Bookmakers
1 Bookmaker Basics Under normal circumstances the bookmaker is the only part in a bet that definitely comes out as a winner.
In order for the bookmakers to keep doing business they need to make bets that allow them to make money each time they offer a bet. Therefore, bookmakers don't set the odds just based on probabilities. They also incorporate a margin ensuring they earn a profit on each bet.
1. A Coin Toss Example Let's take a basic coin toss for £100 as an example: The outcome is either heads or tails, so it is a 50/50 chance. One person bets on heads and another on tails. No matter who wins, the bookmaker would have to pay out the £100, leaving no surplus for him. That would be a rather bad business plan. So instead the bookie lowers the prize money. Let's now say that the bookmaker lowers the payout to £90, instead of the fair £100. This is the equivalent of offering 1.90 odds instead of the fair 2.00. Since our two punters still wager the £100, the bookie will turn a profit whatever the outcome is, since he collects £100 from one punter and pays out £90 of those to the other punter, keeping £10 for himself.
This represents the bookie margin, also known as the commission, the “Vig” or “juice”, mostly in the US. And it is what makes betting such a challenge as you not only have to pick winners, but also do so at a rate of return that is greater than the bookmaker margin.
2. Beating the Margin In other words, picking 5 winners out of 10 with each paying fair odds of 2.00 without any bookmaker commission would see you break even. However, receiving standard bookmaker odds of 1.90 with the 0.10 commission off of the fair odds of 2.00, picking 5 winners would see you make a loss of 5% on your total investment.
How so?
We outlay 10 units, picking 5 winners at 2.00.
5 winners x 2.00
=
A return of 10.
=
A return of 9.5.
We break even on our outlay of 10 units.
But with standard bookmaker commission on odds of 2.00 at 5%, we receive a return of 1.90.
5 winners x 1.90
We make a loss of 0.5. Or in other words, 5% of our outlay of 10 units.
As you can see, when people refer to “beating the bookmaker�, what they are really saying is that success in betting long term, means beating the bookmaker margin.
3. Betting without a bookie For a truer indicator of how much a bet is worth you might turn your attention to the section about betting on exchanges such as Betfair and Betdaq. On a betting exchange users bet against users, and the market is driven by supply and demand only, often resulting in better odds compared to those of the bookmakers. However, it is very important to take into consideration that exchanges charge 2-5% commission on winning bets, thus prices may look more attractive as they actually are when accounting for commission. The commission itself is actually not that different from the bookmaker's margin as a concept, but most bookmakers build in a bigger margin than 5%, so you're mostly still better off with a betting exchange.
2 How a bookmaker sets the odds To the bookmaker, pricing up an event correctly is the key to his long term profitability, and to him this is purely a numbers game.
1. The Bookies Advantage
As we mentioned in the previous tutorial, all bookmakers operate by betting to certain in-built margins on different events. For example on Premier League football many bookmakers price up to around 107%, where all the variables are widely known and they could expect three way business. Where there are more imponderables, for example, a low grade novice hurdle, they would look to bet to around 120% or more to give them some protection from clued up punters. Although a bookmaker very rarely makes the perfect book i.e laying every runner and locking in a guaranteed profit regardless of the outcome, he knows that by having an in-built margin he is favourite to win long term. He also has the right to limit the size of bets he lays and to whom, with account and liability management a massive part of how successful any bookmaker is.
2. Setting The Odds: 'Pricing Up' the Market A bookmaker will first of all price up the "real" chance of an event i.e to 100% and then alter the prices for the in-built margin he has established for the type of event. For example, let's consider an international football match, England vs France: The odds compiler believes the following odds are the true probabilities of either team winning or drawing. To determine the margin in any betting market, we simply add together the implied probabilities for each outcome.
How so?
England
60.6%
Drawn
22.2%
France
17.2%
Total Implied Probability of the Odds
=
100%
Because of the fact his customer base is primarily English and likely to pile into the home team given their recent good run, he prices the event up to a margin of 107%. England to win at odds of 1.54
an implied probability of 64.8%.
Drawn result at odds of 4.22
an implied probability of 23.7%.
France to win at odds of 5.40
an implied probability of 18.5.%.
Total Implied Probability of the Odds
=
107%
Although an England victory is clearly the most likely occurrence and indeed likely to attract the bulk of the support, the bookmaker is comfortable in the knowledge that he is laying the bets at the "right price" from his point of view. Over a long period of time he will grind out a profit and beat the punter.
This is why it is so important to take note of the margins that your bookmaker of choice is offering. If they are offering markets greater than 105% on popular leagues such as the Premier League, then you're best to shop around and find a more generous bookmaker. However, if you're wanting to be on more obscure leagues, then markets of 110% or even great, can be the norm.
3 Free bets and Bookmaker bonuses Today, most bookmakers offer free bets and bonuses hoping to persuade new customers to sign up and use them as their primary betting account.
1. How to find free bet and bonus offers When visiting a bookmaker, they will usually have a 'promotions' page that you can click on to find all their current free bet and bonus offers. Or you can simply visit our Bookmaker Bonus page to find the full range of free bet and bonus offers for dozens of the leading online bookmakers.
2. How do free bets work? Essentially a free bet is an amount of money that a bookmaker will credit to your account, allowing you to bet on particular betting markets or specific bet types. A free bet differs from a regular bet in a couple of ways. Firstly, if your bet loses, you do not lose anything.
And secondly, should you win, unlike a regular bet where you are returned the amount you bet (your stake) plus the profit, with a free bet, you receive only the profit.
3. Are there conditions and restrictions on Free Bets? The answer to this question varies from bookmaker to bookmaker and from free bet format to free bet format. Some bookmakers will offer generous free bets with a range of restrictions while others will offer smaller free bets with relatively few restrictions. What sort of restrictions apply? The most common free bet restriction is the minimum odds required. Again, this varies from bookmaker to bookmaker, with required minimum odds ranging from 1.20 to 2.00 for the bet to qualify as a free bet. Other restrictions can be the sport or league market in which the bet must be placed , the minimum deposit required, an expiry date for use of the free bet offer and the number of times you have to bet any free bet profits before being able to withdraw any winnings. Whatever the free bet offer, you should always check the 'fine print' (the Terms & Conditions) before you choose to take advantage of a free bet offer and open an account with a particular bookmaker.
4. Types of Free Bets and Bonuses Free Bets and Bonuses come in many formats. We will now take you through the most common of these.
Matching Your Stake
Possibly the most common form of free bet. Essentially you open an account and place a bet. The bookie then matches the amount of your first bet, giving you double the stake of your original bet. In other words, if you place a bet to the value of £25, the bookmaker will match that stake with a bonus of £25, giving your bet a total stake of £50. The typical restrictions for this type of free bet, are both the maximum and minimum amount you can bet. You will usually find the minimum stake to be matched in the range of £5 and the maximum £25. You'll also commonly find the minimum odds required to be at least 1.50 and often 2.00.
Free Bet Series Very much like the Match Your Stake free bet, with the difference being that your free bets are divided into a number of individual bets rather than a lump sum bonus. How does this work? Well a typical offer would look something like, Bet £50 and receive five £10 free bets. This form of offer will also likely include time restrictions with frequent expiry dates and in most cases, the next free bet in the series will only become valid at a certain date, typically after the expiry date of the previous free bet. Bookmakers place these types of restrictions on their bonus offer in the hope of encouraging regular return visits to their site.
Initial Deposit Bonus This is less common in recent times, although there are still bookmakers that offer this form of offer. Essentially you are offered a bonus on top of your initial deposit when signing up with a particular bookmaker. Typically it is promoted as a % amount on your initial deposit up to a maximum sum. For example, Receive a 50% Bonus on your deposit up to £200. A common condition however, on such an offer is a minimum number of bets to be made using your deposit/bonus (“rolled over”) before you are allowed to withdraw those funds.
Winning First Bet Bonus
In this format, you receive a bonus if your first bet is a winner. Bookmakers will often reward you with a greater bonus if your bet was on longer odds than shorter odds.
4 Betting with a Betting Exchange Betting Exchanges operate as a medium between punters, matching those willing to lay bets with those more traditional punters who want to back a winner.
They make a profit by charging a commission on winning bets and have totally altered the betting market as we know it in the last ten years.
1. Betfair The most successful exchange is Betfair. It is very simple to open and fund an account, provided you are over 18 of course and live in a country where their use is not legislated against. The biggest event in Betfair history occurred in September 2012, when Andy Murray won the US Open against Novak Djokovic, with over ÂŁ60million matched between punters. For smaller punters Betfair has given them huge value, with a minimum bet of only ÂŁ2 and the chance to play into 100 per cent books (before commission) rather than the traditional bookmakers higher margin offerings.
2. Advantages Of Betting With An Exchange Value Rather than playing against a bookmaker, the punter is playing against another punter with an opposing view, and no locked in margin of profit on any event. If he has a good opinion he can profit.
Unrestricted Size The punter is unlimited in the size he can place bets in, rather than with traditional bookmakers where the winning accounts are usually quickly heavily restricted.
Security Funds within exchanges are secure and guaranteed.
Lock in a profit/trading By laying back his original bet, a punter can secure a "no-risk" profit regardless of the outcome, provided the market has moved in his favour. i.e if you have ÂŁ100 on Liverpool at Evens pre-match and they score first and are 1-0 up, you can lay ÂŁ100 back at 1.33. This means that even if Liverpool win you still win ÂŁ67 but if they do not you lose nothing.
In-Play betting The exchanges have revolutionised in-running betting. i.e prices are available throughout any match and again without any "in built" margin. The bookmakers as a result now offer constantly updated prices on bigger events, although their prices are usually a few points underneath the Betfair price.
3. Disadvantages Of Betting With An Exchange Commission and Premium Charges. New customers winning bets are subject to a 5% charge and this is quite substantial over time and can make long term profitability very hard to achieve, while the most successful Betfair clients have in recent times been subjected to a form of "super-tax" of up to 70%.
Becoming an "action-junkie". The race by race mentality that the exchanges encourage means many punters find it impossible to keep their discipline and end up playing in every race or live event. It can become like an addictive fruit machine particularly to the novice punter.
Lack of liquidity. Much of the smaller, untelevised sports tend to be in very small size and is mainly "seeded" by robots or the exchanges themselves. It has become virtually impossible to get a bet of any size matched on certain events unless it is very close to the "off time". Horse racing for example in midweek is virtually non existent in terms of bets matched in the mornings and the decline is continuing month on month.
The Perfect Market. Pre-exchanges, the more astute punters had opinions about prices that they could profit from. Now withBetfair providing a perfect tissue to the entire betting industry it is very hard to find many errors in the market that used to be commonplace. Betfair is basically a perfect
meeting of all the brains within the betting industry, and it is often difficult to find any edge in the prices, particularly in football for example where all the form/teams etc are well known and in the public domain.
Staking. Although it is possible to self regulate i.e limit maximum amounts of deposits per day/month, many punters find themselves playing far bigger than they have ever done before, particularly with those who are not used to laying or losing large sums. There is little doubt that the "free" Betfair market has proved a tempting honey pot that many have found a very expensive adventure.
4. Conclusion & Advice The betting exchanges and principally Betfair have completely transformed the betting landscape. The apparently low margin product now forms the tissue on which all other bookmakers base their prices, and has given birth to a huge generation of successful professional punters. However, there is little doubt that the novice punter would find this a hornets nest if attempting to play into these shark infested waters, particularly on certain markets where the shrewdies certainly hold all the aces i.e horse or greyhound racing. However, for the smaller ÂŁ10 or ÂŁ20 punter, the exchanges offer fantastic value for their hobby, and they are certainly likely to lose a lot less playing into zero-margin books. To the new punter just setting foot into the world of betting, open a Betfair account but limit yourself immediately to "maximum" deposits per week of something you are very comfortable with and can afford to lose. That way, as you gain experience of using the "machine", you can find areas of strength in your betting and specialise there, avoiding the temptation to bet on everything that moves!