How Do Bookmakers Set Their Odds?

Balancing Price and ValueIf you needed to buy a new TV set, the chances are that you’d know roughly what price you expected to pay – whether it’s an all singing, all dancing bit of tech or a tiny box the like of which some budget hotels still provide to this day.

The same is true of everything from a bag of fish and chips to a three-bedroom semi in your local town – most of us have a fair idea of what we should expect to pay.

So why do punters go in so blindly when it comes to betting odds? Why don’t we know when a price is fair and expected, and then when the bookmaker is pulling a fast one?

The truth is that many of us don’t really know how the bookies compile their odds, from the process used to the inputs that inform their analysis.

I stumbled across an interesting video this week posted by the American sportsbook, WynnBet, on their Twitter feed. It took viewers directly into a meeting in which their trading team were creating odds for the next set of NBA games.

It’s remarkable to see the level of detail they go into, and the video provides a number of key insights that we can use to decide whether or not the odds supplied are fair value or not.

Because, at the end of the day, we know the price we are willing to pay for a bag of chips (between £1-£2.50 depending on size, never more), so why don’t we know what price A Plus Tard should be for the Cheltenham Gold Cup?

How Do Bookies Set Their Horse Racing Odds?

Horse Racing Photo Finish

We know that the weight of money determines the closing price at which horses set off, but how the bookies set their odds for the ‘first show’?

It’s all rather complex and becoming increasingly algorithmic too, but the good news is that many of the tools and analysis they use are actually available to the public too.

The first thing to note is a horse’s form from previous runs. That’s not necessarily their finishing position, but how they ran relative to the distance, the going, any handicap they were carrying, the quality of their jockey, and so on. We can access split speeds, time per furlong and other quantitative measures too.

That creates a template via which we can compare the qualities of the horses in the field, upon which we can build further data points including their record at a particular racecourse, how they’ve fared in graded company before and so on.

Once we have a full picture of how we rank the horses, we can create a set of ‘tissue’ prices that add up to a 100% fair market – not that the bookies are interested in fairness, of course.

It’s a process that takes time and effort, but you don’t need access to complicated software packages – just an old fashioned pen and paper, and your eyeballs, will suffice.

Once you have your own set of odds, you can compare these with those offered by the bookies. Are you able to find a ‘value’ position or two based upon your fair prices? If you can, and your analysis is accurate enough, you might just be able to beat the market.

How Do Bookies Set Their Football Odds?

Start of Football Match

The elephant in the room when it comes to horse racing betting is that horses can be unpredictable animals, which makes drawing up betting models rather more difficult.

But football is a bit more predictable given that we can accurately assess the qualities of one set of players against another.

A starting point for drawing up tissue betting odds in football is to compare the home form of the hosts against the away form of the visitors – the bigger the data set, the better.

This will give you win percentages to work with, with can be translated to implied probability and thus betting fractions (or decimals if you prefer).

Them, you can handicap your odds further, tweaking them to consider:

    • Current form
    • Team news
    • Weather/pitch conditions
    • Motivational factors
    • Other forces (new manager etc)

You can modify your initial odds with these various inputs, and by the end of the process you will have a set of fair prices that you can then compare with the bookies.

This is, more or less, how professional punters go about their business. So why not give it a go for the Cheltenham Festival or next set of Premier League matches….you might just be surprised by how well you fare.