What is the Meaning of Overround?

In this article, we will look at what overround is and how you can factor it into your bets, how it is used by bookies, and some examples of overround in action. The overround itself is slightly complex, and here we are just dipping our toes into the subject to give you a basic overview of what the term means and its general use. You can bet happily enough without ever having to understand or calculate an overround in any event. It is a term you may hear from time to time, and this article should give you a basic understanding of it and a little bit more knowledge to help you with your online gambling going forward, so here we go!

What is Overround?

Overround is calculated by summing up the total of all odds on the outcome of one event. It’s an activity used by bookmakers that creates an overall profit margin so they can avoid losses, whatever happens, and adjust theoretical odds accordingly.

For this reason, an overround is probably the most important factor for a bookmaker to have in every event they offer punters odds for. It means they can guarantee a profit, whatever the event, and they are not taking losses that would ultimately mean the end of their business. This means that while separate punters can win and lose on the bet, the overall result for the bookie should be in their favour or, at worst, not cause them high losses.

How Overround Affects Odds

When you multiply all the odds of an event together, to factor in risk for bookmakers they need to add in an extra percentage, which is called the overround. The higher the overround, the further from the true odds a market will be.

Factors also need to be included, such as a payout, as a punter will receive their stake back alongside any winnings. This needs to be added to a calculation for the overround figure.

Bookies’ odds will vary depending on how much profit they are looking to make on an event, larger bookies can often be more generous with odds on certain events to draw and maintain customers. Professional punters can play this to their advantage by using different bookies for certain events to try and make sure they are finding the best odds from across the internet for any specific event.

Example of Overround

Let’s look at a very simple example of the toss of a coin so we can see how overround works in practice.

With an equal probability of either event, there is no profit or loss on this overround. With the odds being even across the board as long as an even amount is wagered on both sides, the bookie has no risk. But what happens when you add in an extra factor that increases the odds of one or more events coming in?

For instance a roulette wheel includes a green number 0 that changes the odds on a spin of the wheel being either red or black and makes the percentage 48.65% on red or black.

Let’s look at a football match first.

Man City play Nottingham Forest in the Premier League Man City are a 6/4 shot versus Notts Forest at 4/6.

The implied probabilities are thus:

• Man City: 6/4 = 2.50 = 40%
• Nottingham Forest: 4/6 = 1.67 = 60%

Let’s use £50 as a stake for both teams and let’s work out the bookies’ overround.

We first need to calculate their liability and profit from each scenario

If Man City wins at 6/4, then the bookie would lose £25.

• Total staked = £100
• Total payout = £125
• Liability = -£25

If Notts Forest wins at 4/6, then the bookies would make a profit of £16.67.

• Total staked = £100
• Total payout = £83.33
• Total Profit = £16.67

The bookie is in a position with these odds where they will only make a profit if the underdog comes in This isn’t a position they would want to be left in as it’s taking a large risk.

One way to eliminate the risk is to set amounts on each team, limiting the amount you take on the favourite (Man City in this case).

Man City

• 6/4 = 2.50 = 40%
• Total stakes on A = £40
• Total payout if Man City wins = £100

Notts Forest

• 4/6 = 1.67 = 60%
• Total stakes on Notts Forest = £60
• Total payout if Notts Forest wins = £100

By adjusting the stake amounts, the bookies would come out unscathed, breaking even whatever the outcome. It’s not an ideal outcome, though a bookmaker isn’t going to last long breaking even on markets so an overround can be added to push the odds into the bookies favour.

The true odds require all odds ot add up to 100%, an overround means you can have odds at over 100% in total. Below we will see this in action with the same match.

• Man City 23/10 = 3.30 = 30.3%
• Draw: 23/10 = 3.30 = 30.3%
• Notts Forest: 6/5 = 2.20 = 45.5%
• The sum of all probabilities is 30.3% + 30.3% + 45.5% = 106%

In this example, the extra 6% is the overround.

This means that for every £100 stake, the bookie is looking at a £6 profit. They protect this by adjusting the stake ratio to each probability in what is known as a rounded book. This is what causes market movement, as stakes will adjust to ensure more money is staked on certain outcomes by making the odds more attractive to punters.

This is a very simple example, and it’s worth remembering that bookies will use more complex models and factor in a wide range of factors into their final odds and overround amounts.

How does overround work in an Accumulator?

As you add more potential results to a wager, it becomes known as an accumulator. Whilst it’s hard for punters to be able to work out the value in accumulator odds, they still remain a popular bet due to higher returns and the fun of seeing if multiple selections come in. For bookies, this is a dream situation as they can make more money with less risk, as the overrounds from each player’s selection are added together to give a higher total overround figure for the bookies.

Say there were 5 matches, each with the bookies factoring a flat 2% overround on each match. The total overround on an accumulator would actually be 10%. The simple maths of this is shown below.

Overround on an accumulator for all 5 Results:

2% + 2% + 2.% + 2% + 2% = 10%.

Can You Use Overround For Arbitrage Betting?

You may have heard of arbitrage betting, which is a way of hedging your bets by covering several outcomes. This is a more complex way of betting and should ensure that you, as a punter, are taking some of the same steps a bookmaker is to ensure your potential gambling losses are covered. Understanding the overround is key to this type of bettor. Due to its complexity, we won’t go into the ins and outs of arbitrage betting in this article.

Is the Overround Higher or lower on Betting Exchanges?

Punters who look for the opportunity of an arbitrage will generally use betting exchanges alongside their standard sportsbook bets. This is a way of reducing your risk on your bets by covering all of or more of the outcomes in a certain event. This reduces your risk and protects your bets against potential losses, whilst it lowers the amount you can win in total, it basically it gives your bets a form of insurance. Overround on betting exchanges will generally be lower than on standard sportsbooks run by gambling websites.

Conclusion

A betting overround is the main tool that bookmakers use to ensure a built-in, risk-free profit margin. Most punters won’t give overround a second thought whilst they go about their usual wagering activity, and to be fair, an understanding of overround is not really needed for you to place any bets. Many punters aren’t even familiar with the term, to be honest. However, professional punters are well aware of the complexities of how overround affects odds and will take the time to shop around for odds that best suit them, or do the mathematics to see where they can best find value.

For those new to betting, it’s worth having picked up a bit of knowledge on overround for your overall understanding of how the gambling economy works. For more involved punters, or those looking to maximise their gambling profits, a full understanding of the concept is not just helpful but necessary for them to be able to operate successfully. Once you can calculate the overround, you have more ability to shop around various online bookmakers and ensure you are getting the best value for your bets.