How we calculate Odds Payout
Bookmakers will never pay out the max 100% of the stakes they receive, they will keep some of that as their profit. Payout margins are usually around 95%, which means a bookmaker will make 5% profit on the markets they produce. This isn’t an exact science of course and depends on the different outcomes that are backed, but a bookmaker will try to balance the book where they pay £95 for every £100 they collect.
When creating betting odds, bookmakers use their knowledge, who they think will win, how strongly that selection is fancied and a margin. This is the calculation that forms the odds that are offered to you by the bookmakers.
Using the game above between Liverpool and Chelsea, we can calculate the payout margins on that game. Liverpool are 2.10, the draw is 3.60 and Chelsea are 3.40. Converting the odds for all three outcomes to percentages, then adding them together will reveal the over round that the bookmakers have put in, giving us their profit margin.
Liverpool: 2.10
Draw: 3.60
Chelsea: 3.40
(100 / 2.10) + (100 / 3.60) + (100 / 3.40) = 47.62 + 27.78 + 29.41 = 104.81
The closer this number is to 100 means that you are getting a better deal from your bookmaker, the 104.81 is lower than 105, which means it is a good payout in this example, meaning you should bet now, and this is something that many new sites aim for.
To calculate the payout percentage we do one more calculation here
1
——————————————————– =0.952
1 / 2.10 + 1 / 3.60 + 1 / 3.40
0.952 means that 95.2% of the money is paid out, giving a calculated margin of 4.8% and something that a new customer should be looking for when signing up to a brand new betting site.
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