OVERROUND Meaning and
Definition
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Overround refers to the calculation of bookmakers' odds that ensures a profit margin for the bookmaker, thereby establishing an advantage for the house. It is a measurement of the sum of probabilities for all possible outcomes exceeding 100%. Often expressed as a percentage, the overround indicates the additional percentage points added to the total implied chances of an event occurring to create market inefficiencies and generate profits for the bookmaker.
To determine the overround, bookmakers analyze the probability of different outcomes and assign odds to each possible result. By adding the reciprocal of each outcome's odds, they calculate the implied probabilities of all events. The resulting sum represents the bookmaker's book percentage. In a perfectly balanced market, these implied probabilities would add up exactly to 100% as the odds would accurately reflect the true probability of each outcome.
However, bookmakers introduce an additional percentage to the total implied probabilities to guarantee a profit. This extra percentage constitutes the overround, representing the bookmaker's profit margin. Consequently, the sum of the implied probabilities surpasses 100%, allowing the bookmaker to have an edge and generate income over time.
Understanding the overround is vital for bettors, as it enables them to evaluate the competitiveness of the odds offered by different bookmakers. By comparing the overrounds offered by various operators, bettors can identify favorable odds and potentially maximize their chances of winning.
