The margin a bookmaker applies on the betting odds is the number one information a bettor should know in order to increase long-term profits, with lower margins favoring the bettor and larger margins eating into betting profits. Here’s a simple guide on how to calculate margins on 1X2 odds.
While novice bettors tend to compare odds, smart bettors know that the real price a bookmaker is charging is the betting odds’ margins.
Let’s take an example of a soccer game with three possible outcomes (home team to win, away team to win, draw). For the first week of the Premier League 2016/17 season, Pinnacle offered an opening price of 3.41 for Hull City to win at the KCOM Stadium against Leicester City, who were priced at 2.39, with the draw set at 3.19.
|Hull City to win||3.41|
|Leicester City to win||2.39|
Calculating 1X2 odds’ margin in two simple steps
1. Convert the odds for all three possible outcomes into decimal probability
2. Solve for the equation:
Margin = (1/Home Odds) + (1/Away Odds) + (1/Draw Odds) – 1
Step One: The first step in calculating margins on 1X2 odds is to convert each 1X2 market into a decimal chance of winning. That’s the equation inside each set of brackets above: (1/Odds).
For the home team, in this case Hull City, the decimal probability is (1/3.41) = 0.293 (which symbolises a 29.3% chance of winning), while the draw is (1/3.19) = 0.313 and Leicester is (1/2.39) = 0.418.
|Hull City to win||3.41||0.293|
|Leicester City to win||2.39||0.418|
Step Two: Now simply substitute the numbers above into the rest of the formula to calculate the margin.
Margin = (0.293) + (0.418) + (0.313) – 1. Therefore the margin is 0.024 – or 2.4%.
Comparing bookmaker’s margin
The same game sees another popular bookmaker offer odds for Hull City at 3.10, Leicester at 2.10 and a draw 2.90. This works out to a huge margin of 12%, which is more than five times more expensive than Pinnacle.
In practical terms, this means that if you had placed a $100 bet on Hull City to win on the 1X2 market you would have won $31 more playing with Pinnacle than by placing the same bet with another major online bookmaker.
At Pinnacle, we don’t just believe that it is important to offer the best odds; we are also on a mission to educate bettors on how to make more sophisticated decisions. But don’t take our word for it. We encourage you to check our margins and compare us to other bookmakers, before deciding what is the best sports betting deal online.
Due to our unique risk management model, we are able to offer better value than other bookmakers. This is why Pinnacle is the number one choice for sharp bettors.