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What Are the Crucial Factors for Setting Sports Odds?

If you are interested in sports betting, you must have visited the Vulkan Bet site. You can place a bet on hundreds of matches, and different odds are offered for all these matches, right? Moreover, different odds are displayed not only for the matches but also for each of the dozens of outcomes that are likely to occur in each match. So, have you ever wondered how these odds are calculated? How do you think bookmakers calculate the odds they will offer to bettors, and why do they always manage to make a profit regardless of the match result? We answer these questions below.

Calculating Sports Odds

Let’s explain with an example from football. A football match can end in 3 ways. The home team can win, the away team can win, or the match can end in a draw. All of these are outcomes, and they all have a different probability of happening. So how are these probabilities calculated? The bookmaker, like bettors, conducts research and determines the probability of each outcome. But unlike bettors, the bookmaker can access much larger and more detailed data. Almost always, this calculation is done automatically by the bookmaker’s betting platform (i.e., SBTech). This platform has an enormous database of past match results and team performances and uses these data to determine a probability for each possible outcome. For example: 

Match: Real Madrid – Manchester United

The probabilities that a bookmaker calculates are:

  • 40% Real Madrid wins
  • 35% match ends in a draw
  • 25% Manchester United wins

Based on these probabilities, the bookmaker calculates the odds as follows:

  • 100/40 = 2.50 Real Madrid wins
  • 100/35 = 2.85 match ends in a draw
  • 100/25 = 4.00 Manchester United wins

However, these are not the odds offered to bettors as the bookmaker cannot make a profit with these numbers. We can explain the reason for this as follows:

  • Real Madrid wins bet: 400 EUR
  • The match ends in a draw to a draw bet: 350 EUR
  • Manchester wins bet: 250 EUR

Let’s imagine you placed a bet on all these outcomes with these numbers. In total, you have invested 1,000 EUR. Whichever of these bets wins, you will receive a payout of 1,000 EUR. However, for the bookmaker to make a profit, there must be a difference between the investment and the money paid to the bettor. To do this, the bookmaker adds its own commission (profit margin) to the odds it has determined in the first stage. For example, the bookmaker recalculates rates with a 5% profit margin. In this case, the odds offered would be:

  • (100-5)/40 = 2.37 Real Madrid wins
  • (100-5)/35 = 2.71 match ends in a draw
  • (100-5)/25 = 3.80 Manchester United wins

In this case, for each outcome to pay 1,000 EUR, we will need to change the stakes to:

  • Real Madrid wins: 2.37*421 EUR = 1000 EUR
  • The match ends in a draw: 2.71*369 EUR = 1000 EUR
  • Manchester United wins: 3.80 * 263 EUR = 1000 EUR

Note that the total amount we have to invest to win 1,000 EUR is now 1.053 EUR. The difference (53 EUR) is the bookmaker’s profit margin. Basically, the bookmaker has calculated the actual odds for each outcome but added its own profit margin before offering them to bettors: this is how sports odds are calculated. 

It Is Hard Even for Computers

In the past, these calculations were done by people with such expertise, but in recent years, this work is done entirely by computer programs. The biggest advantage of this is that bookmakers can freely determine their profit margins. As a matter of fact, the programs used always give the same results, but since the bookmakers freely determine the profit margin rates, it seems like the betting sites offer different odds from each other. A bookmaker can fix its profit margin at just 2% to attract attention: in this case, it will appear to offer higher odds than others. This is indeed true, but the probability of outcomes is always the same: no matter what computer program is used, the probabilities do not change because the data used is always the same.

Still, making these calculations is difficult even for computers. Because no program takes into account the luck factor or cannot include unexpected developments that may occur during the match (for example, the injury of a star football player) into the calculation. Therefore, it is always a problem that the proposed odds may become unexpectedly low or high. The bookmaker can only hope for the best in this situation: even if computer programs can complete research in hours that would take days, they can still be wrong.

 

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