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How do I calculate betting margins?

In simple terms, bookmakers make a profit by accepting bets on a given market, and adjusting odds to attract bets in the right proportion to secure a profit regardless of the outcome. This is achieved by offering odds that do not fairly represent the actual statistical probability of the event concerned – true odds. The deviation of the odds offered from the ‘true odds’ is the bookmaker’s Margin.

The coin toss example

The simplest analogy for explaining margins is betting on a coin toss. When betting with a friend, you might for example bet $10 to win $10, on Heads or Tails. Under these terms, neither of you hold any advantage, as the odds given (2.0 in Decimals odds/+100 in American odds) reflect the actual probability (0.5) of the event occurring. In betting terms this is called a 100% Market or Book, which gives no advantage, or Margin to either the person placing, or accepting, the bet. Therefore, a 100% Market = zero Margin!

The market percentage

If, however, you were placing a bet on a coin toss with someone seeking to make a profit – i.e a bookmaker - that Market Percentage would be greater than 100%, and the amount by which the Market Percentage rises above 100% is the size of the Margin the bookmaker holds over the bettor (this is also known as edge, commission, juice or vigorish). This essentially is how all bookmakers work, but the important difference for bettors to understand is the variation in Margins that bookmakers hold, as this is what determines the value of their odds, and ultimately, the potential profit for a bettor.

Novice bettors might reasonably ask “Why should I care about the odds of all outcomes, as I am only betting on one?” The concept of betting value relates to the market as a whole, i.e. considering the odds for all outcomes. The higher the Margin, the poorer the value for a bettor, which is why Margins are the best way to truly compare odds.

Getting the best value

You may be surprised by the huge difference in Margins across the spectrum of bookmakers within the industry. Using Premier League soccer 1X2’s as an example, you’ll find some bookies pricing their markets up to 110% i.e. a 10% Margin, compared to Pinnacle who at 2%, are the market leader, with the Industry Average at 6%. This represents a huge difference in potential value that any bettor seeking to get the best deal should be aware of.

Pinnacle’ approach

Importantly, Pinnacle don’t selectively apply a low Margin policy to certain markets as loss leaders, we apply it to every market we post, and unlike Betting Exchanges who advertise similar Margins, don’t charge commission on winning bets, which negates the value of their odds.

The table below shows Pinnacle' Margins for our most popular sports betting markets, compared to the industry average*. This clearly demonstrates why it pays to bet at Pinnacle, giving you the best odds and the best chance to win more.

*The industry average for NFL, College Football, NBA, MLB and NHL uses the recognised standard American benchmark.

How to calculate margins

You can calculate margins using the following equation:

(1/Decimal Odds Option A)*100 + (1/Decimal Odds Option B)*100

For example, imagine a hyperthetical match between Roger Federer and Rafael Nadal. You could calculate the margin on the odds as follows:

Rafael Nadal 1.926
Roger Federer 2.020
(1/1.926)*100 + (1/2.02*100) = 51.92 + 49.51 = 101.43% Market i.e. a Margin of 1.43%

For anything greater than a two-way market simply sum the additional options in the same way.