Overround Explained: The odds offered by bookmakers are unlikely to correspond exactly to the actual probabilities of the outcomes in any market happening, as no bookmaker is likely to operate without trying to offset its costs (and trying to make a little something on top)! Bookmakers are likely to be taking money from lots of customers over the possible outcomes – they may try to guarantee themselves a profit regardless of the result. Bookmakers may start a market by working out the actual probabilities of the outcomes in a market occurring and then incorporating a profit margin into the odds, but as money comes in on the market they will often adjust prices to attract less or more money to particular outcomes – e.g. they may want to limit their liability on an outcome they already face a big payout on if it comes through, or they may want to attract more money to different outcome(s) to one(s) they already have taken a lot of money on to guarantee a profit or minimise potential losses. How do bookmakers use overround to try and make profits?
As an example, here are the odds a bookmaker was offering, at the time of writing, on an upcoming Rugby Union match. There are only three possible outcomes in this market:
The home team wins: 15/8
The match is drawn: 16/1
The away team wins: 2/5
You will need to apply the following equation to the fractional odds: denominator/(denominator+numerator)
Home Team Win: 8/(8+15) = 8/23 = 34.8% [h]
Draw: 1/(1+16) = 1/17 = 5.9% [d]
Away Team Win: 5/(5+2) 5/7 = 71.4% [a]
[h] + [d] + [a] = 112.1%
- As these are the only 3 possible outcomes in this market, if [h] + [d] + [a] don’t equal 100% the odds cannot correspond to the actual probabilities of each outcome (as the sum of the actual probabilities will always equal 100%, if the market consists of the full set of possible outcomes).
- If the sum of the percentages is above 100%, the market is in the bookmaker’s favour. The bookmaker could guaranteed itself a profit, if it takes the right ratio of bets on all outcomes. The amount over and above 100% is called the overround.
- It is unlikely any bookmaker will offer a market at less than 100% (unless they have made a temporary mistake) – otherwise all the bettor would have to do is place a bet for the appropriate amount on each of the outcomes and guarantee themselves a profit.
The main point of this article ‘Overround Explained’, is so you can use this method above to calculate the best markets to bet on at a given bookmaker – look for the lowest % after using the method above, e.g. 115% is better than 120%. A bookmaker may offer different amounts of overround on different markets. You should also avoid accumulators as the effect of any overround is compounded, in the bookmaker’s favour.