How do odds in sports betting work?

Now a days, most of new bettors ask: “But how do bookmakers set the odds of a sports event?”. This might be a good question to answer to start understanding how odds in sports betting work.

Every bookmaker has a specialist financial department or even bettors with a lot of experience in predicting fair odds for a certain event. These groups of people focus on probability calculations. This is going to help to determine what is the minimum margin that a bookmaker can offer to its bettors, this margin will be very important for the event result. This margin is considered, by bettors, to be the “commission” that bookmakers propose to its bettors.

Bookmakers analyze several factors:

• Statistics;
• History;
• Famous specialists opinions;
• Disciplinary situations of a team structure;
• Other external factors;

Let’s check the following example:

Team A 2.00 (around 50%)
Draw 3.50 (around 25,6%)
Team B 3.90 (around 28,6%)

If we sum up the probabilities 1X2, in this case , Team A winning, the draw and Team B winning, we’re going to have the probability of 104,2%. Although it should only be available 100% of the probabilities, which means, we have a margin or commission of 4,2% that the bookmakers provide.

This is the margin or commission, what we call the Market Margin or “Over-round” or “vig”.

But why do odds change before an event begins?

Besides all the factors bookmakers analyze, written above, the real reason that make bookmakers change their odds is clearly the bettor.

And why?

Let’s see the same example. If, by any reason, there is a bettor that believes Team A odds is wrong via information he had that the best player from Team B is injured. The same bettor places a bet on the team A winning with a huge investment capital, that almost reaches the bookmaker limits. In this specific case, this bettor is saying that Team A odd is wrong and it should decrease.

For the bookmaker this shouldn’t be a problem. Because by decreasing the odd, the next bettor will buy an odd much lower and will get less profit. Which means, what generates the odds changing on sports betting it’s the information that reaches bookmakers.