Bookmakers have to make their business profitable, otherwise, they wouldn’t exist – and none of us would be able to place our bets.
To ensure they stay profitable, bookies have to add something called commission to their odds. Sometimes, this commission is called the Vig, sometimes it’s called the juice.
But how do bookmakers calculate their vig? How can you calculate bookmaker vig? We find out in this article.
How Do Bookmakers Set Betting Odds?
We’ve got a separate article all about how bookmakers set odds, which you can find here.
But let’s just go over things briefly for a moment:
Bookmakers don’t set accurate odds.
In other words, they don’t set odds that reflect accurate probability. This is because, if they did, they would likely lose out … and eventually go out of business.
Instead, bookmakers select their preferred winners and losers (of course), but they set the odds so that different punters will be encouraged to bet on either side. Player A will come along and back one side of the bet, and Player B will come along and back the other side. Both believe they can win.
By setting their odds in this way, bookmakers are enticing punters to come along and place bets, but they’re also taking a big chunk out of the betting odds so as to ensure their margin/juice/profit is safely intact.
How To Calculate A Bookmaker’s Juice
Unfortunately, when it comes to sports betting there is no such thing as a fair market.
Because if there was, the bookmaker wouldn’t make a profit. It would then go out of business.
As such, the advantage is always slightly on the bookmaker’s side.
Look at it like this: Let’s say that a market is 100% and that this 100% represents a fair one. When it’s less than 100%, the advantage lies with the punter. When it’s over 100%, the advantage lies with the sportsbook because there is now less value to be found.
To calculate a bookmaker’s commission, let’s start with 1.65 odds.
If we divide 1 by 1.65, we get 0.606. For each possible outcome, we do this before adding them together and multiplying the result by 100. This gives us the market percentage.
Here’s an example of a soccer game that has three possible outcomes (home win, away win or tie):
- Home win: 2.00
- Away win: 3.90
- Draw: 3.50
Let’s see what that looks like after we’ve made our conversions:
- Home win probability: 1 divided by 2.00 = 0.500
- Away win probability: 1 divided by 3.90 = 0.256
- Draw probability: 1 divided by 3.50 = 0.286
Our total, then, is 1.042, which gives us a market margin of 104.2%.
What does this tell us?
Well, next we need to calculate the average commission paid on each bet, minus the margin:
- Commission = (1 – (1/market margin))* 100%
- Commission = (1 – (1/1.042%)* 100%
- Commission = (1 – 0.96)* 100%
- Commission = 4%
As we can see, each time you bet $100, the bookmaker takes home $4 on average, which gives them a 4% commission rate.
Enjoyed this article? Make sure to check out the rest of our site for more tips and tricks on sports betting.