Overround explained: how bookmaker margins work in horse racing

How do you calculate the overround on a horse race?

Convert every runner's price to an implied probability, 1 divided by the decimal odds, and add them up; the total is the book percentage and anything above 100 is the overround.

In the six-runner example below, the implied chances add up to about 111.4, so the book is 111.4 per cent and the margin is 11.4 points. For a ten-runner race, do the same for all ten runners. Include every runner, however big its price, because outsiders often carry a disproportionate share of the margin.

The overround is not quite the bookmaker's profit. It is the margin the bookmaker would earn if money came in exactly in proportion to the prices, which rarely happens. It is still the clearest single measure of how fair a set of prices is.

What do 100, 115 and 130 books look like?

A 100 book is fair, with no margin; a 115 book means the prices would pay back about 87p for every pound staked if money followed the prices; and a 130 book pays back about 77p, a much worse deal.

The payback figure is 100 divided by the book. At 100 the payback is complete, at 110 it is about 91p, at 120 about 83p and at 130 about 77p. In practice, a book around 110 on a small field is competitive, while books well above 120 are common on big-field handicaps and on the first prices of the morning.

Why do bigger fields carry bigger bookmaker margins?

Each runner's price carries a little margin, so the more runners in a race the bigger the total overround tends to be, and big-field handicaps are harder to price accurately, which bookmakers cover with extra margin.

The field size table on this page shows the pattern: over the last 30 days, races with under eight runners carried the lowest average final-show book and races with sixteen or more the highest. Per runner the margin may look small, but it adds up, and the table updates daily.

Is the bookmaker margin loaded onto favourites or outsiders?

Bookmakers tend to load more of the margin onto outsiders, so long-priced horses are usually shorter than their fair price by a bigger proportion than favourites, a long-observed pattern called the favourite-longshot bias.

Results bear this out: across large samples, favourites win closer to the rate their prices imply than outsiders do. That is one reason exchange prices for outsiders are so often much bigger than bookmakers' prices. For anyone comparing prices, it means the best-price hunt matters most on bigger-priced horses.

How can you use the overround when comparing prices?

Use the overround to judge how fair a whole set of prices is, then compare individual horses across bookmakers, because the best available price on each runner often forms a combined book far closer to 100 than any single bookmaker offers.

If you take the best price on every runner from across the bookmakers, the combined book can drop close to 100 and occasionally below it. That is the practical case for comparing prices rather than using one account: the same horse at 7/1 rather than 5/1 changes its implied chance from about 16.7 to 12.5 per cent, and over many bets that difference matters far more than small differences in form assessment.

Morning prices usually carry bigger margins than final prices, because bookmakers price cautiously before money arrives. The live figures on this page show the gap between the morning and final shows over the last 30 days.

Why are exchange books close to 100?

On an exchange, backers and layers set the prices against each other, so competition squeezes the book close to 100, and the exchange earns its money through commission on winnings rather than through a margin built into the odds.

The back side of an exchange market usually adds up to slightly above 100 and the lay side slightly below, with the gap narrowing as more money arrives near the off. Once commission is taken into account, the effective margin is small but not zero. Exchange liquidity matters: in thin markets, gaps between back and lay prices can be wide.

How big are bookmaker overrounds right now?

Over the last 30 days of British and Irish racing, the average final-show overround across the 26 bookmakers tracked was 121.5%, and the most competitive bookmaker averaged 111.3%.

Margins also shrink through the day. The average morning overround over the same period was 127.6%, falling to 121.5% by the final show before the off, from 1,134 races. The bookmaker margins page ranks every bookmaker tracked and splits the figures by field size and race type.

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