How does the vig work and what is Bookmaker’s overround?

If you bet on sports, you probably know that bookmakers have the advantage and because of that they make lots of money.

But how big is this advantage and how does it work? What is the difference between margins (overround) and vig and more in this article…

Bookmakers make money by accepting bets on a market and pricing it in a way that does not represent the true probability of the outcomes.

This margin, or overround, gives them an edge over bettors.

How big is this edge, what is vig, calculating fair odds and more… below

I’ll explain this in a real example and for two types of odds: decimal odds and American odds. But the concept is the same, because all odds represent the prices you pay on the market.

Margin (overround) vs Vig

First, what is a margin (overround) and what is a vig and then how to calculate fair odds?

The vig, or juice, is the bookie’s fee on a wager placed by bettors.

The overround is the sum of the reciprocal of all odds in a betting market.

How does vig and overround work in a real example?

Let’s say we have two way example (Team A vs Team B) odds:

• Decimal odds 2.29 (US +129)
• Decimal odds 1.65 (US -154)

Calculating (decimal)

• 1 / 2.29 = 0.43668
• 1 / 1.65 = 0.60606
• Overround = 1.04274 (if the market would be fair, this number would be 1)
• Vig = (1.04274 -1)/1.04274 = 0.04098984772 (or 4.099%)

Calculating (American odds)

• 100 / (129 + 100) * 100 = 0.43668
• -154 / (-154 + 100) * 100 = 0.60606
• Overround = 1.04274 (if the market would be fair, this number would be 1)
• Vig = (1.04274 -1)/1.04274 = 0.04098984772 (or 4.099%)

How much do bookmakers make because of unfair odds?

In a proportional scenario let’s say that a total of $10,000 was wagered. Bettors placed $4,188 at 2.29(+129 US), paying them a total of $9,590. But because they collected a total of $10000, they made $410 profit. Same story for US odds.​

Other bettors placed remaining ($10,000-$4,188) $5,812 at the odds of 1.65 (-154) and if they win, bookmakers pay them their profits (1.65*$4,188 = $9590) and still hold a profit of $410, because they collected at the start a total of $10,000. Same story for US odds.

What are fair odds and fair probabilities?

What would be the fair odds and how to calculate fair probabilities?

• 1 / 2.29 = 0.43668
• 1 / 1.65 = 0.60606
• Overround = 0.43668 + 0.60606 = 1.04274

​next step…

• 0.43668 / 1.04274 = 0.418782
• 0.60606 / 1.04274 = 0.581218

Now you can check it. Sum these two numbers and it must be 1:

0.418782 + 0.581218 = 1

After that turning fair probabilities into the fiar odds is easy:

Decimal:

• 1/ 0.418782 = 2.39
• 1/0.581218 = 1.72

What do you see here?

Instead of a fair 2.39, you get only 2.29. Instead of fair 1.72 you got only 1.65.

Same with US odds:

• Plus moneyline: (1-0.41878)/0.41878*100 = +139
• Minus moneyline: -(0.581218/(1-0.581218))*100 = -139

From here we already see that we calculated fair odds (+139 vs -139). And that means that you pay +129 instead of +139 and you pay -154 instead of -139.

What does this mean for bettors, and how can you use the numbers to your advantage?

You must look for bookies with the lowest possible overround and place your wagers with them. This will help you get better odds on your bets.

Understanding the odds and probabilities is crucial for your success in sports betting. Sign up for a free betting course to learn more lessons about how to become a winning bettor.