Betting shop receipt

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What is the commodity here? What are we exchanging our £2 for in a betting shop?

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Hello,

My name is Alice and I’m your commodity consultant for today.

The commodity you are betting on is the chance that you are going to win/loose. Here is all the information I have found on how the bookies work:

“When a football team goes into battle with the opposition, their coach has usually done hours of research in an attempt to gain a winning advantage. The coach will look at how the opposition plays, the systems they have in place and what tactics they have used in the past. The coach is attempting to gain an edge over the opposition by mapping out a plan that will hopefully see his side triumph.

The same rules apply for punters who bet with a bookmaker. It's important to understand how the bookmaker works; how they set their odds, why they change them as the betting progresses, why they have maximum bet amounts and the types of bets bookmakers gain the most money from. Of course, the latter is very important because a bookmaker gains what the punter loses and just like a football coach, if we fully understand how a bookmaker works, then we can gain the edge over them.

Bookmakers have numerous ways of setting their odds but to understand it fully, we have to look at the bookmakers which are generally the first to 'price-up'. Different bookmakers scattered around the world will be the first to produce odds for certain betting markets - you won't find one being first out for everything. In doing so they will generally have a team of experts amongst them that formulate prices based on their opinion. Setting odds at the start can be a very risky business. Their opinion might differ to that of the betting public, which may result in some heavy action on the options the market determines to be mispriced. It's no coincidence, therefore, that the bookmakers who produce the earliest of odds have large bookmakers' margins.

A bookmaker's margin is basically the net return that bookmakers should profit over the long term. An example of a tennis match, priced up by bookmakers:

Rafael Nadal 1.53 (8/15)
Andy Murray 2.37 (11/8)

The bookmaker's margin here is calculated by summing the reciprocal of the odds as below.

Bookmarkers Margin = (1/1.53) + (1/2.37) = 107.6%

Let's say that £6,535 was bet on Nadal and £4,219 was bet on Murray. No matter what the outcome, Bookmaker X here would make a profit of £755. Given that £10,754 was bet on this event, their profit on turnover is equal to

755/10754 = 7%

which, of course, is a sound position for bookmakers but a far less desirable market for punters. Bookmakers who release odds earlier than other bookmakers will usually price-up in a conservative manner by reducing their prices and thus increasing their margin. The margin can be thought of as a 'buffer'. The greater the buffer, the less their potential liability they will have as a result of pricing-up incorrectly.

Of course, in the example above, the exact amount quoted won't always be as balanced, and more often than not a bookmaker's book will not be balanced. What this means is that more money has been bet on one side than the other, to the extent that they could lose money should one of the players win. This, however, will result in an increased gain should the option that has been laid loses.

This is where we as punters come in. Bookmakers with margins of around 107% will never make 7% on turnover in the long term but will usually make an amount smaller than this because what the punters bet on will influence the bookie's price. Prices move because too much money has been bet on one outcome, giving the bookmaker a large liability should that player win. Like punters, bookmakers are always looking to reduce their liability and to do this, they will attempt to attract money on their opposition. In essence, they attempt to balance their book. To do this, the bookmaker will increase the price on the opposition to make the price more appealing to punters while shortening the price of the runner which has been well backed in an attempt to discourage further investment on that selection.

Let's assume that we had the same amount of money bet on Nadal and Murray, as listed initially above, before assuming that a lot of money has subsequently been bet on Nadal. There could be injury concerns on Murray, or perhaps other bookmakers have opened up the betting on the market, with prices leaving Bookmaker X the best price for Nadal. In other words, later opening bookmakers rate the chances of Nadal higher than Bookie X and offer prices of 1.48 and 2.5 for Nadal and Murray respectively. This will result in punters betting on Nadal going to Bookie X and bettors of Murray going to the later opening bookmakers, as these are the best prices available.

We assume £10,000 is bet on Nadal at his current odds of 1.53. At this stage, should Nadal win, Bookie X will be out of pocket by £4,544, but would gain £10,754 should Murray win. Bookie X can do a number of things. They could lay off the bets, which we will talk about later, or they can change the odds to be more in line with other bookmakers.

Let us say that they decide to change the odds, and re-price Nadal at odds of 1.45 and Murray at 2.60, which still keeps their bookmaker's margin of over 107%. If £5,884 is bet on Murray at these prices, Bookmaker X's books will be exactly balanced and they gain a profit of £1,340. Their profit has gone up because their turnover has increased. Their bookmakers' margin, however, has in fact gone down. Now out of the £26,638 that has been bet, they are only now making a profit on turnover of 5%, as opposed to the earlier 7%.

As stated before, bookmakers will never make the amount that their margin is calculated at. Of course, in the above example it might not matter how much the bookmaker decides to change his odds, he may never balance his books. In fact, bookmakers rarely do and are not fussed with losing or gaining money on any one individual event. They are primarily concerned about the long-term profit (which should be our aim as punters too!).

So what other options does Bookmaker X have if they don't balance their books? Well, they could take the risk on for this particular match and hope that the outcome will favour the side that they will gain money on.

However, it could be that one of the players is under a serious injury cloud and they decide that it's best to "lay-off" so as to eliminate any risk and potential loss. Because Bookmaker X has a high bookmakers' margin, this means that they will easily be able to find several bookmakers that have good odds that are better than their own. Let's just say that even though they changed the odds, no other bets got matched, and hence they have £16,535 bet on Nadal at odds of 1.53 and £4,219 bet on Murray at 2.37.

As other bookmakers have better odds despite the odds changing, Bookmaker X has found odds for Nadal and Murray at 1.5 and 2.75 respectively. By matching the £10,000 bet on them with £10,000 of their own at odds of 1.5 they eliminate any risk that they might incur. It is also quite often that bookmakers will 'lay off' on betting exchanges, so even though you believe you are betting against other punters, you are in actual fact also betting against other bookmakers on the exchanges.

Bookmaker X no longer has any liability for this event and will make a profit of £456 if Nadal wins and a profit of £754 if Murray wins”

Source: The Art of Bookmaking
https://betting.betfair.com/the-art-of-bookmaking.html

“There are two groups of gamblers, those who hope to win and those who plan to win. By understanding how bookmakers work, you can calculate how to become more profitable with your betting and transform your losses into wins. This article explains how bookmakers work with a coin.
The essence of understanding how bookmakers work is understanding where to place a bet. Most novice punters make this mistake because they don’t understand how bookmakers work.

Bookmakers make a profit by pricing their betting markets so that the odds offered do not represent the statistical probability of the event.

For example, betting on a coin toss statistically represents a 50/50 chance (2.0 in decimal odds) on either outcome – heads or tails. You bet £10 to win £10, making this a 100% market.

Bookmakers create markets that go above 100% to create an edge, which is where the bookmaker makes its money.

For the coin toss, bookmakers would offer heads or tails at odds below 2.0, meaning you would have to bet more to win £10. If the odds were offered at 1.91, you would have to bet £11 to make £10, and the market percent is 104.7%. Therefore the bookmaker’s margin is 4.7%.

To calculate margins on 1X2 odds read this article, while this article helps you calculate commission-free odds on an Exchange.

Watch this video for a short guide to how bookmakers work. http://www.pinnaclesports.com/en/betting-articles/betting-strategy/how-bookmakers-work

How Pinnacle Sports Works

Pinnacle Sports prices two-way markets – such as the five major European soccer leagues – to just 102%, which means it offers much better soccer odds than traditional bookmakers, where margins are as high as 110%.

Using the coin toss as an example, you would need to win close to 53% of bets to break even with traditional bookmakers, but by betting with Pinnacle Sports and its 102% market, you would need to win just 51% to break even.

2% may not seem much at first, however over the medium to long term, that difference is huge, and ultimately gives you the best chance to win more.

Take a look at how the variations in bookmaker margins impact their payouts over a season, and you’ll see why understanding about margins is so critical, as it makes a huge difference to your potential winnings, and every bettor wants to maximise their payout.”

Source: How Bookmakers Work
http://www.pinnaclesports.com/en/betting-articles/betting-strategy/how-bookmakers-work

“"LIFE IS a 6-4 chance," Damon Runyon once wrote, referring to the statistical probability expressed in odds that any individual's existence will be a happy one. But what did the great man, on whose books Guys And Dolls was based, mean? In fact, odds, bookmaking: what's all that about, then?

If Runyon was right and a happy life is a 6-4 chance then it follows that a miserable one must be the 4-6 favourite - i.e. the chances of a happy life are 40 per cent and the chances of a dismal one are 60 per cent.

But no bookmaker will offer 4-6 and 6-4. That would leave the bookie with no profit margin. If two punters, taking opposite views, back their fancy to receive a return of pounds 100 "optimistic punter" will place pounds 40 at 6-4 on said life being happy while "realist," sorry, "pessimist punter" places pounds 60 at 4-6 on said life being miserable.

The bookmaker will therefore have taken pounds 100 worth of bets and stands to pay out pounds 100 whatever the result. What's the point? None. Instead, the bookie will offer 4-7 about life being miserable and 5-4 about life being happy which, as a glance at the accompanying bookmakers' over-round calculator reveals, will mean the punters seeking a return of pounds 100 will have to fork out pounds 63.64 at 4-7 and pounds 44.44 at 5-4 respectively. Total take: pounds 108.08; pay out: pounds 100; guaranteed profit: pounds 8.08. That's how bookies make their money.

Using the bookmakers' over-round calculator , a punter can work out what the bookie's over-round (profit margin expressed in percentage terms) is on any event. It is an important factor for the serious punter to be aware of because, generally speaking, the bigger the field for any event on which a book is being made, the bigger the over-round and the less value there is for the punter.

In practice, bookmaking is not the licence to print money many imagine it to be. Before the bookmakers are castigated as being second only to estate agents in the Parasitical Profession Stakes, the following points should be considered.

To know a bookmaker's true profit margin the punter needs to know the prices at which the bookie actually laid bets, often bigger than those displayed. And, while arithmetic about obliging punters backing everything in a contest to receive the same return - therefore enabling bookies to make proportional books - sounds like easy money in the classroom, just have a go at trying to make a round book on a cold December afternoon in the cheapest enclosure at Towcester where the attendance consists of three men and a dog called Colin (and they all - Colin included - want to back the same horse).

"The idea is to try and get every horse in the book at as short a price as possible," an older and wiser hand at the game once confided but, in practice, on-course bookies generally try to make a round losing book on the first three horses in the betting, hoping that a victory for anything else will give them a "skinner" - the equivalent of "Zero" on the roulette wheel, a 100 per cent profit on the race.

For punters trying to "beat the book" there are ample opportunities on the racecourse nowadays, especially since the abolition of on-course tax.

Bookmaker's prices are as subject to the laws of supply and demand as any other commodity. The more bookmakers there are in relation to punters in attendance, the tighter the bookmakers' profit margins will have to be in order to lure the limited amount of money there is flying around and the better the value there is to be had for punters.

Quiet midweek meetings, when many of the bookies are simply turning up to bolster the appearance quota they must meet to keep their licences, are happy hunting grounds for professional punters who will dive around the ring, snapping up the value as the best prices the bookies offer leaving them collectively betting "overbroke" - i.e. a punter can back every runner at the best price on offer and be guaranteed a profit. Many professionals play the market this way, backing three or four in a race and, if they are any sort of judge at all, coming out in front in the long-run.

Off course, of course, with nine per cent betting tax to contend with, the game isn't worth a candle for punters. Anyone who says they make the game pay off course is either being economic with the actualite or can't count and shouldn't be let out.”

Source: Racing: How the bookies take your money
http://www.independent.co.uk/sport/racing-how-the-bookies-take-your-money-1103397.html

by MoCCconsultant on May 21st at 4:47pm
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