How Do Bookmakers Generate Odds?
Published on 21/09/19
Many bookmakers hire a mix of mathematician’s and knowledgeable sports experts to generate odds, and their aim is to stack those odds firmly in their favour.
How Bookmakers Try And Stack Odds In Their Favour
Bookmakers generate odds for horse races and other sporting events, because they want punters to bet with them. But you don’t have to take their odds if you don’t think they offer value for money.
When betting first became legal, punters didn’t have much choice when it came to taking odds. There wasn’t competition amongst bookmakers there is today, and it was much easier for bookies to build in a percentage for themselves.
For example, if a bookmaker offered odds on a two-horse race, football match, or tennis match in which both selections were deemed to have an equal chance, bookies used to offer 10/11 each of two – when the real odds is even-money.
That means if a bookie laid £1,000 on both selections, he would have a turnover of £2,000. But, regardless of which selection won, he would only pay out £1,909 – guaranteeing himself a profit of £91 or 4.5% of his turnover.
The above is a simplistic example of how bookmakers generate odds, but the principle of building in a percentage for themselves remains the same no matter how many selections there are in a sporting event – it just takes more skill on behalf of the bookie.
Of course, each selection doesn’t have the same chance of winning and the bookies aim is to try and offer odds that represent a slightly less chance than the real chance of each selection winning.
Your challenge as a punter is to try and spot where the bookies have made a mistake. For example, if you think that a bookmaker is offering 5/1 about a horse that you think should be a 3/1 chance – that’s when you should bet. It’s your opinion versus theirs and, when you’re right more often than you’re wrong, you’ll make long-term profits from betting.
The Different Ways Bookmakers Formulate Their Odds
Horse racing betting markets can be especially volatile, as there are several different influences that can affect these markets.
Online bookmakers are normally the first bookmakers to offer odds on a race. Ante-post odds on the biggest races of the year such as the Cheltenham Festival races or Royal Ascot races are often available months.
Many bookmakers also offer ante-post odds on the biggest races each week, often pricing up big Saturday races on Monday afternoon shortly after the 5-day declarations have been released. These markets are then reformed after the 48-hour and 24-hour declaration stages. These are the easiest races for bookies to prices up as there is normally a great deal of form and statistics from previous editions for their odds compilers to consider.
Most smaller races aren’t priced up until the night before and these are more difficult races for the bookmakers to pile up. Some big bookmakers will have their in-house odds compilers do it, whilst some will pay an outside firm to do it. Some of the new sportsbooks even simply copy the odds of other bookmakers.
Bookmakers will try and build in a big percentage into their early prices for these races, as these types of markets are open to a greater degree of fluctuation. There are normally early gambles on horses the moment the odds are announced. There are then early morning movers, and other gambles throughout the day.
Another major influence in horse racing markets is the on-course bookmakers. On course betting patterns can often be completely different due to the type of people who bet on course. Favourites are especially popular with many people who are simply having a day out at the races, as are outsiders with occasional punters who are looking for a quick and easy return on their money.
The other major influence is the betting exchanges such as Betfair and Betdaq and millions of pounds are bet on the exchanges each day and these markets. The difference between the exchanges and the bookmakers is the exchanges don’t build-in a percentage to try and make a profit, because they simply take a percentage of everyone’s winnings. That’s why many punters consider the exchanges offer a true reflection of what the real odds are about any selection in any horse race or other sporting event.
The good news is that all these influences make betting markets and odds more competitive and, as many fluctuations are based on the betting activity of non-professional punters, there are lots of opportunities for professional punters to exploit.
Beating The Odds
Anyone who tells you that making money from gambling is easy is as a liar – but today’s competitive world of bookmaking does offer the professional punter a good chance of beating the odds.
You need to put the work into studying the form, deciding what are the real odds about a selection’s chances, and betting when you get those odds or better.
If you don’t have time to put the hours in that a professional punter does, you can always follow the advice of a professional tipster for a small monthly fee.
Remember – it’s the bookies job to generate odds and your job to beat the odds!