Most punters believe they are betting against the bookmakers. In fact, they are betting against their fellow bettors. This is represented by the fluctuations of the odds.
Why do odds change? Odds constantly change on an outcome in a particular game in response to:
* number of bets and
* amount of money staked
This is why you can see odds around 2.10 in the morning and get only 1.90 later in the day. For example, if $1000 is staked on Home win, the price for Away win will then go up to make the Away team more attractive for the punters to bet. Through the adjustment of the odds according to the market conditions, the bookmakers’ objective is to balance their books for that event.
Bookmakers do not gamble. They charge a certain percentage of margin for each bet and as long as their books are balanced, they win irrespective of the match outcome. The bookmakers set the odds according to demand and supply to balance the action from all sides and because of the margin, they always win.
In the event a bookmaker could not balance his books through odds fluctuations, he will then reduce his risk by transferring some amount of the bets wagered to other bookmakers that have odds better than his own. This is known in the industry as ‘farming out’. Thus, besides the punters, sometimes the bookmakers also trade on the betting exchanges to balance their books.
If the imbalance of money staked in an event is too great, for example, due to rumor of fixed matches, etc, the bookmakers may remove the event altogether.
So the punters are betting against each other. This means when punter Mr A wins in an event, his win is actually paid for by losing punter Mr B.
This cast the bookmaker in the role of a broker who takes commission on the market and funds the winners from the losing bets.