How Do Bookmakers Set The Betting Odds?
Most bettors ask how the betting odds are set by bookmakers. That’s why we thought about doing this article to explain the bases of betting odds and reveal all the secrets.
To make it clear from the start, this is not an article to show why 1.90 / 1.90 are available instead of 2.00 / 2.00, the kind of odds (British, Decimal, American etc), how we convert odds into mathematical probabilities and vice versa. We will talk about how the bookmakers come to the conclusion that certain odds (for example why 1.60 and not 1.50) should be given, which are the reasons why the odds oscillate (and sometimes even more) and see if a sudden oscillation may even be the sign of an betting match.
What “SECRETS” you will find in this article:
- Setting odds
- Who sets the odds?
- How are the betting odds set?
- Setting “fake favourites” in certain sports
- What is important to understand about setting odds
- Why the odds oscillate
- How do injuries or other major events count?
- The oscillation of odds in unbalanced matches
- Why the biggest odds change before the start whistle is blown
- Occurrence of value bets
- Dropping odds – sign of an arranged match for betting?
- Why do the odds differ from one bookmaker to another?
- Why does the payout differ from one bet to another?
- he occurrence of safe bets due to differences in odds
- Best betting odds
1. Setting odds
1.1 Who sets the odds?
In the first instance, the odds are set by traders, that is to say, by the employees of the bookmakers who only deal with this. Not everyone gets to be a trader, but only those who have solid knowledge of mathematics, statistics, probabilities. and maybe even psychology. Now you can ask yourself the following question: “Does each bookmaker have its own traders?”” Yes, but that does not mean that everyone is calculating those odds from 0.
First and foremost the odds of a sporting event are established by the traders of the world’s most financially powerful gambling operators. This category includes operators such as Pinnacle, SBOBet and Betfair.
The other operators take into account the odds set by those listed above, at least partially if not entirely. However, we are of the opinion that the really small bookmakers (here we refer to street bookmakers or online bookmakers only for the market in a single country) account almost entirely for the odds set by the most powerful bookmakers in the world.
1.2 How are the betting odds set?
Less experienced bettors think odds are set according to real odds as a bet to win. Although this may be partly true, things are in fact much more complicated than that. Bookmakers are not interested in offering real odds, but “commercial” betting odds that are attractive to all customers, no matter what they are betting on. A bookmaker wants bettors to bet on all the possible outcomes of a bet, and total losses and gains are pretty much the same regardless of the outcome of the bet.
Example: suppose that on a bet with two possible outcomes we have equal odds of 1.90 for both options. In such a situation, the bookmaker has not set probabilities of 50% because both results have equal chances of success, but because they anticipate that they will bet equal amounts on both options. For example, if you bet a total of € 1M on one option and € 1M on the other, the bookmaker wins € 100k regardless of the outcome, and this is the bookmaker’s aim.
Practically, the operator targets a secure profit through the set profit margin. If the bookmaker offers a 90% payout on that bet and a 10% profit margin, then he wants to win those 10% regardless of which bets the customer prefers and with what outcome that sporting event ends. Let’s take another example to get a better understanding of what it is all about.
Example 2: We assume that a bookmaker anticipates that over / under bet has equal winning chances for both options. But traders predict that 60% of betting money will go “over” and 40% “under”, and this will actually be the main aspect to be taken into account.
The truth is that in the long run bookmakers are always winning and not necessarily because there are more who lose than those who win, as would a regular bettor think (although this is as true as possible). For a sports betting site, it is sufficient for the wagering amounts to be equal to those lost because they earn constantly from the profit margin on each bet.
Steps to set odds
Taking into account those written above, there are three main steps to take to establish odds.
- Step 1 – First, it is anticipated how much per cent of the total bet will go on each betting option.
- Step 2 – Decide on payout and profit margin.
- Step 3 – Do the necessary calculations to see what rate corresponds to each possible result.
EXAMPLE: we have a bet on “Total Goals: Over / Under 2.5”. The bookmaker decides that customers will probably bet almost equal amounts on both options, so he decides to offer 50% chance to score both over 2.5 goals and under 2.5 goals. The bookie also decides to pay a 95% payout. In this case the odds on that bet will be 1.90 / 1.90.
1.3 Setting “fake favourites” in certain sports
What few know is that in niche sports or even in popular sports where it is difficult to find relevant information on betting operators, they resort to a technique that involves establishing “fake favourites.” In particular, this trick is used to bet on horse racing and dog racing, but what exactly does it consist of?
Suppose we have a horse race with the following competitors:
- Magic Moon
- Mystic Elf
- Les Gan
Let’s say the operator anticipates that Zattar is the real favourite, and that Magic Moon starts with the second chance. But what does the bookmaker do? Takes advantage of the fact that most bettors do not know how to properly analyse a horse race and do not even know where to get relevant information from, so it puts Yasmin the favourite according to the odds. Why would he do that? Because most bettors choose to play their favourite by believing that they have the best chance of winning. And so the odds can look like this:
- Yasmin @ 3.00
- Magic Moon @ 5.00
- Zattar @ 6.00
- Les Gan @ 17.00
- Mystic Elf @ 26.00
However, they will not give the real favourite a very large share, because there are also bettors (few in number) who really know how to properly analyse such races and find real favourites.
In popular sports, such a technique would never work because bettors are much better informed and the information available on the net is much more. Anyone who has heard of Manchester United and can find tons of news and articles about it, but how many have heard of a horse called “Yasmin”?
1.4 What is important to understand about setting odds
Although there are some basic elements that traders take into account in determining betting odds (such as anticipating betting trends), no one from the “outside” knows the exact formulas. In fact, they take into account many more factors than those listed above. On the other hand, although no one knows exactly how to calculate, many of those who have been betting for years are able to accurately anticipate the approximate odds that will be offered for a particular game.
However, one thing is clear. Many sports experts, mathematics and psychology experts are working with these bookmakers, who have a say when it comes to the offered odds. When odds are given, the intuition of the players’ response (ie their betting trend) is more important than calculating the real probability that the event will take place. And no matter how good you are with statistics and numbers in general, and how many “programs” you have, it’s never easy to predict how a mass of people around the world will think. And no matter how clever these employees are, it is impossible to anticipate what will happen, and so we get to point 2 of our article: the oscillation of odds.
2. Why the odds oscillate
A lot of foreign sites believe that odds are changed based on new information that bookmakers have from a particular match. For example, if an important player is injured, the odds for the team to win will increase. Although this is partly true, betting tendencies are important. And to this agree some well-known sites (not many, but most professional, not the common ones). This is why a key player from the host team is injured for nothing; if the bettors continue to bet massively on that team, the bookmaker has no interest in increasing the odds because it will be against his own interests.
No matter how professional the traders may be, it is impossible for them to anticipate exactly how bettors will bet. Plus, trends can change from one hour to the next, and then the odds have to be constantly changed and balanced. Let’s say for a prediction of over / under 2.5 goals, initial odds of 1.85 / 1.85 are offered. If 60% of betting money goes to “over 2.5” then the odds for this bet will drop, and for “under 2.5” it will increase. If, then, the world changes its mind and there are many who bet on maximum two successes, the odds change again, and so on.
2.1 How do injuries or other major events count?
After reading what we wrote above, you might say we may not be right because you have always seen that bookmakers are changing odds after something notable happens. If the scorer of a major team is injured, then the odds of that team will almost certainly decrease. This is true, but also because traders anticipate that the new information available will change the betting tendencies, which is often the case.
If an important player from a Colombian second league team would be injured, the victory odds for that team will not fall immediately because such information will not reach the ears of the bettors, and then neither betting trends should not change too much.
2.2 Oscillation of odds in unbalanced matches
In a very unbalanced match, a bookmaker will try to offer outsiders the most attractive odds for the world to bet on this and not just the favourite. In most cases, the favourite will actually win, and the bookmaker knows this, and is therefore interested in bets running in both directions, not just one. When the favourite wins the house, he wants not only to pay money from his own pocket, but also take it. Professional gamblers know this and consider that such bets on a very unbalanced match are not profitable in the long run and prefer to avoid them. On the other hand, most of the bettors will be quickly bewildered by these attractive odds offered to outsiders and the chance to win a significant amount of money from a shot.
2.3 Why the biggest odds change before the start whistle is blown
The betting odds are in a continuous oscillation, but the more we approach the start time of a game, the more and bigger the oscillations are. This is because many bet only a few minutes or a few hours before a game starts, which is understandable because everyone expects to have fresh information. The more you bet, the more oscillations occur.
For a similar reason you will see that in a second or third hand game you will not be able to bet a lot of money 3-4 days before it starts, but the limits are raised as the match approaches. At first, there is not much liquidity on that game, and then the bookies are cautious in offering the possibility of wagering large sums in one shot. The more these liquidities increase, the higher the limits.
2.4 Occurrence of value bets
The fact that bookmakers change odds according to betting trends leads to the occurrence of value bets, ie bets where the odds are higher than the real probability of winning. Suppose we have a new “over / under” bet where more bettors count on a poor match in success, so the odds reach 2.00 for over and 1.80 for under. If more people bet on a result does not mean implicitly that the result and has greater chances of success. Perhaps that “over” prediction has a real 60% probability of winning, and so at a 2.00 it becomes a value bet.
Of course, you need a complex analysis model in order to accurately estimate the probability of winning a bet, and as a rule, only professional gamblers (which are very few in number) have it. But surely if the bookies set the odds only by probability and did not take betting tendencies into account, then bets would no longer exist. No bettor in this world can have an analysis model as good as a bookmaker simply because the operator allows him to invest hundreds of thousands or millions of dollars in software, equipment, analysing information, hiring the best traders, etc.
Considering the information above, it is quite obvious that there are much more chances to find value bets after already betting big amounts of money on a match, and especially on bets where odds have oscillated a lot. And because most bettors choose to bet on favourites, you’ll probably find underdog “value bets”, especially when it comes to “Match Winner” bets.
2.5 Dropping odds – sign of an arranged match for betting?
Is the sudden drop in odds a sign of a tricky match? It could be, but it is not mandatory. We assume that two teams fix the game, and the closest people to players start to massively bet on a certain outcome. The odds of that result will drop dramatically for bookmakers to balance potential gains, which is understandable. On the other hand, for various reasons, a fake rumor that a match is fixed is spread on the internet. Even if the information proves to be incorrect, there will be enough people to bet and lower those odds.
As a rule, bookmakers will not drop their odds on their own initiative even if they have reasons to believe that something dubious will happen to a match, but will let them balance on their own according to the betting tendencies. Of course, things change if the bookies have reasons to be cautious and start to establish odds in line with this situation. We have seen several times during the last stages of the Serbian Championship when teams in the last places received odds of 1.20 – 1.50 to win on the field of teams at the top of the standings. We also saw matches in Italy where an equal result received the first odds of only 1.40 – 2.00. But just because they have incredibly suspicious odds, it does not necessarily mean that something dubious will also happen.
Think that those players are not completely detached from reality. Even if they plan to fix the match, if they see the press, bettors or bookies anticipate that arrangement, they will find out these things and will be more cautious and even give up the original plan in order not to attract unwanted attention on them.
3. Why do the odds differ from one bookmaker to another?
The first reason why odds are different from from one bookmaker to another is more than obvious: betting trends may vary from operator to operator. Maybe at a match between Arsenal and Chelsea, at Netbet punters bet more on the hosts’ victory, and at Betano they bet more on the victory of the guests, and then implicitly we can expect some differences in odds. Then there is also the payout, which can sometimes be higher and sometimes lower.
3.1 Why does the payout differ from one bet to another?
Online bookmakers also count on competitors when determining the odds of a match. Usually the bookie that comes first with odds at a particular game will, in most cases, provide a fairly low payout. Those who come up with odds afterwards will try to come up with a more attractive offer than the competitors. The more bookmakers offer odds, the higher the payouts. This is why, for example, in an Arsenal vs. Chelsea match, the payout will be much higher than the one of an unknown basketball match, even if you bet on both matches on exactly the same site.
Other variables add here. A certain bookmaker can occasionally come up with more attractive odds than competitors at a certain betting option, even if he has nothing to gain from this in the short run. He may prefer not to make a profit or even lose money on a particular game! Why would he do that? When he offers the most attractive odds on the market for a particular bet, many bettors will prefer to place that bet, and so the bookie earns some new customers and persuades the old ones not to go elsewhere. These things will, of course, be beneficial in the long run.
Different strategies and priorities
Operators often have different strategies and priorities, and this is reflected in the offered odds. Bettors can benefit from this; there are different sites on the internet where you can see where you find the best odds for a particular match and bet type and it is good to bet where the higher odds are. Ideally you should have an account with the best licensed betting sites and put each bet where odds are better.
Odds are only part of the basic strategy each bookmaker has. A bookmaker could offer lower odds for some matches, but could compensate by very tempting promotions. Marketing, free bets, welcome bonuses, loyalty bonuses, attractive contests, betting and customer support improvement, etc; all of these can also be part of the basic strategy of bookmakers.
If an online bookmaker has a good year and profit is more than expected, the leaders may decide that it is time to take certain risks by placing their own bets. Thus, they can offer at a certain sporting event odds that do not necessarily reflect reality, with the risk of betting more on one option than another. Usually in such situations they rely on certain information that they only have, and most bettors do not. If they are right then they will increase their gains even more.
3.2 The occurrence of safe bets due to differences in odds
Of all the reasons given in this article, sometimes there may be big differences in odds from one bookie to another, and there is also the possibility of arbitrage, a strategy that involves placing sure bets. A sure bet is betting on all the possible odds of a bet at the highest odds in the market so that no matter the final outcome of the match, a profit will be made. For example, if a Unibet football game has 2.10 odds of “over 2.5 goals,” Sportingbet offers 2.00 odds of “under 2.5 goals,” if you bet 487.8 EURO at Unibet and 512.20 EURO at Sportingbet you will have a guaranteed profit of 24.39 EURO, regardless of the outcome of the bet.
Unfortunately, today, the “Arbitrage” strategy comes with more disadvantages than advantages so it’s not worthwhile to use it.
4. Best betting odds
As we said above, odds vary from an event to another. No bookie will always have the best betting odds, so it’s good to have more than one account at a time and place each bet where the odds are better.
You can make exceptions when you can also benefit from an attractive promotion, or you want to bet on an option that is only available with a single bookmaker.