Monday, 2 September 2013

Margin - helping the inexperienced

This is simply a blog post explaining to any new gamblers the extent of the margin imposed by the bookmakers. Most believe that roulette is a mug's game because there is no skill involved. Whilst this may be true (try telling the gamblers in macau with their number sheets that), football margin is often overlooked.

The house's edge in single zero roulette is 2.7%. Therefore, every time you place a bet - red/black, Even/Odd or number bet, the house enjoys a small edge. That is not to say you can't go on improbable runs and win large amounts; it simply becomes more difficult over time. A casino in Monte Carlo recorded 36 blacks in a row according to rumour!

In football, the average margin on the win market is 7%. On Betfair, it often 0% but this is before commission. However, as this picture will show, if you were to have every betting account in the marketplace, then the bookmakers' collective edge is actually negative.

This means, if you were to bet on stan James' 3.4 for Mexico, Paddy Power's 3.25 for the draw and BetVictor's 2.55 for Italy, you would a) make an extremely tiny percentage in arbitrage and b) you could bet any of the selections knowing that the bookmaker holds no edge on that particular bet (unless one of the selections is wrong value-wise).

Bookmakers want your action. But of course, they want your action at a bad price. Continue to bet these 'top-prices' and you will be restricted (as spoken about in a previous blog post). 

So if the bookmaking industry has no collective edge due to a 0% margin how do they enjoy substantial profits? 

1) Degenerates
2) Lazyness. 

The first category are responsible for the bulk of bookmakers' profits. They must bet. If Team A are going to win, what does it matter that the price is 2.5, 2.3 or even 2.1. These customers are regularly taken advantage of, whatever their PR teams would have you believe. 

Lazyness does have an impact on the gamblers' profits. Although there is very little apparent difference between £10 to win £24 and £10 to £26, over time, this does make a considerable difference.

Business is business and therefore bookmakers are entitled to charge a margin. However, what is unacceptable is the exploitation of those needing or wanting to gamble on specific events. For instance, the Grand National has a bookmaker margin of up to 50%! This means that the price you receive should invariably be double. They get away with this because their brands are strong and the casual punter (lazy) does not care about price.

I would be happy to create a gamblers' union demanding more free bets and better prices with strike action. However, those in categories 1) and 2) are hardly going to join...are they :)

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