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What is a Betting Overround?

'Overround' can be simply defined as the practice of factoring in the profit margin which is implemented by bookmakers, and is best displayed as a percentage. You will most often see Overround mentioned in relation to horse and greyhound racing, with ITV racing displaying the Overround percentage before each race when talking through the runners.

The Overround will be different between bookmakers, as it is determined by the odds they are offering on each selection.

Whilst the famous old adage 'you never meet a poor bookmaker' has a ring of truth to it there is some complicated maths that goes into successfully running a betting company, but how exactly do bookmakers make money?

In this article we will answer that precise question, examining the concept of the overround, which is fundamental to understanding this topic. We will see how the overround is calculated, how odds are created, how to look at odds as percentages of probability of outcomes and why that is important. 

You might be wondering why this is useful to you as a bettor, understanding Overrounds can help you find better value from different bookmakers and also plays a key part in using the Betfair Exchange to further your betting strategy.

Bookmakers and punters alike have to understand the mathematics behind calculating and setting odds in order to lay or back bets successfully and profitably.

Bookmakers are always trying to make a profit and understanding how they go about this can help you spot the best odds around and how to avoid backing selections at poor odds. In addition to this, taking advantage of bonuses or free bet offers is key to profitability as a bettor.

The more you know about bookmakers’ calculations and techniques when it comes to sportsbook betting the more likely it is that you’ll generate a profit on an exchange, where you have the opportunity to essentially become the bookmaker.

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What is the Overround?

To explain the Overround with an example let’s take the case of a full time result market on a Premier League match of Liverpool vs Manchester City. In this scenario you have three potential outcomes that are represented as 1 (home team wins), X (draw) and 2 (away team wins).

Say the bookmaker feels the approximate probabilities for the full-time result are 40% for a Liverpool victory, 30% for the game to end in a draw and 30% for City to return to Manchester with three points for the win.

The odds presented by the bookmaker are 7/5 for 1 (home win), 11/5 for X (draw) and 12/5 for 2 (away win). Let’s look at those odds in a bit more detail. In the UK and Ireland fractional odds are used, whilst in Europe the familiar format is decimal odds and with both there is an associated implied probability.

For the odds quoted the model looks like this:

1 (home win) = 7/5 (fractional odds) | 2.40 (decimal odds) | 41.67% Implied probability 

X (draw) = 11/5 | 3.20 | 31.25%

2 (away win) = 12/5 | 3.40 | 29.41%

Then let’s add up the total implied probability for the three possible outcomes of the game:

41.67% + 31.25% + 29.41% = 102.33%

The numbers (prices or odds) and their associated implied probabilities provide the bookmaker in this instance with an overround of 2.33%, which guarantees the bookmaker a profit, regardless of the final score in the fixture. An Overround closer to 100% means that as a bettor you are getting better odds, as the bookmaker is making a smaller theoretical profit on those odds.

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An Introduction to Laying and Backing

One of the key concepts to grasp in betting is that of laying and backing, which are the two sides of any bet. Say you want to back (bet on) a draw in a big football match at a specific price, then you need someone (a bookmaker or another punter on an exchange) to lay that bet at the price (odds) you are willing to take. 

Laying a number of bets and keeping a record of the odds and the stakes put down in a book or ledger is in fact where the name bookmaker comes from. The bookmaker offers odds on each possible outcome of an event, set their odds and then ensure that they take an adequate amount of money staked on each outcome, thus guaranteeing a profit whatever the final outcome is.

For online bookmakers in the digital age, most of this work is done by algorithms and using a hefty amount of computer power across a vast array of markets and on millions of selections per year. One of the key elements of these calculations determined by the bookmakers’ digital algorithms is the overround.

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Thinking About Accumulators

In the earlier example of the 2.33% overround from the 1X2 Liverpool vs Man City bet you might think that is not much of a profit margin for the bookmaker. Given the hundreds of thousands or even millions of bets taken by the bookmaker each year those profits start to add up.

Indeed, bookmakers can also compound their profit margins by offering multiple bets such as doubles, trebles or bigger accumulators. Say they offer similar 1X2 odds on two football matches the bets become doubles for the punter (who has to predict correctly on the outcome of two games) and the profit margin doubles 2.33% + 2.33% = 4.66%. If it’s a five match accumulator those overround figures grow to 2.33% + 2.33% + 2.33% + 2.33% + 2.33% = 11.65%. 

For punters it is harder to calculate the value in accumulator odds than in single bets, but for most people betting is more about the fun and hope of winning a big bet, rather than value seeking like professional bettors may do.

When it comes to laying bets on an exchange, like the Betfair Exchange, the prices you are willing to offer other punters will be calculated using the methodology outlined earlier in this article. On the Betfair Exchange, the odds on offer will nearly always be better than on bookmakers as there is no Overround or profit affecting the odds, instead they charge a small commision on every betting transaction.

If you are betting win-only singles, the Betfair Exchange will nearly always be a better option from an odds point of view, however it can be slightly more complicated to use than a typical bookmaker.

As a final word remember that many bookmakers also reserve the right to restrict or suspend bettors accounts if they suspect any kind of foul play, or simply because providing their services to very well informed or particularly successful bettors affects the bottom line too much. We cover that topic in more depth in our article on how to identify a good tipster.

It is totally legal for bookmakers to do this and we ensure all our bookmaker partners take customer service very seriously, working with high levels of integrity and fairness with customers, some lesser known bookmakers may take advantage of this and refuse to payout or block accounts unfairly.