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Betting Terms: ROI and Margin

Betting Terms: ROI and Margin

If you are well-advanced punter, you are already familiar with these terms, but you will find few bits and pieces which are worth your time. If you are just starting your betting life you should find useful information here. I will try to explain few common terms in betting.

ROI – is the return of investment. Other sources define ROI as yield. We are treating our betting as an investment, we need to know what returns we are getting from it. ROI is a good evaluation of your hard work. If it is positive, you are winning. If it is negative – you need to work harder. Calculations of ROI are simple.

Example A: per month you had 100 bets x 50 euros each = 5000 staked (turnover). You won some, you lost some but returns from your stakes are 5300 euros. Total profit is 300 euros. Now we need divide your profit from total turnover and multiply by 100%.

profit/turnover*100%= ROI 300/5000*100%= 6% ROI

In theory, the higher the ROI, the better you are doing. But it also depends on your stakes, turnover and number of bets.

Example B: per month were placed 300 bets x 40 euros each = 12000 staked (turnover). Total profit 500 euros.
500/12000*100% = 4.16% ROI.

Would you rather have 300 euros and 6% ROI or 500 euros and 4.16%? Of course, all of you chose bigger profit that higher ROI. Most tipsters are boasting about ROI, but it is not the only evaluation of the tipster. There are more things to consider before judging the performance of a tipster and you can read about it here.
You might say that punter A risked only 5000 compared to punter’s B 12000 staked. Looking at the stakes (40-50 euros) we can say that both have similar betting banks, but staking is more frequent. It doesn’t mean that higher volume/turnover will bring you more money. Just punters A and B have different betting styles. Maybe punter A is pickier, placing bets only when he sees value (actually you should bet ONLY when you see value or misprice by bookie). Punter B might have better connections, more tipsters, more betting systems – that’s why his turnover is much higher but ROI lower. You must find your style yourself.

Margin – every market has built in margin by bookmakers. The more information bookmakers have about the game, the better quality of the game – the lower the margin they will built in attracting the customers. The low margin is 105% and less. For poorest quality sports bookmakers want to protect themselves and apply 109% (for 2-way markets) and even 112% and more for 3-way markets.
Build in margin means that in the ideal scenario if bookmakers receive an equal share of bets on every outcome they would make money just on margin (like broker fee). But usually it never happens, that’s why odds are starting to shorten if public/punters are starting to back one outcome. Bookmakers want to balance the book and odds are starting to drop on one team, and go up on the other team in the event. Does it mean bookmakers priced event wrong? Yes and no. There are a lot of cases when in weak markets someone posts info on betting forums and a lot of people start backing the same team, pushing the price down. It doesn’t mean that you should get on this game unless you know why the price moved.

Example how to calculate margin:
Atletico Madrid – Bayern Leverkusen 1.57 – 4.33 – 6.5
Margin = (1/1.57 + 1/ 4.33 + 1/ 6.5) -1 = (0.637 + 0.23 + 0.154) – 1 = 0.021 *100% = 2.1%

As we have here top game, Champions League quarterfinal, the margin is very tight – only 2% or 102% – there are two descriptions of margin.
In the image below you can see how close game is priced by most bookmakers. Every bookmaker wants big bets on top events and you can’t find better quality than Champions League. A few weeks ago, bet365 announced that Barcelona’s win 6-1 against PSG cost them 8 digits amount (that’s more than 10 million). But they usually forget to mention how much money they make every week on top games when favorites fail to win.
If you check for example Lithuanian football league game, you will see margin applied from 110% to 112% in most bookmakers and only a few ones will offer less than 107%. Bookmakers do not have enough time and resources to analyze team news. They will not attract a lot of money on this league, so it is not worth their time. Even small bets will move the line quick. So, if you see a big drop on the similar level league, don’t take it for granted that you found winning bet. To move the line in such small league by 20 cents you need 800-1000 euros (20 cents is a move when odds are cut by 0.2, for example from 1.8 to 1.6). To create the same move on Champions League or Premierleague 100k won’t be enough.
Food for thought: where is bigger chance to make money? On Champions League with tight margin, nice odds but information about every single player and analyzed/followed by top traders or on low-level league with a bigger margin, but not so well analyzed and neglected by bookmakers?

Is it important to know what margin is applied to the game you bet? No. You will be looking for highest odds anyway and margin doesn’t make a difference on the game you bet. It is just one of the useful things to know for your personal intelligence.

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