Odds compilers set the odds at bookmaking firms. They are also known as traders, and their role is absolutely essential. The odds they set eventually determine how much in wagers a bookmaker is likely to take in, and how much money they are likely to make. The act of setting the odds for a sports event is known as pricing the market.

There are a number of aspects involved in pricing up markets for sports events. The primary goal is to make sure the odds accurately reflect how likely any particular outcome might be, while also ensuring that there's a built-in profit margin. Determining the likelihood of outcomes is largely based on statistics, but very often a certain amount of sports knowledge must be applied as well.

Compilers therefore have to be very knowledgeable about the sports for which they are pricing markets; thus, they often specialize in just one or two. They also have to have a solid understanding of various mathematical and statistical principles.

Let's look at how a compiler might price up a market for a tennis match in which Novak Djokovic is playing Andy Murray. These two players are very close in ability, so the compiler would have to take a number of factors into consideration. They would look at current form, for example, and each player's known ability on the relevant playing surface. They would also take the results of past meetings into account.

Based on all these factors, they might reach the conclusion that Djokovic has roughly a 60% chance of winning the match and Murray roughly a 40% chance. The odds that approximately reflect these chances are Djokovic at 1.67 and Murray at 2.50. These odds don't include any vig, which would also need to be considered.

Generally speaking, compilers have a target margin. This may vary quite significantly for any number of reasons, but let's assume in this case that the compiler wants around a 5% margin. They would reduce the odds for each player by 5%, giving 1.59 for Djokovic and 2.38 for Murray.

A bookmaker's margin can be calculated by adding the reciprocal of the odds for all possible outcomes and converting it to a percentage. In this case, there are two possible outcomes, and the following equation would be used.

Margin Example

As you can see, the compiler has achieved the target of a 5% margin. However, the job doesn't end there. Compilers also have to try and make sure that a bookmaker has a balanced book.

How the Bookmakers Make Money - What's the Secret

Long story short--they make a lot of money because it doesn't matter who wins. They take in enough money on both sides and charge a vig. For them it's not as childish as r's are better, no d's are better.