How do Bookies Set Odds? | How do Bookies Calculate Odds?

The bookmakers odds setting procedure is complex because there are dozens of factors to consider. Fixed odds are locked in place, so once a bet is placed, potential payouts are known. Many of the things bookmakers take into account during the odds setting process are also analyzed by players. The difference is that they have greater resources and alter the betting odds with the house edge.

To understand how bookmakers make money, you should know that the odds are published weeks and sometimes months in advance. They create sports odds based on analysis and focus on many factors, but these are not written in stone. As kickoff draws near, the sports betting odds are modified to reflect the bookmakers’ risk management.

Players trying to craft complex live sports betting strategies analyze many factors. Bookmakers go even further because they have more resources, money, and manpower. They have tremendous market influence and work relentlessly to minimize their risks. That’s why bettors are frequently confronted with drifting and dropping odds, which makes odds calculation in betting more difficult.

We explained how do bookmakers calculate odds based on implied probability but this does not answer how they make money. Is it possible for a bookmaker to “lose” an event? The answer is no: As long as there is not a push bet situation (which is pretty rare), the bookmaker never loses and always makes a profit no matter what the outcome of that event is. And they even won’t lose any money in a push bet situation on any sports, they just don’t make a profit. So, how is this possible? 

To answer this question, we must first talk about the “house edge” concept. Bookmakers have a house edge just like casinos, and this value indicates the profit they will get from your bets. For example, if this value is 3%, the bookmaker will make a 3 EUR profit from every 100 EUR bet, regardless of the outcome of the match.

Let’s talk about how do bookmakers set football odds so you can understand this concept better. Imagine that there is a match between Team A and Team B. We explained how do bookies set odds for matches like this: They simply calculate the probabilities of all outcomes. Let’s say that the software they use produced a result like this, after all these calculations:

(*) We recommend reading our how to read soccer odds article to understand what these figures actually mean.

The most important thing in this table is that when you add up the probability percentages, the result is 100 (35.45 + 29.10 + 35.45). Therefore, the house edge rate is zero: this figure must be over 100 for the bookmaker to make a profit. Therefore, the bookie sets the rates offered to the end-user, aka bettors, as follows:

When you add the probability percentages in this table, the result is 105 (37.00 + 31.00 + 37.00). This figure means that the house edge is 5%, which means that the bookmaker will make a profit of 5 EUR from each 100 EUR bet no matter which of these outcomes occur. Now you really learn how to make money betting on football. In other words:

Why do you sometimes get dropping odds or enhanced odds as the match date approaches? What is the actual difference between low odds vs high odds? The bookmakers set the odds of a specific match one week earlier, for example. If you track these odds, you will see that they constantly change: Sometimes you have odds lengthen or drift and sometimes you have odds shortening. There are two reasons for this: 

1. The first odds determined by the bookmaker show the situation at that moment

So for example, if Team A is shown as the “favorite” one week before the match starts, the bookmaker determines the odds accordingly. But a week is a long time: Team A can lose this position, for example, due to a player change and this leads to dropping odds. In other words, developments that may affect the outcome of the match also cause changes in odds.

2. The bookmaker tries to make all bets as equal as possible for the outcomes it offers

• It is not good for the bookmaker to have too many people bet on the favorites or betting on the underdog: Ideally, every outcome should have an equal number of bettors.
• For example, if the proposed bet is “who wins the match”, there are only two outcomes, Team A and Team B. The bookmaker wants an equal number of bettors to place a bet for both teams to win. By doing that, it can simplify things and reach a higher profit margin.
• In real life, of course, it is not possible to achieve full equality, but if, for example, the number of people betting for the underdog is too low compared to the favorite team, the bookmaker tries to encourage new bettors by raising the underdog odds to level the bettor numbers as much as possible.
• In other words, one of the reasons for the odds changes is that bookmakers try to obtain the same number of bettors for different outcomes.

So, how are odds set in exchanges? Unlike bookmakers, sports betting exchanges do not set any odds. Each member of the exchange can offer odds for a specific event and you can purchase that offer. Likewise, you can offer your odds for any event too. In other words, exchanges are like farmer markets. The exchange itself is there just to supervise (*) and each member is free to create their own bets & odds. This often results in better value for bettors, making it a smart choice if you want to bet on bookings or other specific outcomes, as the odds are typically more favorable compared to those set by traditional bookmakers.

(*) Sports betting exchanges do not have a house edge: In order to make a profit, they charge a small commission from each winning bet. Betfair exchange, for example, usually charges a commission of 5%. But this may vary according to your accumulated Betfair Points, which can offer you discount rates on the commission.

Value bet (for example, value football betting) is the name given to the bets that offer the lowest house edge values and best possible odds. In other words, you can make an actual profit by choosing these bets. In order to find value bets when betting on sports, we recommend the following:

We explained how do bookmakers set their odds with examples: You know now why they always win no matter what the actual outcome is. You can use this info to your advantage: Since you learned how bookmakers create odds, you also understood how to find the best offers and now you have complete knowledge on betting terms. Check the bookmakers to find the value bets or simply pick one of our recommended top 100 bookmakers: We already reviewed all of the biggest betting companies out there. In any case, your next step after learning how do bookies set odds is to make some practice: Place your first bet today!

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