Guest post written by Paul Micelli
The world of sports betting is littered with fantastic tales of lucky punters scooping massive wins from nominal stakes and our national press are always quick to seize on these ‘rags to riches’ stories because of the feel-good nature that they represent.
Even more common are the desperate tales of casual bettors who have wagered beyond their means and found themselves facing times of financial hardship – A concept that many of us could face without effective bankroll management and a studious approach to our betting activities.
However, the important role of the bookmaker is often overlooked and this is a relatively strange concept when you consider how big a part they have to play in our betting fortunes. In many ways, the typical bookmaker simply operates in a circle where they rarely gain any plaudits. When they win it’s usually just another hard-luck story concerning the unfortunate punter. When they lose it’s yet another tale of glee from gloating gamblers who hope to be taking them for even more money tomorrow.
Balancing the Books
Essentially the role of the bookmaker is to take different wagers on a series of races, games or other sporting events. If a sports betting enthusiasts makes a winning selection then the bookmaker will be faced with a payout. If a bettor loses, the bookmaker keeps their stake and this is how they make an operating profit. Once bets are taken the bookmaker has to balance the market. This is achieved by trying to get bets on all possible outcomes.
If a book is in place for a football match, for example, the bookmaker will want to take bets on both teams. If a match is rated as being exactly equal, the bookmaker would offer even money odds on each side. However, an equal amount of bets being placed on the game would result in the bookmaker failing to make a profit. This is why bookmakers always operate to carefully calculated margins.
Bookmakers will usually apply margins on sporting events and these are usually set at levels of between 2% and 20%. There are a number of factors that a bookmaker will consider when establishing these margins. The type of sport being wagered on, the size of a particular league, current form and many other parameters come into effect so that a competitive betting market can be offered.
If margins are calculated correctly, bookmakers stand to make a profit from all losing bets irrespective of the outcome of an actual event. In the case of our equally-rated football match, the bookmaker may actually offer odds of 10/11 on each side with a further margins allowed for the prospect of a draw.
Even so, there are still occasions where bookmakers can take a thrashing. A bookmaker must try to keep the market as attractive as possible in order to gain the maximum number of bets on an event. If our fictional football bet only attracted bets for one side, the bookmaker would have a massive number of payouts to make on all bets if that team actually wins and there would be no chance of recouping those losses from any losing wagers. The reverse side of this situation is that the bookmaker would make massive profits if the other team emerged victorious. Balancing the book is absolutely essential and margins have a massive part to play when it comes to keeping bookmakers in business.