Bookmaker margin: how to calculate overround, with examples

Key facts

The bookmaker margin, or overround, is how far a market's implied probabilities add up past 100%. A $1.30 and $3.40 tennis match totals 106.33%, an overround of 6.33%.
If bets came in exactly in line with those prices, the bookmaker would keep $595.74 of every $10,000 staked on that match, in our calculation.
Bookmakers make money three ways in Australia: margin in fixed odds, a commission taken from tote pools (14.50% of the TAB win pool), and exchange commission on winnings (Betfair, 6% to 10%).
Racing markets carry more margin than two-way sport: our example eight runner race totals 113.89%. Betfair says some large bookmakers run 115% to 120% on Group 1 races.
Margin compounds in a multi: four legs at 5% each make a 21.55% overround, in our calculation.

What the bookmaker margin is

The bookmaker margin is the cut built into a set of prices. Each decimal price implies a probability (1 divided by the odds), and in a fair market those probabilities would add up to exactly 100%. A bookmaker's market adds up to more. The excess is the margin, usually called the overround.

The overround is not a fee you see on your bet slip. It is hidden in the prices, which are all a little shorter than fair. That is why two bookmakers can both have "$2.00" on a team and still be charging you very different amounts across the whole market.

How to calculate the overround

List every outcome in the market, including the draw if there is one.
Convert each decimal price to an implied probability: 1 / price.
Add them up.
Subtract 100%. What is left is the overround.

Our implied probability calculator has a margin calculator that does this for any market. Here is the method by hand on three different markets.

Worked example 1: a two-way tennis match

A tennis head to head has the favourite at $1.30 and the outsider at $3.40.

Player	Price	Implied probability	Fair price (margin removed)
Favourite	$1.30	76.92%	$1.38
Outsider	$3.40	29.41%	$3.62
Total		106.33%

The overround is 6.33%. To get fair prices, multiply each price by the total (1.0633). Spreading the margin in proportion like this is the simplest method; other methods split it differently between favourite and outsider.

Worked example 2: a three-way soccer market

A soccer match has three results, so the margin is spread over three prices.

Result	Price	Implied probability	Fair price
Home win	$2.10	47.62%	$2.20
Draw	$3.40	29.41%	$3.56
Away win	$3.60	27.78%	$3.77
Total		104.81%

An overround of 4.81%. Even though no single price looks short, all three are 4.6% below fair on average.

Worked example 3: an eight runner race

Racing markets have many outcomes, and every runner carries part of the cut.

Runner	Price	Implied probability	Fair price
1	$2.80	35.71%	$3.19
2	$4.20	23.81%	$4.78
3	$6.00	16.67%	$6.83
4	$7.50	13.33%	$8.54
5	$10.00	10.00%	$11.39
6	$15.00	6.67%	$17.08
7	$21.00	4.76%	$23.92
8	$34.00	2.94%	$38.72
Total		113.89%

This race carries a 13.89% overround, more than double the tennis match. Betfair publishes a comparison of its own: it puts its average overround on 2021 Australian Group 1 thoroughbred races before the jump at about 103%, and says some large bookmakers sit somewhere between 115% and 120%.

How bookmakers make money from the margin

A fixed odds bookmaker does not need to know who will win. If the money comes in roughly in line with its prices, it pays out less than it takes on every result.

Take the tennis match and $10,000 in bets split in proportion to the implied probabilities: $7,234.04 on the favourite and $2,765.96 on the outsider. In our calculation either result pays out $9,404.26, so the bookmaker keeps $595.74, or 5.96% of the money bet. That share is the hold, worked out as 1 - 1 / 1.0633.

Market	Total	Overround	Hold (kept from a balanced book)	Average return per $100 bet
Soccer, three-way	104.81%	4.81%	4.59%	$95.41
Tennis, two-way	106.33%	6.33%	5.96%	$94.04
Eight runner race	113.89%	13.89%	12.20%	$87.80

In practice the money never lines up perfectly, so bookmakers move prices to attract bets on the side they need. The margin is what lets them do that without losing on average.

The tote and the exchange charge differently

Not every Australian betting product uses an overround.

Model	How the operator is paid	Example rate
Fixed odds bookmaker	Margin built into every price	Varies by market and bookmaker
Tote (TAB pools)	A commission taken from the pool before dividends are paid	Win 14.50%, Place 14.25%, Trifecta 21.50%, First Four 23%, Big 6 25%
Betting exchange (Betfair)	Commission on each punter's net winnings in a market	Usually 8% on Australian racing, 6% on sports, 10% on NRL

On the TAB win pool, a 14.50% commission means 85.50% of the pool is shared among winning tickets. On the exchange, prices come from other punters and Betfair says it builds no profit margin into the market; you pay instead through commission when you win. Our guide to tote vs fixed odds compares the first two, and betting exchange Australia explains how to convert an exchange price after commission.

The margin compounds in a multi

In a multi, the prices multiply, and so do the margins. If every leg carries a 5% overround, a multi's overround is 1.05 to the power of the number of legs, minus 1.

Legs	Overround at 4% a leg	Overround at 5% a leg	Average return per $100 at 5%
1	4.00%	5.00%	$95.24
2	8.16%	10.25%	$90.70
4	16.99%	21.55%	$82.27
6	26.53%	34.01%	$74.62
8	36.86%	47.75%	$67.68

Those are our calculations, assuming every leg's price is otherwise fair. An eight leg multi at 5% a leg hands back about two thirds of what you bet, on average. The multi bet calculator shows the combined odds of any multi.

Pundit tip: add up the market before you compare one price. A bookmaker whose race totals 112% is charging more across the card than one at 106%, even if your runner happens to be a few cents longer.

Using the margin to find value

Once you remove the margin, you have a fair price to compare with other bookmakers. If a fair price works out at $2.14 and someone offers $2.25, that price beats the yardstick. Our guide to value betting walks through that check, how to read odds covers the price formats themselves, and our bet types guide explains the markets those prices belong to.

Frequently asked questions

What is a bookmaker margin?

It is the cut a bookmaker builds into its prices. Convert each price in a market to an implied probability (1 divided by the decimal odds) and add them up. Anything over 100% is the margin, also called the overround.

How do you calculate the overround?

Divide 1 by each decimal price, add the results and subtract 1. For $2.10, $3.40 and $3.60 in a soccer match: 0.4762 + 0.2941 + 0.2778 = 1.0481, so the overround is 4.81%.

How do bookmakers make money?

Fixed odds bookmakers set prices that add up to more than 100%, so if bets are spread in line with the prices they keep the difference whatever happens. Tote operators take a set commission from each pool before paying dividends, and exchanges charge commission on punters' net winnings.

What is a good bookmaker margin?

Lower is better for you. In our examples a tennis match carries 6.33% and an eight runner race 13.89%, and Betfair says some large bookmakers run 115% to 120% on Group 1 races. Compare the same market across bookmakers rather than judging one price on its own.

Does the margin matter if I only bet small amounts?

Yes, because it is a percentage of every dollar you bet. A 6% hold costs about $6 for each $100 you turn over on average, and turnover adds up quickly when winnings are rebet.