is unlikely to win, and it means the bet is likely to be lost.

But in many situations the competitors are rather equal and we’ll have to take into consideration many nuances.

Bookmaker margin

And now we come to the bookmaker gain.

Let’s take an example where two equal rivals are met: «Player 1» и «Player 2». The odds on the win of the first and the second player are equal – 1.9. Taking into account that the competitors are equal, the probability of bet amount distribution between the players at the bookmaker will be the same. For example, let’s suggest that on the win of both the first and the second player equal number or bets are placed, 10 000 EUR on each player.

Now we’ll examine a profit calculation at a bookmaker. Let’s suggest «Player 1» has won, the bookmaker takes all money, placed on «Player (it is 10 000 EUR) and pays this money to the players, who bet right, the money amount is 10000*1.9-10000 (bet sum) = 9000 EUR. As a result, the winners get their money, but 1000 EUR is left to the bookmaker, so the bookmaker takes certain percentage. This percent is called a margin – a bookmaker guaranteed profit.

Probably, it will be interesting for you to know if the odds are not 1.9-1.9, but, for example, 2.1-2.1 and it will allow us to get a guaranteed profit from a bookmaker. It is possible, but not in the line of one bookmaker. There exists a form of gain based on such arbitrage opportunities. We’ll try to give information on this question on other pages of our site.

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