Profit Margin Calculator

What are fair odds and bookmaker's profit margin?

Fair odds are the inverse of the underlying option's probability: odds = 1/probability. If the options cover the complete set of possible outcomes, the sum of their probabilities should be equal to 100%. Bookmakers bake in profit margin by assuming a higher probability for each option, thus making the probability of any outcome greater than 100%.

For example, given a match of two completely equal teams, each having 50% chance of winning. Fair odds for a 2-way 12 bet would be 2.0 for each option as 1/50% = 2.0. By adding a 5 p.p. margin to each option, the implied probability of any outcome would be 110 %. In this scenario, the bookmaker has a 10% profit margin and the odds for each option would be 1/55% = 1.8182.

If you would like to build intuition for odds and their probabilities, check out the Odds Converter.

How does MeasuredBets Profit Margin Calculator work?

The formula to calculate a bookmaker's profit margin is as follows:

P = \sum_{n=1}^{N} \frac{1}{odds_n} - 100 \%

where:

$P$ is the profit margin
$N$ is the number of options
$odds_n$ is option $n$ 's odds