How do bookies set odds? - Explained

When you load onto a betting app, odds from various sports will fill your screen. While many know how to play the odds and take a swing at beating betting apps, not everyone is up to date with the technicalities of how bookies set their odds.

Bookmakers balance mathematical probability with market behavior while setting odds in their sportsbooks. This process involves many statistical models, real-time data feeds, and risk management tools. All betting apps with bonuses have to walk a thin line while setting odds because they must protect their profit margins while remaining competitive enough to attract bettors.

Bookmakers make odds by calculating the true probability of each outcome and adding a built-in profit margin. The latter ensures that the betting app remains profitable regardless of the result, so the “house always wins” saying is true.

Odds compilers for sports betting analyse various elements, including:

• Historical performance data

• Current form of teams and athletes

• Injury reports and team news

• Home/away advantage

• Weather conditions

• Public sentiment

Here’s a basic example of how bookmakers set odds:

• Based on statistical analysis, the bookmaker's odds compiler determines the following for an NBA match:

  • Celtics have a 65 percent true probability of winning

  • Trail Blazers have a 35 percent true probability of winning

• Without any margin, "fair" decimal odds would be:

  • Celtics: 1.54 (100 ÷ 65)

  • Trail Blazers: 2.86 (100 ÷ 35)

But the bookmaker adds a five percent margin, and this adjusts the odds to:

• Celtics: 1.47 (implied probability: 68 percent)

• Trail Blazers: 2.70 (implied probability: 37 percent)

Notice that 68% + 37% = 105%, not 100%. That extra 5 percent is the overround, the bookmaker’s edge. If you convert these to American odds, you'd see something like Celtics -213 and Trail Blazers +170.

If the bookmaker takes £1,000 in bets on each side (£2,000 total):

• If Celtics win: They pay out £1,470 to Celtics bettors (keeping £530)

• If Trail Blazers win: They pay out £2,700 to Trail Blazers bettors (losing £700)

The betting app may adjust the odds further to encourage more action on the Trail Blazers' side and balance this situation.

Betting odds can change before events to balance betting volume or due to new information. When a large amount of money flows toward one side, bookmakers can make those odds less attractive while lengthening the odds on the opposite outcome because they want to avoid any potential losses due to imbalance.

Breaking news can also create immediate odds adjustments. A star NFL quarterback getting injured hours before the kickoff can cause changes in odds.

Bookies make money through overround, the surplus in odds. You can notice the overround in betting apps by adding up all the odds; they’ll exceed 100 percent.

Bookies’ profit margin is also called vigorish, or vig, and it tends to be around 4-to-5 percent.

In an example:

• Punter A bets £100 on over 2.5 goals

• Punter B bets £100 on under 2.5 goals.

  • Total pool: £200

  • Winner receives £191 (£100 stake + £91 profit)

    • Bookmaker keeps: £9