# HOW TO: UNDERSTANDING OVERROUNDS

## Learn the Truth Behind the Odds

Do you pay attention to the percentages at the top of an Exchange market? In this article we are going to explain why you should. These percentages are going to reveal one of the biggest differences between a bookmaker and a betting exchange.

Common sense says that two outcomes can occur in a coin flip. You have a 50% chance of correctly predicting whether it lands on heads or tails. The two outcomes add up to 100% – known as a perfect betting market – meaning the odds of both outcomes are set at \$2.00 to make it a 50-50 split. So why will you see head-to-head markets where both selections are priced below \$2.00?

This is an example of where the overround raises its head and what bookmakers need to do to make money (IE. Take a portion of revenue from the customer). The overround is a single figure – expressed as a percentage – that can be calculated for any market in which a margin can be built into the odds. It is calculated by

1. Finding the implied probability of each selection in the market through research and historical data
2. Adding up the results for the market and converting to a percentage

Let’s use an example of an AFL head-to-head market for Richmond v Collingwood, where each team is paying \$1.90. The overround is calculated as follows:

1. [Implied probability of Richmond winning] + [Implied probability of Collingwood winning]; which equals
2. 1/1.90 + 1/1.90; which equals
3. 5263 + 0.5263; which equals
4. 053 or an overround of 105.3%

## Why is the Overround Important to You?

The bigger the overround, the better it is for the bookmaker. When their profit margin grows, the less value is on offer to the punter. What you want to see is an overround as close to a perfect 100% market as possible. That means the bookmaker will have no implied edge on the market whatsoever.

Or, to put it in a different context

If you were to back every runner in a 12-horse race in order to win \$100.00 and the overround was 120%, you would need to outlay \$120.00, meaning you are already \$20.00 behind before the race has jumped! If the overround was 110%, then your outlay would be \$110.00 … etc.

You’re now ready to hunt for the best available odds using overrounds as a guide. They can vary significantly depending on what you are betting on. You should therefore always be mindful of markets where the overrounds appear too high – racing futures markets are a great example of a potential trap for punters.

The only problem is that most bookmakers won’t display their overrounds before or during an event – while Betfair does. You can also find overrounds visible on third-party odds comparison websites, which are a damning reflection of the difference between a bookmaker and a betting exchange.

## Get Around Real Value!

A betting exchange, such as Betfair, uses a commission-based model to structure markets. Betfair markets will form freely and are dictated by the punter. There is no profit margin built in like a bookmaker, meaning overrounds will strike much closer to 100% and offer fairer prices than what a bookmaker can provide. This is why you will see Betfair regularly demonstrate its price advantage over competitors (after commission).

To give an example, the average Betfair overround on all Australian Group 1 thoroughbred races in 2021 prior to jump time was approximately 103%. The average overround on the same events with some of Australia’s largest bookmakers was somewhere between 115% and 120%!

If you are keen to use Betfair based on overrounds, here’s a tip: wait until 30 minutes from jump time to engage with a Betfair market. The prices will typically start to form and become more liquid, and you will see the overround shrink closer to 100% from then.

## Understanding Overrounds on Betfair: A Comparative Guide

Introduction

In the world of sports betting, grasping the concept of Overrounds becomes pivotal for savvy punters looking to gain an edge. This comprehensive guide will shed light on Overrounds, focusing on Betfair’s unique approach and comparing it to traditional Corporates.

Section 1: What are Overrounds?

Overrounds represent the bookmakers’ profit margin in betting markets. When bookmakers set odds for an event, they embed a margin in the odds, ensuring they make money irrespective of the outcome. This surplus collectively exceeds 100% and represents the Overround.

On Betfair, a betting exchange, punters can back or lay bets, effectively matching wits with each other. Unlike traditional bookmakers, Betfair’s odds are set by punters, leading to potentially lower Overrounds.

Section 2: Why Overrounds Matter

Overrounds significantly impact potential returns on winning bets. Higher Overrounds on traditional bookmakers mean a larger portion of the stake goes to the bookmaker, reducing overall payouts.

On Betfair, with potentially lower Overrounds, a larger proportion of the stake goes to other punters, improving potential profits when winning.

Section 3: Understanding Overrounds

Calculating Overrounds on Betfair is done indirectly, focusing on “back” and “lay” odds, corresponding to the highest and lowest odds offered by punters. The formula for calculating the Overround on Betfair is:

Overround = ((1 / Lowest “back” odds) + (1 / Highest “lay” odds)) – 1

Comparing Overrounds between Betfair and traditional bookmakers like Sportsbet and TAB allows punters to identify potential value bets. Lower Overrounds on Betfair suggest more competitive odds, providing better value for wagers. In contrast, higher Overrounds on Corporates may indicate less favorable odds, prompting exploration of other options or opportunities on Betfair for potentially higher returns.

Section 4: Comparing Betfair to Corporates

Betfair’s innovative betting exchange model allows punters to set their own odds, resulting in potentially lower Overrounds. This peer-to-peer system means better value for punters who are more likely to find attractive odds.

On the other hand, Corporate bookmakers operate on the traditional model, where they set the odds themselves. While they offer convenience and a wide range of markets, they usually apply higher Overrounds, which can impact potential profits.

Conclusion

Understanding Overrounds is crucial for maximizing returns in sports betting. Betfair’s unique betting exchange model often leads to more favorable Overrounds compared to traditional bookmakers. By recognising the differences and leveraging this knowledge, punters can make more informed betting decisions, find value bets, and enhance their success in the thrilling world of sports betting on Betfair.