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| Understanding the "Vig" |
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| Many who bet on sports believe that the loser pays 10% "vig" for losing the bet, so on a 100 wager, you win $100, but lose $110. But wait a second, by entering the bet, aren’t you really risking $110? So why don’t you win $110? Therefore the winner pays the $10, right? Well, not so fast. You could also think of it as a $105 "bet" where the winner and the loser each pay $5. The point is, no matter how you slice it, on a typical $100 bet, you are risking $110 to win a $100. So how do you calculate the fee you are charged for placing a bet?
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| Here is the way I like to look at it. Think of it as the total amount risked vs. the amount that the bookmaker keeps for themselves. In our example of two bettors taking opposite sides of a bet, each bettor risked $110 for a total amount of $220. The winner would get $210 back - the $110 he put in to place the bet plus the $100 he won. The loser of course, receives nothing, so the bookmaker keeps $10, which is about 4.5% of the total amount wagered. To break even, a gambler must win at a rate of about 52.4% (Amount Risked/(Total Wagered - Fee)).
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| Why is this useful? Well with the onslaught of online sportsbooks and betting exchanges, bets are offered in all sorts of varieties. Some sportsbooks offer standard line bets at –108 or even -107. To compare what type of fee this equates to, use the same formula:
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| Odds | Equiv. Fee (%) | Break Even Win Rate |
| -108 | 3.7% | 51.9% |
| -107 | 3.3% | 51.7% |
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| Knowing this information is especially useful when comparing sportsbook fees to the fees charged by betting exchanges such as tradesports.com (a.k.a. tradebetx.com) or BetBug.com (See our Betting Exchanges section). Tradesports charges a nominal fee of 4 cents per "contract". Without getting into details, this equates to paying 80 cents for a typical $100 wager. However, this fee is charged both when the bet is "matched" and when the bet is "settled", adding to a grand total of $1.60, or 1.6% of the amount wagered. BetBug charges 5%, but only to the winner. Ahh, but again it’s really all semantics, isn’t it? So you wager $100, win $100, but then pay $5 for the "Winner’s" fee. However, in the end, aren’t you really risking $100 to win $95, no matter who is actually getting charged? Applying the same formula, your betting fee comes out to be $5/200, or 2.5%.
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| So applying this logic, it makes the most sense to go with a betting exchange, right? Well, in most cases yes, but online books offer many more types of bets, such as parlays and teasers that an exchange simply can’t offer, so it’s really a matter of personal preference. However, I do encourage our site visitors and members to look into a one of the betting exchanges as a means of maximizing profits over the long term.
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