Betting Odds Explained

Bookmaker – Friend or foe?

It’s not by coincidence that there is a bookmakers shop in virtually every UK high street. Walk into any of these shops and you will be met with an array of colorful features, posters and betting promotions. You could be forgiven for thinking that bookmakers had lost the plot and were falling over themselves to give money away.

Quite the contrary, lurking within the betting markets and betting forecasts, the mathematics and betting odds are very much against the punter!

Who is making a money from gambling?

Visit any UK high street and you will see at least one bookmaker shop. Bookies pay wages to employees, dividends to shareholders, betting tax to the government and would not exist unless there were significant amounts of money being lost by their punters. Bookmaker’s employ odds compilers, with the necessary skills, tools and knowledge to create accurate betting forecasts. The way these betting markets are created, means that the odds are always in the bookmakers favor. As a result, the majority of punters will lose long term.

A war between punters !

It’s not so much a war between punter and bookmaker, but a war between the casual and astute punter, with the bookmaker acting as broker or middleman. Making a living from backing horses is no easy task. How many professional gamblers do you know ? Phil Bull, Alex Bird, Harry Findlay, Dave Nevison – not many right ?. The profession requires discipline, dedication and a significant amount of hard work. Success is not just about backing winner’s, it’s about backing horses at the right odds .i.e If you can beat the book, if you can consistently bet at odds higher than they should be, then you will win long term.

Few professional punters make more than 10% on turnover. For the casual punter the difference between betting a horse at 6/4 and betting the same horse at 7/4 – probably appears to be insignificant. Yet the difference between these odds is 25% in outlay. For the professional punter, always getting the lower price of 7/4 and 6/4 may mean the difference of making a profit or making a loss, long term.

Chances and Probabilities – calculating odds

It is normal for bookmakers to express betting odds in terms of percentage chances.

To translate odds into chances, simply add up both sides of the odds and divide the number on the right hand side by this number. Thus for a horse at 2/1, gives 1/3rd or 33.33% and for a 6/4 chance, gives 4/10ths or 40%

What the Punter is up against !

Imagine a three runner race where each horse has an equal chance of winning. The true odds for each horse is 2/1. The odds neither favor the punter nor the bookmaker.

Mathematically speaking, the probability of any one of the horses winning, is a 1 in 3 chance or 33.333%. Adding the individual probabilities of each horses to give 1.0 [or 100%]. No matter how many runners, no matter what the individual chances of any horse, the total true probability of all the horse winning, will always total 1.0 [100%].

Horse Name Betting Odds % Chance
of winning
Horse A 2/1 33.333%
Horse B 2/1 33.333%
Horse C 2/1 33.333%
Total over round = 100.00%

Over round

In reality, bookmakers build a bias into their betting forecasts, so in theory, no matter what the result, the bookmaker will make a small % profit. Take another 3 runner race. The total race bias is called the race over round. In this case the sum of the individual horse % chances exceeds 100 %.

The betting odds are now in the bookmakers favor and the punter will no longer be “all square” if all horses are backed. The amount in excess of 100% is the degree to which the betting odds are in the bookmakers favor. Bookmaking is founded on the principle that any horse racing betting forecast will have a certain amount of over round built into the odds.

i.e. taking another 3 runner race, where each horse has an equal chance of winning. In reality bookmakers are more likely to offer 15/8 [rather than 2/1]. Now the over round is 104%. So bookmakers will profit by 4% on betting turnover, no matter what the result

Horse Name Betting Odds % Chance
of winning
Horse A 15/8 35.000%
Horse B 15/8 35.000%
Horse C 15/8 35.000%
Total over round = 104.00%
Effect of runners on %over round

We randomly collected the race %over round for 100′s of races and plotted them against the number of runners in the race [see below].

Bookmaker over round

There is a strong positive correlation- as the runners increases, so to does the %over round/bookmer profit. For example, for a 10 runner race, the over round is approximately 117% but for a 40 runner race, such as theĀ Grand National, the over round is a whopping 140%!

How does this affect the punter?

Taking another fictitious race with the average over-round of 1.22 [122%]. Assume there were thousands of punters, all randomly picking horses with a pin, then these punters would lose 22/1.22ths of the total investment made [i.e. 18p for every every pound bet]. Or putting another way, the bookmaker would make a profit of 18p for every pound bet. The bigger the turnover, the bigger the field. Similarly, the bigger the over-round, the bigger the profit. The over-round that bookmakers build into a race is the hill that the professional punter must over come in order to make a profit from betting on horses racing in the UK.

Seek value – compare the odds!

Punters must somehow find an edge in their betting strategy. Seeking value betting opportunities is a strategy that punters can use to make a long term profit from horse race betting. The successful punter will seek to bet horses only when the betting odds are in their favor. i.e. only when the true odds [% winning probability] is greater than the betting odds being offered by bookmakers.

Odds-On uses a specialized horse racing model to create a betting market, compare the calculated odds against those offered by bookmakers, and to identify value betting opportunities.