Guide
Guide · 5 min read
The bookmaker's cut, and what it costs you
Sportsbooks do not work for free. They build a fee into the price of every bet. You never see it as a line item. You see it as odds that are a little worse than fair. Knowing how big it is, and how to shrink it, is worth more than most picks.
Where the cut hides
Take a game that is truly 50/50. A fair price would pay even money on both sides. Instead the book offers -110 on both. Work out the break-even chance of each side (see the guide on break-even) and you get 52.4% for each.
Adding up both sides
Side A at -110: 52.4%.
Side B at -110: 52.4%.
Together: 104.8%.
Real chances always add up to exactly 100%. The extra 4.8 points is the bookmaker's cut.
What it costs on a bet
Say you bet $110 at -110 on a side that really wins half the time. Half the time you win $100. Half the time you lose $110. On average that is 0.5 × $100 − 0.5 × $110 = −$5 per bet. Per dollar risked, that is about 4.5 cents.
Over 100 bets of $110, you risk $11,000 and lose about $500 on average, even though your picks were exactly as good as a coin flip would be on an even game. That is the cost of the price, before any question of skill.
Taking the cut out
To find a fair chance, we remove the cut. The simplest way is to shrink both sides in proportion so they add up to 100%.
Example: -125 on one side, +103 on the other
-125 has a break-even of 125 ÷ 225 = 55.6%.
+103 has a break-even of 100 ÷ 203 = 49.3%.
Together: 104.8%.
Divide each by 104.8%: 53.0% and 47.0%. Now they add up to 100%.
53.0% is the fair chance for the -125 side.
There is more than one way to remove a cut, and the methods disagree most on long shots. KYT works it out two standard ways and uses the one that is less flattering to your side, so we never call a price better than it is.
Now compare what the bet needs with what it is worth. At -125 the bar is 55.6%, but the fair chance is 53.0%. The bet falls 2.6 points short. Per dollar risked, it costs about 4.6 cents on average (0.530 × 1.8 − 1).
Shopping for the price
Different sportsbooks charge different cuts for the same bet. A side priced at -105 instead of -110 has a break-even of 51.2% instead of 52.4%. On a true 50/50 game the cost drops from 4.5 cents per dollar to 2.4 cents, roughly half.
Same pick, same game, half the cost. That is the idea behind KYT's price grades. We grade the price, never the pick: an A means the price is better than fair by more than a point, B- is better than fair by up to a point, and an F costs 5 cents or more per dollar. Our results page tests these grades in public against the pros' closing price.
The cut is not a trick. It is the price of the service. But it is the biggest cost in betting that you can actually control, and you control it by looking at the price before you place the bet.
For entertainment and education. Nothing here predicts results or recommends a bet.