Instead of building a margin into the odds like bookmakers, betting exchanges charge commission. Learn how to calculate commission on a betting exchange, and how it affects your winnings.
How to calculate betting exchange commission
You can calculate how much commission you will be charged with the following equation:
Commission charged = ((stake * odds) - stake) * commission rate
Let’s now use an example for the 2016 Australian Open final between Novak Djokovic (1.20) and Andy Murray (5.50) to work out how much commission you will pay.
Your stake is £100. You may assume your return from a £100 bet on Murray to win would be £550 (5.50 * £100). But this doesn’t take into consideration the commission.
Using the calculation above and Smarkets’s industry-low 2% commission your return for a £100 bet on Murray at 5.50 can be calculated as:
So in our example, if Murray had won you would be charged £9 total commission on your bet, meaning your profit would be £441 and your return would be £541 (including stake).
How does different betting exchange commission affect your profit
Not all betting exchanges charge the same commission, so understanding how a betting exchanges commission rate affects your profit is vital.
Using the same odds and stake from the example above, the table below shows that you would make £13.50 more betting with Smarkets than with a betting exchange that charges 5% commission.
|Betting exchange commission||Commission paid||Return|
Note: Bookmakers don’t charge commission, instead they build a margin, or overround, into the odds which do not represent the true probability of the outcomes, giving them an edge over the bettor - Learn how to calculate betting margins.
Apply this to betting
By learning how to calculate commission on a betting exchange, you now understand how differing commission structures affect your overall profit.
Next, you should learn how to factor commission into betting odds, so you can compare odds across the different betting exchanges and traditional bookmakers.
This will enable you to find the best value, ensuring an increase in your potential profit. Remember the best value is the fairest odds, which is what you get with Smarkets.