Understanding Juice/Vig in Sports Betting

Charging Vigorish/The Overround

The main technique bookmakers use to put the odds in their favor is the inclusion of vigorish. Vigorish, or vig, is also known as juice, margin, or the overround. It is built into the odds bookmakers set to help them make a profit. In essence, it’s a commission charged for laying bets. To best explain vig, we’ll use a simple example of a coin toss.

The toss of a coin has two possible outcomes and each is equally likely. There is a 50% chance of heads and a 50% chance of tails. If a bookmaker were offering true odds on the toss of a coin, they would offer even money. This is 2.00 in decimal odds, +100 in moneyline odds, and 1/1 in fractional odds. A successful $10 bet at even money returns $20, which is $10 profit plus the initial stake back.

Let’s say this bookmaker had 100 customers all betting $10 on the toss of a coin, with half of them betting on tails and half of them betting on heads. The bookmaker would stand to make no money at all in this scenario.

As you can see from the above image, the bookmakers are taking in a total of $1,000 in wagers, but they also have to pay out a total of $1,000 in winnings whatever the result. Since they are in business to make money, this is obviously not a good scenario.

This is precisely why they build in the vig to the odds. They can thus guarantee, theoretically at least, that they will make money regardless of the outcome. When two outcomes are equally likely, it is common for them to use odds of 1.9091 (-110 in moneyline, 10/11 in fractional).

Continuing with the coin toss example, the odds on heads and tails would still both be the same, but they would now be at 1.9091. This means that a successful $10 would return a total of $19.09 ($9.09 in profit, plus $10 original stake).

Let’s see how that looks for the bookmaker now, with 50 customers betting on tails and 50 customers betting on heads.

As you can see, the change in odds has made a big difference, and the bookmaker is now making a guaranteed profit on every toss of the coin. The total amount they pay out is always going to be $954.50 against the $1,000 they have received in total wagers. Their built-in profit margin of $45.50 is the vigorish, or overround, and it’s usually expressed as a percentage of the total wagers received. In this case, the vig is equal to roughly 4.5%.

This is a very simplified example, but it does serve to illustrate how bookmakers set the odds to give them an advantage. Things get a little more complicated when it actually comes to sports events, as the possible outcomes aren’t usually equally likely. There are more than two possible outcomes in many betting markets, and bookmakers aren’t always going to take in exactly the same amount on all possible outcomes.

For these reasons, making money as a bookmaker isn’t as straightforward as simply charging vig. Other techniques are required to ensure consistent profits, and this is where the role of odds compilers comes in.