Bookmaker Commission

Bookmaker CommissionThe bookmakers always win, right? But how do they do it? The method that bookmakers rely on the most is the commission that they charge. Different names are used to refer to the commission. Some call it the Vig, the Juice, the Margin, while others know it as the Cut, the Percentage or the Take. The commission is the percentage that bookmakers take out of betting odds in order to take their cut of the action, regardless of the outcome of an event.

The percentage that is charged is different from bookmaker to bookmaker. Sometimes the vig can change from game to game, as well. Most commonly, bookmakers offer higher or special odds in order to attract more punters, and therefore to earn more money.

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Bookmaker’s Commission Explained

Bookmaker's Commission ExplainedA common misconception is that odds are built up on who bookmakers think has the best chance to win in the game. However, this is not entirely true. Bookies may have a favourite team or player, but all they do is business. They set the betting odds in order to collect money from every side of the book. This will guarantee them profits, regardless of the result of the game.

How does a bookmaker ensure a profit? The answer to that question is very simple – by charging a commission. Every time you bet, you pay a commission. The bookmaker takes a cut of the whole amount of the betting odds. This percentage is called the Theoretical Hold.

If bookmakers have a correctly balanced book, the commission will be left over after they pay out winnings. Bookies offer so many markets, so the book is not always balanced, but it surely guarantees a profit after the end of every action.

100% Juice

100% JuiceThe clearest way to explain what is a 100% Market is to take a look at the “even money” bets. This means that the two sides of the market will attract the same action, i.e. the probability of losing and winning is equal, 50-50.

The best example that can be given in order to explain this is the one with the coin toss. When you toss a coin, there are two outcomes – there is a 50% possibility that the coin will come up tails and 50% chance of coming up heads. The odds would be an even 2.00 on tails and heads. If you bet 1.00, you would win 1.00. This is what a 100% Juice means and it is also known as “fair odds”. In a few words, you would get back the full value of your return.

However, bookmakers need to generate profits, too, because after all, this is business. Therefore, they would take their slice of the cake by offering betting odds from 1.85 to 1.99 as “even money”. This means that the betting platforms do not offer the full price you should take. Basically, this is how bookmakers take their commission.

Calculating the Market

sports betting odds sheetSo a 100% Juice offers no benefit for the bookmaker, nor for the punter. If the market is calculated at less than 100%, there is a higher value in the betting odds. When the juice is greater than 100%, this means there is less than the absolute value in the market.

Calculating the commission is not a difficult task. First, you need to turn the decimal odds into the percentage chance which they represent. Let’s take the odds of 1.65. In order to convert the odds, you need to divide 1 by 1.65, which will be equal to 0.606. You do the same calculation for every outcome of the event, then you need to add the results together and multiply the total by 100. You will have the market percentage, which is also referred to as “overround”.

In order to understand the calculation, here is an example. Let’s say that you want to place a bet on the football match between Barcelona and Real Madrid. Real Madrid are at odd of 2.00 , while Barcelona are at odds of 3.90. The odds for a draw are 3.50:

Real Madrid probability: 1 / 2.00 = 0.500
Barcelona probability: 1 / 3.90 = 0.256
Draw probability: 1 / 3.50 = 0.286

The total result is equal to 1.042, therefore the overround is 104.2%, meaning that the market is less valued.

Calculating the Vig

Calculating the VigThe next step is to calculate the vig. There are a few methods that you can use to assess the juice, but here is the easiest one: the Juice = [ 1 – (1 / {the overround / 100})] x 100. If we take the odds from the football match example, the formula would look like this: [1 – (1 / 1.042)] x 100, which will result in 4%. Therefore, the betting odds of the football game have been juiced with 4%.

Most bookmakers offer a display of the overround on every market. You may not want to calculate every single outcome, especially if you place bets on horse racing, where the market is of 12 or more runners. Moreover, there are many calculators available on the Internet, which will do the hard work for you. But if you feel confident enough, you may do it yourself.

Who Pays the Commission

Who Pays the CommissionThe next question one can ask is who pays the commission? There are two answers to that question. The first one is that those who lose pay. And it is actually very reasonable, because winners take back their initial stake and collect their winnings. The winnings are a percentage of the money that losers put down and the remaining sum goes to the bookmakers. You can easily guess the second one – the winners pay the commission. This is backed up by the fact that winners do not get the full value of the bet they initially placed.

Therefore it is said that the more you win, the higher the percentage of the juice will be. If you win 50% of 100 bets at 1.90 odds, you must pay 5% vig. But if a punter wins 80 of 100 at 2.00 odds, one will generate a 160 profit. But if the odds are 1.90, you will have a 152 return, which obviously is less than 160. The conclusion is that you need to pay 8 units of 100 units bet, which means that you pay 8% not 5%. This is why it is suggested that the more you win, the more you need to pay.

The Price of the Vig

The Price of the VigIt is time to take a look at betting value when you shop for the best markets. In order to do so, we need to compare even money odds and see whether there is an increase or a reduction in the vig.

It is very important to carefully choose the markets you place your bets at. A slight difference between the percentages may be critical. If you place an even money bet on a market with 2.5% Juice with a 53% winning strike rate, you would receive a 3.35% return. But if you bet on those markets with a Juice of 5%, the return would be only 0.7%.

Let’s say that you start with a 1000 bank and you place bets of 1% units until you place 1000 bets. You place even money bets and hit 53% winning strike rate. The difference between 2.5% and 5% Juice is mentioned above, so you would know that placing bets with 2.5% Juice is the better choice. Therefore, after 1000 bets your bank would grow to 1397, meaning that the return is 39.7%. On the other hand, if you bet with a juice of 5%, the return will be just 7.2% (1072).

Finding the Best Markets

The conclusion is quite obvious – punters are recommended to place bets at bookmakers, which offer higher value markets. However, this is a fact that many people do not understand. They often make mistakes and do not profit. You simply can compare the bookmakers’ odds and see the difference for yourself. It may seem like a small percentage that odds of 1.90 are slightly less than those of 1.95, but choosing the right market will tip the scales in your favour.

To sum up, bookmakers will not eliminate the commission. The only thing you can do is to find a sportsbook that offers reduced vigorish. After all, they are doing business and if it wasn’t for the vig, bookies would go bankrupt in no time. Therefore, the juice is not going anywhere, so take a look at the odds, offered by different bookmakers and find the best vig.

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