The old saying goes that the bookmaker always wins and, while that’s not strictly true, they do their utmost to try. How bookies make money is often thanks to the overround.
Overround is the practise of factoring in a profit margin on the prices offered by bookies. This is also known ‘vigorish’ or ‘vig’.
Overround is a key factor in how bookmakers decide the odds on any given market because it goes a long way to deciding how much profit they will make.
"I am not one of the people who believe that the main reason why a chap becomes a bookmaker is because he is too scared to steal and too heavy to become a jockey" - Noel Whitcomb
In simple terms, overround involves pricing markets unfairly in the bookies’ favour so that, if all factors were equal, the bookmaker would still make a profit.
A ‘perfect book’ or ‘fair book’ would see the implied probability of all outcomes adding up to 100%. However, bookies use overround or vig to make this probability greater than 100% - which then becomes their profit.
Here’s an overround example from a tennis match:
Overround and accumulators
If you’ve ever wondered why bookmakers like punters to place accumulator bets, the overround is revealing.
As well as increasing the odds (and therefore the chances of you losing), placing multiple bets such as accumulators increases the overround. If a bookmaker has an overround of 105% on five football matches, a punter selecting those five matches in an accumulator means the bookie’s overround is 25%.
With vigorish that high, it's little surprise that many professional gamblers will not go anywhere near accas.
Factors affecting overround
The challenge for bookmakers face is keeping overround in place while other factors change.
Obviously, punters don’t always bet equally on all outcomes - more are likely to back one than the other. This is why bookies will over shorter odds on one (the favourite) and lengthen odds on the other.
When adjusting the odds, bookies take great care to protect the overround. This can be a very fluid process as, with improved odds on offer, more punters are likely to start backing other outcomes. And, in markets with multiple outcomes - such as a horse race with a large field, this can become a complex equation.
Making the book is what gives bookmakers their name. Nowadays, teams of expert statisticians, odds compilers and software are used to price markets while, of course, factoring the overround for profit.
Another factor bookmakers must also consider is keeping the market attractive. There’s little point factoring in a big overround if it makes the odds so unappealing to punters that no one places a bet.
On highly popular markets such as big football matches, bookies know their overround must be lower and their profit margin smaller as rivals will undercut them. However, the large volume of bets on such markets, means they are still highly profitable.
Overround and betting exchanges
Betting exchanges such as Betfair and Smarkets do not use overround. Their profits come from commission on transactions between players.
For this reason, exchanges often offer more competitive prices than bookmakers. There are occassions when the exchange ‘lay’ price is shorter than the bookmakers’ ‘back’ price, and this is when an arbitrage (or arb) bet is possible.
How it applies to matched betting
Matched betting is a method of guaranteeing a profit when using bookmakers. Oddsmatching software shows matched bettors exactly how profitable or otherwise bets are. When the rating is more than 100, it means an arb opportunity has occurred.
However, matched bettors tend to steer clear of arbs as bookmakers don’t like punters doing it and it could lead to account restrictions.
In some ways, the overround is the friend of the matched bettor.