What is Over-Round and How do Sportsbooks Make Money?

What is Over-Round and How do Sportsbooks Make Money?

Understanding the term “Over-Round”, and how Australian sportsbooks make money, is a crucial element to becoming a successful sports betting punter.

Over-Round is what guarantees sportsbooks profit in the long run. In a nut shell, it’s the margin that they build into pricing, however it may not always be obvious when you look at a betting market. Here’s how it works.

Imagine a sporting event with two teams, let’s say it’s Richmond against Melbourne in the AFL. Sports traders, whether they work for a bookmaker or they are professional punters, might estimate that Richmond will win this match two out of every three times, or 66.6%. Now to frame that percentage as betting odds, it equates to $1.50, since 1 divided by 1.50 is 66.6%. So that means that Melbourne will win 33.3% of the time, which is 1 in 3 times, or betting odds of $3.00.

So we’ve worked out a fair betting market is Richmond $1.50 and Melbourne at $3.00. This is a fair market because when you add 66.6% and 33.3% together, you get 100%. So the “Over-Round” is 100%. Punters are getting paid out true odds that the event occurs, so if the markets were always like this, neither punter nor bookmaker will actually make any money over the long term.

The way sportsbooks make money is to tweak the odds slightly in their favour. For the above scenario, they might offer Richmond at $1.43 and Melbourne at $2.70. Here’s how that tips the scales in their favour:

True Odds
Richmond $1.50  (66.6%)
Melbourne $3.00  (33.33%)

Over-Round 100%

Sportsbook Odds
Richmond $1.43  (70%)
Melbourne $2.70  (37%)

Over-Round 107%

So if the Over-Round is more than 100%, then the sportsbook know they will ALWAYS make a profit, regardless of the result, as long as punters back each team in proportion to their true chance of winning. Of course punters don’t always do that, so that’s why sportsbooks will adjust odds depending on the weight of money they’ve received on a certain side of the book. This helps them to balance their books and stay in profit.

Sportsbooks ALWAYS have an Over-Round greater than 100% on EVERY betting market.

So if the sportsbooks are guaranteed to profit, how can punters actually win money?

Sharp punters will look for situations where they think the sportsbook sports traders have estimated the odds incorrectly, and are offering value for an event to occur.

The other way is to ensure that you are getting the best odds possible for your bet, and most of the time, that’s going to be by using the Betfair Exchange.

You see, Betfair isn’t like a regular sportsbook. They do not factor Over-Round into their prices. Because Betfair is a peer-to-peer betting exchange, the odds are set by other punters according to what they think the true odds are. The Betfair Exchange markets are ALWAYS going to be close to true odds of the event which gives punters the best price possible.

Betfair doesn’t make its money through Over-Round. Instead, Betfair charge a commission of between 5-10% on winnings, depending on the sporting or racing code. This will often provide a better value bet for punters than traditional sportsbooks who may set markets with horrible Over-Round of 120% or even more.

It’s important for all punters, whether new or experienced, to be able to spot Over-Round in a betting market and understand when you are getting poor odds. Look for the value on the Betfair Exchange before you place your next bet.

Learn more about Betfair at the Betfair Hub, or click on the banner below to join Betfair today!

 

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