Betting odds are supposed to reflect the probability (statistical expectation) that a particular event will happen.
Because bookmakers are profit-making enterprises who offer bets on the market, it is understandable that they build-in a winning margin to their odds computations. This margin is called overround.
The overround differs from bookie to bookie and can be at its lowest around 2.5% (e.g. Pinnaclesports pride themselves on being the bookmaker with the highest odds and the lowest margins) but can reach 12% or even higher (e.g. Ladbrokes, and most of the other high street bookmakers).
The overround is the bookmaker’s mathematical advantage and ensures in the long run that they will collect more money (stakes) than they will have to pay out to bettors.
It should be obvious that a bookmaker needs this margin in order to pay staff and running costs, and of course to make a profit.
In an accumulator bet (also called ‘multiple bet’ or ‘parlay’), the overround is exponentiated, which increases the profits of the bookmaker by multiples.
Exactly how does this work?
Here’s an example: If the overround is, for example, 6%, then in a five-fold accumulator bet the compound interest is 33.8%.
The above calculation means that a five-fold bet containing individual bets each with an overround of 6% generates a profit margin of 33.8% for the bookmaker. But what does this mean in reality?
Bookmakers overround example
Here is a table for five cup finals in mid-May 2012 (Swiss Cup, Scottish Cup, UEFA Champions League, Portuguese Cup, Coppa Italia), and the odds offered by the bookmaker, Tipico:
You will find the mathematically correct probabilities calculated for these five cup finals in our article The Permutations of 5 Cup Finals in 5 Days, and the following table shows the corresponding true odds (or ‘zero’ odds):
Comparing the above tables, you can see straight away that the true odds differ dramatically from the bookmaker’s odds. For example, Basel’s true odds of winning their match were 1.89, but the bookmaker offered this bet at 1.67. The draw in the Swiss Cup final had true odds of 4.05, whereas the bookmaker offered only 3.80, et cetera.
Sometimes bookmakers odds are higher than the true odds. Using our example again, betting on Bayern to win was available at 1.8, although their true odds were nearer 1.54. However, of the 15 home, draw and away bets only five were offered at higher prices than the true odds, and 10 were lower.
Tipico’s average overround was between 4.13% and 6.22% per match: