Bookmaker margin: what it is and how to calculate it

What margin is

If odds reflected only true probabilities, the implied probabilities of all outcomes would add up to exactly 100%. In practice a bookmaker adds its own margin to every price, so the sum is always above 100% — that excess is the bookmaker's profit, whichever outcome actually happens. Margin is also called the overround.

Margin always works against you, while a value bet works in your favour: margin lowers the expected value of every bet by a fixed amount, whatever side you take. Different markets from the same bookmaker often carry different margins — the most popular markets, such as 1X2, usually have a lower margin than rarer or more exotic ones.

Calculating it for two outcomes

The implied probability of any odds figure is 1 divided by the odds. Adding up the implied probabilities of all possible outcomes gives a number above 1 — that excess over 1 is the margin.

The formula: margin = Σ(1 / odds) − 1, usually expressed as a percentage. The closer this number is to zero, the smaller the bookmaker's cut and the better the price for you.

Why call it the overround? Because the sum of implied probabilities “spins” past 100% rather than stopping there — the more outcomes a market has and the higher the margin, the further past 100% that sum runs. Every percentage point above one hundred is pure added profit for the bookmaker, unconnected to any real risk.

Ways to remove margin

The simplest method is proportional: each implied probability is divided by the sum of all of them so the total becomes exactly 1. A more precise method is power removal, which accounts for the favourite–longshot effect: lines usually carry a smaller share of the margin in the favourite's price than in the underdog's, so the proportional method slightly overstates the favourite's true probability, and the power method corrects for that more accurately.

That happens because the most popular markets carry the most money and the fiercest competition between bookmakers, so each one is forced to keep its margin lower or lose customers. In rarer or more complex markets, where there are fewer bettors and less competition, a bookmaker can afford a higher margin, since the risk of losing a customer there is smaller.

Why it matters to you

Margin shows how much a given bookmaker takes from every bet you place, so when two offers look similar it's worth choosing the lower margin, not just the bigger number. Comparing the best price across several bookmakers for each outcome, the combined margin on those best prices is often well below any single book's own margin: for example, for best prices of 1.95 / 1.97 the sum ≈ 0.5128 + 0.5076 ≈ 1.0204, so the combined margin is only ≈ 2.0%. Each bookmaker's profile on kefas shows its measured average margin — a quick way to compare books against each other.

Margin and the number of outcomes

The more possible outcomes a market has, the higher its margin usually is — a bookmaker adds a little more of its own cut for each extra outcome. A two-way market (say, “yes / no”) usually carries a lower margin than a three-way 1X2 market, and markets with dozens of possible results can carry a margin well above either of those on its own.

That's another reason to favour simpler, more liquid markets if the goal is finding a value bet: the fewer the outcomes and the higher the turnover, the easier it is to work out fair odds accurately, and the less margin there is to overcome for a bet to be worth taking.