Have you ever tried to explain to a friend or family member how sports wagering works? With all the numbers flashing on the screen it can look quite complicated at first. Luckily, it’s actually quite simple and easy to learn.
One of the first questions many people ask is how the sportsbook makes money? People spend endless hours arguing about trap lines, reverse line movement and sharp/square action. People think that sportsbooks need to have 50 percent of the action on each side to be profitable. The thing people fail to recognize is that sportsbooks don’t operate at 0 percent margins.
Generally speaking, a sportsbook margin is the “vig”, “juice” or “commission” that a book takes. When using decimal odds, most sportsbooks use 1.90 odds (or -110 in American odds) for most sports that have a handicap (spread) or total (over/under). Let’s use Game #1 of the NBA Finals as an example. The Over/Under is 218.5 is (1.90) each way.
There are only 2 possibilities that can happen with this Over/Under 218.5. Either the total score of the game will go over 218.5 or it will go under. It’s literally just like flipping a coin and choosing heads or tails. The thing is, the sportsbook isn’t offering 2.00 odds (or EVEN in American odds) on the outcome. If they were, then the sportsbook would be operating at a 0 Percent Margin.
Let’s pretend there were two bettors that wanted to win $1,000 on the game. If one was to take the Over 218.5, they would need to wager $1,100 in order to win $1,000. The person taking the under would also have to wager $1,100 to win $1,000. Thus, no matter what the outcome of the game was, the sportsbook would be making money.
They took in a total of $2,200 and only paid out $2,100. Instead of operating at 0 percent margin, the sportsbook is operating at a slightly higher than 5 percent margin which is par for the course when looking at most sportsbooks.
Realistically, sportsbooks have different margins on different sports. Lets dig into the Euro Cup odds for Italy and Spain match on the 1×2 Market. Currently, the odds are the following:
Italy = 2.47
Draw = 3.20
Spain = 3.10
To calculate what the margin is, simply divide the corresponding numbers by 100.
After doing the simple math, the sportsbook is operating at a 3.92 percent margin, which is lower than both the soccer and NBA match.
Over time, margins will make or break a sports bettor’s bankroll. The higher the margin on a fixture, the less money the sports bettor will make. Therefore, it is ideal to make sure you are getting the best margins possible. After all, as fun as sports wagering is, it all comes down to math in the end!