Legalbet Introduces New Formula for Sportsbook Margins
We at Legalbet have changed the formula we use to calculate a sportsbook’s margin on our site. Previously, we used the most common version of the formula, used by many rating resources, but that does not correctly determine the size of the sportsbook’s margin in the line.
What Has Changed?
The old formula for two outcomes looked like this:
(1 / Odds per player 1) × 100% + (1/Odds per player 2) × 100% = 100% + margin.
For three outcomes we saw this:
(1 / Team 1) × 100% + (1/Draw) × 100% + (1 / Team 2) × 100% = 100% + margin.
The problem with these formulas is that they calculate the probability of certain outcomes from the sportsbook’s point of view and based on the margin’s presence in the line. However, it does not correctly assess the profit incurred by the sportsbook.
The more accurate formula shows the sportsbook’s margin like this:
For two outcomes, margin = 1-1/(Probability 1 + Probability 2), where Probability 1 = 1/Odds 1, and Probability 2 = 1/Odds 2.
For three outcomes, margin = 1-1/(Probability 1 + Probability 2 + Probability 3), where Probability 1 = 1/Odds 1, Probability 2 = 1/Odds 2, Probability 3 = 1/Odds 3.
In order to make it a little clearer, we will give a specific example:
Consider an MLB game between the Chicago White Sox and the New York Yankees. The sportsbook places odds of a victory on New York at 1.58 (-172), with the possibility of extra innings at 4.05 (+305), and a Chicago win at 7.15 (+615).
Using the new formula, we get:
Margin = 1 – 1/ (1/7.15 + 1/4.05 + 1/1.58) = 1.93%.
Why is this necessary?
The sportsbook margin is a very important indicator for players. If you know what percentage each betting site takes from each bet, you can more effectively select profitable markets. This helps you to save money every time you place a bet!
We always want to help players and give them as objective information as possible. You can read more about sportsbook margins and how they are calculated, in our Betting School.
See Which Sportsbooks Have the Lowest Margins in Legalbet's 'Rating by Odds'.
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