The overround, also known as the bookmaker’s margin, is the percentage added to the true probability of each outcome in a betting market to guarantee that the bookmaker makes a profit. For instance, if a football match has three possible outcomes (win, lose, draw), the true probabilities might be 33.33% for each outcome. However, the bookmaker may adjust the odds to reflect an overround of 5%, which means the total implied probability of all outcomes exceeds 100% (in this case, 105%). This ensures that regardless of the match outcome, the bookmaker will profit from the bets placed.
Overround Example
For example, if the odds for a football match are set as follows: Team A to win at 1.80, Team B to win at 2.00, and a draw at 3.50, the implied probabilities would be approximately 55.56%, 50%, and 28.57% respectively. The total implied probability is 134.13%, indicating an overround of about 34.13%, ensuring the bookmaker’s profit.