Implied probability
1 ÷ odds turns a price into a chance.
Odds explainedUpdated 6 min read
How Bookmakers Make Money
The margin inside the odds, and how an exchange differs
Bookmakers make money by pricing every outcome slightly below its fair odds. On a 50-50 event a fair price is 2.00, but a bookmaker might offer 1.90 on both sides. The implied chances then add up to more than 100%, and that extra is the margin. A betting exchange instead charges commission on winnings.
By the Powerplay247 Editorial Team. Reviewed by the support desk.
The overround
The amount above 100% is the margin.
Exchange model
Players set prices and pay commission.
Long-run effect
Margins add up over many bets.
01
What is implied probability?
Every decimal price can be turned into a percentage chance by dividing 1 by the odds. Odds of 2.00 imply a 50% chance. Odds of 1.25 imply 80%. Odds of 4.00 imply 25%.
This is the fastest way to judge a price. If you think a team wins 60% of the time and the odds imply 50%, the price looks generous to you. If the odds imply 70%, it looks short.
02
What is the bookmaker's margin?
Add up the implied probabilities of every outcome in a market. With fair odds the total is exactly 100%. Bookmakers price each side slightly lower, so the total comes out higher. That excess is called the overround or margin.
Take a toss priced at 1.90 on both teams. Each side implies 52.6%, so the market adds up to about 105.3%. The bookmaker keeps roughly 5% of the money bet on that market over time, whichever team wins.
03
How does a betting exchange make money?
On an exchange, players bet against each other. One player backs an outcome and another lays it, and the exchange matches them. Prices come from players, so they often sit closer to fair odds than a bookmaker's.
The exchange earns through commission, a percentage taken from your net winnings on a market. You pay nothing on a losing market. The rate is set out in the market rules, so check it before you bet.
04
What does this mean for your betting?
The margin is small on any single bet and large across hundreds of them. That is why betting works best as paid entertainment with a fixed budget. Comparing prices, sticking to markets you understand and keeping stakes flat all help you lose less of your money to the margin.
- Convert odds to a percentage before betting
- Prefer markets with tighter prices on both sides
- Count commission when working out exchange profit
- Treat losses as the cost of the entertainment
At a glance
Margin worked out for three markets
| Market | Odds offered | Implied total | Margin |
|---|---|---|---|
| Fair coin toss | 2.00 / 2.00 | 100% | 0% |
| Toss with margin | 1.90 / 1.90 | 105.3% | 5.3% |
| Football result | 2.10 / 3.30 / 3.60 | 105.7% | 5.7% |
Implied probability for each price is 1 ÷ odds. The football row adds 47.6% + 30.3% + 27.8%.
Quick formula
Implied chance = 1 ÷ decimal odds. Add every outcome in the market together. Anything above 100% is the margin you pay.
Keep reading
Related guides
Quick answers
Frequently asked questions
4 questions
What is an overround in betting?
It is the amount by which a market's implied probabilities add up to more than 100%. It measures the bookmaker's built-in margin.
How do I convert odds into probability?
Divide 1 by the decimal odds. Odds of 2.50 imply a 40% chance, and odds of 1.50 imply about 66.7%.
Do betting exchanges have a margin?
Exchange prices come from players, so there is no built-in bookmaker margin. The exchange charges commission on net winnings instead.
Can anyone beat the bookmaker's margin?
A small number of disciplined bettors find prices that are better than fair. Most players don't, so it is safest to treat betting as entertainment with a fixed budget.
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