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How do bookmakers create odds?

Before we answer this question, lets think of a betting scenario.

 

If i was to roll a dice there could be six possible outcomes.

 

So I would a have a 1 in 6 chance of guessing the correct number.

 

This equates to odds of  5/1 or decimal 6.

 

So lets say there are six people and they all put £1 on a different number. The winner would end up with £6.

 

Now if a bookmaker was to put odds on the same event it would be very different. They would not be able to offer 5/1 as there is no money in it for them and of course they are a business and need to make a profit.

 

So they could offer odds of 4/1. the winner would get £5 and the bookmaker would get £1.

 

This is a very simple example and of course you know the exact odds for rolling a dice, but this simple example shows how a bookmaker would work it out.

 

Picking the odds for a horse race is very complicated as there are so many factors involved. The horses form, the weather conditions, the length of race, etc. Bookmakers have odds compilers who put use extensive formulas and inside knowledge to compile the odds, they also go off each other and betting exchanges.

 

The odds will constantly change, for example if they are taking too much money on one horse they might cut the odds so there book is balanced. Also if they are not taking enough money on a certain horse they might lengthen that horses odds.

 

Odds for a football match could change drastically if a key player was to be injured or not picked, there are so many different permutations involved.

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Article written by Michael Flynn.