Overround

In one sentence

The overround is the amount by which the implied probabilities of every outcome in a market add up to more than 100%, and it is the bookmaker's built-in margin.

How it works

In a fair book the chances of all outcomes add up to exactly 100%, because one of them must happen. Bookmakers shade every price a little shorter than fair, so the implied chances add up to more than 100%. The excess is the overround, sometimes called the vig or juice.

The bigger the overround, the more you pay to bet. A 13% book on a bookmaker's exact-goals market is far more expensive than a 2% book on a Premier League match.

On the Betfair Exchange the best back prices usually sum close to 100%, and the best lay prices sum slightly below it. The gap between them is the spread, and Betfair's cost to you comes as commission on winnings rather than a margin in the price.

The maths

• B: the book total, the sum of all implied probabilities.
• N: the number of outcomes in the market.
• O i: the decimal odds for outcome i.

In plain English: add up one over each price; anything above 1 is the margin.

Worked betting example

A bookmaker's exact total goals market (illustrative prices): 0 goals 11.00, 1 goal 4.50, 2 goals 3.60, 3 goals 4.20, 4 goals 6.50, 5 or more 7.00.

1. Implied chances: 0.0909, 0.2222, 0.2778, 0.2381, 0.1538 and 0.1429.
2. Book total: 0.0909 + 0.2222 + 0.2778 + 0.2381 + 0.1538 + 0.1429 = 1.1257.
3. Overround: 12.6%.

Now a Match Odds market on Betfair.

4. Best back prices: Home 2.14, Draw 3.60, Away 3.85. Book total = 0.4673 + 0.2778 + 0.2597 = 1.0048, an overround of 0.48%.
5. Best lay prices: Home 2.16, Draw 3.65, Away 3.90. Book total = 0.9933, just under 100%.

The fair price sits between the two. The exchange book is more than 25 times tighter than the bookmaker's goals book, before commission.

Where it's good

• Comparing the cost of betting across bookmakers and markets.
• Choosing which markets to specialise in: low overround means less to overcome.
• Checking market health on the exchange; a back book well above 100% usually means the market has not formed yet.
• Spotting arbitrage: if the best prices across firms sum below 100%, there is an arb.
• The first step before removing the margin to get fair probabilities.

Limitations and pitfalls

• The overround is a total. It does not tell you how the margin is split across outcomes, and longshots usually carry more of it.
• Comparing overrounds across markets with different numbers of outcomes is unfair; a 10% book on the 19 Correct Score selections is tighter per selection than 10% on the 3 Match Odds outcomes.
• Exchange back books near 100% do not mean betting is free. Commission of 2% on net winnings still applies.
• Low overround does not mean the prices are accurate, only that they are consistent with each other.

How to build it

• pandas: group prices by market and sum the reciprocals.
• Data: full market snapshots with every selection's price at the same moment, from the Betfair API or odds feeds.
• Practical tip: track overround over time for each market type you trade. Watch how quickly it tightens towards 100% as kick-off approaches.

Related methods

• Implied probability: the pieces the overround is built from.
• Margin removal: stripping the overround out to get fair chances.
• Favourite-longshot bias: why the margin is not spread evenly.
• Market efficiency: tight books tend to mean sharper markets.
• Arbitrage: what happens when the best combined book falls below 100%.