# How to Calculate Margins in Sports Betting

Margins are among the most polarizing topics in sports betting. On one side you have people who prefer to calculate their edge or payout as a percentage of the bankroll, while others prefer to look at the actual cost of various events and make their own calculations. This article will walk you through the logic behind each method using some real-life examples.

## Payouts As A Percentage Of The Bankroll

The vast majority of sports bettors prefer to calculate their margins as a percentage of their bankroll. This method of calculation is quite easy to understand and it gives you a good idea of how much money you should risk in a particular sports bet. For example, if you have a \$10,000 bankroll and you put \$5000 on the favorite then your margin would be 50%. This means that you would win \$5000 if your favorite team wins the game and you would lose \$5000 if your underdog team wins the game. As a percentage of your bankroll, this is a positive margin. People who prefer this method of calculation will even tell you that you should never risk more than twice your bankroll on a single bet. This is mainly because the percentage margin method of calculation takes into account the cost of all wins and losses combined. While many people don’t have a problem with losing just a little money, the majority of them do have a problem with losing a large sum of money. The key takeaway from this is that you should be willing to lose some of your money in order to make money. If you are looking for a way to improve your odds at winning your wagers then you should look into the different methods of calculating margins.

## Cost-Based Margins

On the other side of the spectrum, you have people who prefer to calculate their margins using the cost approach. The basic premise behind this method is that you should assess every wager you make against the cost of the event you are betting on. The cost-based calculation of margins takes into account all the relevant costs including the implied or historical odds, the over/under prices, and the fees. By adding up all these figures you can get a good idea of how much you are likely to win or lose from the particular bet. To illustrate how this works, let’s look at a \$10,000 bet on the New York Knicks vs Miami Heat at 8.5 in the under/over game. We will assume that the bettor uses American funds and accepts wagers on a variety of sports including basketball. As you can see in the table below, the cost of this game is approximately \$52. Based on this information, the cost-based margin for this particular bet is a negative \$52 which means you would lose \$10,000 on this bet.

The key takeaway from this example is that you should be able to easily figure out what your margin would be using the cost-based approach even though you are not familiar with this type of calculation. This is because you would only need to enter some of the relevant information such as the odds and the amount wagered to get a rough idea of your margin by simply entering the cost of the game. You do not need to have an exact figure for the amount you have on hand or the amount wagered because these figures will change based on how much you enter. This is important for people who prefer to use an estimate when figuring out their margins because they do not want to have to constantly re-calculate everything manually.

## Net Profits Or Losses

Some people who prefer to calculate their margins as a percentage of their bankroll prefer to call them net profits or losses since this takes into account both wins and losses. This is mainly because many times you will win some money on a particular bet and then you will lose some money on another. For example, if you bet \$10,000 on the New York Knicks and they win the game then you would gain \$10,000 on the bet but if the team you are backing loses the game then you would have a \$5000 loss. The net profit or loss from the bet is the total amount you win or lose on the bet – in this case \$20,000. As an alternative to the percentage of the bankroll method, this is another way of looking at your margins which takes into account all the relevant costs and win/losses. As you can see in the table below, the net profit or loss from this bet is a \$20,000 gain which is slightly higher than the \$20,000 figure using the percentage of the bankroll method. This is because the percentage of the bankroll method only takes into account the amount you win as opposed to the overall net profit or loss from the bet.

The key takeaway from this example is that if you prefer to look at your margins in terms of net profit or loss rather than as a percentage of your bankroll then you should calculate the win/loss of each bet individually rather than as a summed total.

## Expected Value

Another method of calculating margins which has become quite popular in recent years is the expected value method of calculation. This method of calculation takes into account both the cost and the value of each individual wager. More specifically, it takes into account the cost of each wager plus a small amount determined by the amount you win on each bet. Mathematically speaking:

(C1 + CV1) x (P1 + 1) = EV1

where:

• C1 is the cost of the first wager
• CV1 is the cost of the second wager
• P1 is the profit (if any) from the first wager
• EV1 is the expected value (profit + value) of the second wager

The basic premise behind this method of calculation is that you should expect to win a certain amount of money on each wager you make. Based on this, you can determine how much you are likely to win or lose on a particular wager. The expected value method of margin calculation is quite similar to the cost-based method but it adds an additional element of risk to take into account. This is because you are including an additional element of chance in your calculations which means you are increasing the likelihood of you losing money on a particular wager. As with the other methods of calculating margins, you can use an approximation when calculating this figure as you need only enter the relevant information such as the cost and the amount you wager to get a rough idea of what your margin would be using this method. This is also a very flexible method of calculating margins since you can easily alter the way you look at it if you are finding it slightly difficult to understand. For example, if you are only using the cost of each bet as opposed to adding it all up at the end, you could easily switch to include an additional amount for the probability of each wager winning. This would change your overall expected value figure but it would still maintain its basic premise of risk and reward. You could also use this additional element of chance to include the historical win/loss record of the team you are betting on to make it more interesting.