How to calculate betting exchange commission into odds

Learn how to calculate betting exchange commission into odds, so you can compare prices accurately with other exchanges and bookmakers, allowing you to find the best odds.

Why calculate commission into betting odds

Rather than building a betting margin into the odds like bookmakers, betting exchanges charge commission.

We have already explained how to calculate commission on a betting exchange which allows you to determine your return, and how it varies depending on the commission rate you pay.

With base commission rates varying from Smarkets’s industry-low 2% to 5% and more from other exchanges, learning how to calculate betting commission into odds is vital for finding the best odds, when comparing with bookmakers and other exchanges.

Calculating betting exchange commission into odds

As betting exchanges don't include a betting margin, you need to be able to calculate their commission into odds. To do this, use this simple equation:

Exchange odds with commission factored in = 1 + ((1 – (Commission / 100)) * (Odds – 1))

Let’s use an example to calculate the betting exchanges commission into your odds if you wanted to place a £100 bet on QPR to beat Leeds United on the 1X2 market with 2% commission applied.

 Result Smarkets odds Implied Probability % Leeds United 2.04 49.02% Draw 3.55 28.17% Queens Park Rangers 4.25 23.53%

You may expect your bet to return £425 (including stake). However, this doesn’t include the 2% commission. To work out the true odds including commission use the following formula:

QPR odds with 2% commission applied = 1 + ((1 – (2 / 100)) * (4.25 – 1)) = 4.19

The odds for a QPR win with 2% commission applied are 4.19 rather than 4.25, meaning your return from a £100 bet would be £419 (including stake).

How does commission affect odds

 Result Odds on exchange 2% commission 5% commission Leeds United 2.04 2.02 1.99 Draw 3.55 3.50 3.42 Queens Park Rangers 4.25 4.19 4.09

The table above highlights how using a betting exchange that charges a higher commission than Smarkets’s 2% can impact the odds and affect your overall payout.

For instance, if you bet £100 on QPR to win using a betting exchange that charge 5% commission your return would be £409 - £10 less or 2.4% worse off.

It may not appear a huge difference, but it will soon add up to a considerable amount.

It's important to understand that Smarkets only charge commission on net profits per market, compared to some other exchanges who charge commission whether you win or not.

Calculating the betting margin on an exchange to compare with bookmakers

Now you have converted the betting exchange odds to include the commission you can calculate the true market margin.

To do this for the 1X2 game between Leeds and QPR simply use the following calculation:

(1/Home Odds) *100 + (1/Away Odds) *100 + (1/Draw Odds) *100 = Margin

Therefore the overround on Smarkets with 2% commission applied would be:

(1/ 2.02) *100 + (1/ 4.19) *100 + (1/ 3.50) *100 = 101.94%

If you were to place the bet with an exchange charging 5% commission your margin would be 103.94% or 2% more than Smarkets, while one UK high street bookmaker offered a margin of 7% for this bet in 2017.

Understanding betting margins and how to calculate them is a fundamental skill for bettors seeking the best odds, as the higher the margin is the worse the odds are.

Apply this to betting

Having the ability to calculate betting exchange commission into odds is vital for any bettor looking for the best odds, and the most value from a bet.

Betting margins and commission structures vary greatly across bookmakers and betting exchanges, so calculating the odds correctly is vital for long-term value. We think smart bettors will choose Smarkets’s industry-low 2% commission.

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