Vigorish
Encyclopedia
Vigorish, or simply the vig, also known as juice or the take, is the amount charged by a bookmaker
, or bookie, for his services. In the United States it also means the interest on a shark's loan. The term is Yiddish slang originating from the Russian
word for winnings, выигрыш vyigrysh. Bookmakers use this practice to make money on their wagers regardless of the outcome. To minimize their risk, bookmakers do not want to have an interest in either side winning in a given sporting event. They are interested, instead, in getting equal betting on both outcomes of the event. In this way, the bookmaker minimizes his risk and always collects a small commission
from the vigorish. The bookmaker will normally adjust the odds
or the line
, to attract equal action on each side of an event.
The concept is also sometimes referred to as the overround
, although this is technically different, being the percentage the event book is above 100% whereas the vigorish is the bookmaker's percentage profit on the total stakes made on the event. For example, 20% overround is vigorish of %. The connecting formulae are v = and o = where o is overround.
It is simplest to assume that vigorish is factored in proportionally to the true odds, although this need not be the case. Under proportional vigorish, a moneyline odds
bet listed at −100 vs. −100 without vigorish (fair odds) could become −110 vs. −110 with vigorish factored in. Under disproportional vigorish, it could become −120 vs. +100.
By contrast, when using a sportsbook with the odds set at −110 vs. −110 (10 to 11, 1.9090..) with vigorish factored in, each person would have to risk or lay $110 to win $100 (the sportsbook collects $220 "in the pot"). The extra $10 per person is, in effect, a bookmaker's commission for taking the action. This $10 is not in play and cannot be doubled by the winning bettor; it can only be lost. A losing bettor simply loses his $110. A winning bettor wins back his original $110, plus his $100 winnings, for a total of $210. From the $220 collected, the sportsbook keeps the remaining $10 after paying out the winner.
, or scaled commission fee, of $10 ÷ $220 = 4.55%. Since the winning bettor got his full $110 wager back, plus $100 in winnings, many observers will assert that only the losing bettor paid the vigorish. Others would attest that the winner — who had risked $110 and only received $210 in the end, instead of doubling his money to $220 — is the only bettor who paid the vigorish. To discuss how the bettors are affected by the vigorish, we must first define what they would have bet at fair odds (without the presence of vigorish) or else there is no way to compare how much tax is placed on the winner or loser due to the vigorish. There are unlimited possibilities for how the presence of vigorish could affect the amount wagered by a bettor, since a bettor is free to bet in any arbitrary way based on the odds. There are, however, several natural options to consider which give different results on how vigorish affects a bettor.
These are three examples of possible gambler behaviors that all give different answers to the distribution of vigorish fees amongst winners and losers. One therefore cannot say precisely whether winners or losers or both are paying the vigorish until the gamblers' behaviors with respect to the fair odds and juiced odds is defined.
For a two outcome event, the vigorish percentage, v is
where the p and q are the decimal
payouts for each outcome.
This should not be confused with the percentage a bettor pays due to vigorish. No consistent definition of the percentage a bettor pays due to vigorish can be made without first defining the bettor's behavior under juiced odds and assuming a win-percentage for the bettor. These factors are discussed under the debate section.
For example, −110 side pricing of an even match is 4.55% vigorish, and −105 side pricing is 2.38% vigorish.
Bookmaker
A bookmaker, or bookie, is an organization or a person that takes bets on sporting and other events at agreed upon odds.- Range of events :...
, or bookie, for his services. In the United States it also means the interest on a shark's loan. The term is Yiddish slang originating from the Russian
Russian language
Russian is a Slavic language used primarily in Russia, Belarus, Uzbekistan, Kazakhstan, Tajikistan and Kyrgyzstan. It is an unofficial but widely spoken language in Ukraine, Moldova, Latvia, Turkmenistan and Estonia and, to a lesser extent, the other countries that were once constituent republics...
word for winnings, выигрыш vyigrysh. Bookmakers use this practice to make money on their wagers regardless of the outcome. To minimize their risk, bookmakers do not want to have an interest in either side winning in a given sporting event. They are interested, instead, in getting equal betting on both outcomes of the event. In this way, the bookmaker minimizes his risk and always collects a small commission
Commission (remuneration)
The payment of commission as remuneration for services rendered or products sold is a common way to reward sales people. Payments often will be calculated on the basis of a percentage of the goods sold...
from the vigorish. The bookmaker will normally adjust the odds
Odds
The odds in favor of an event or a proposition are expressed as the ratio of a pair of integers, which is the ratio of the probability that an event will happen to the probability that it will not happen...
or the line
Spread betting
Spread betting is any of various types of wagering on the outcome of an event, where the pay-off is based on the accuracy of the wager, rather than a simple "win or lose" outcome, such as fixed-odds betting or parimutuel betting. A spread is a range of outcomes and the bet is whether the outcome...
, to attract equal action on each side of an event.
The concept is also sometimes referred to as the overround
Mathematics of bookmaking
In betting parlance, making a book is the practice of laying bets on the various possible outcomes of a single event. The term originates from the practice of recording such wagers in a hard-bound ledger and gives the English language the term bookmaker for the person laying the bets and thus...
, although this is technically different, being the percentage the event book is above 100% whereas the vigorish is the bookmaker's percentage profit on the total stakes made on the event. For example, 20% overround is vigorish of %. The connecting formulae are v = and o = where o is overround.
It is simplest to assume that vigorish is factored in proportionally to the true odds, although this need not be the case. Under proportional vigorish, a moneyline odds
Fixed-odds gambling
Fixed-odds betting is a form of wagering against odds offered by a bookmaker, an individual, or on a bet exchange.-Calculating fixed odds:It is customary with fixed-odds gambling to know the odds at the time of the placement of the wager , although this category also includes wagers whose price is...
bet listed at −100 vs. −100 without vigorish (fair odds) could become −110 vs. −110 with vigorish factored in. Under disproportional vigorish, it could become −120 vs. +100.
Example
A fair odds bet: Two people want to bet on opposing sides of an event with even odds. They are going to make the bet between each other without using the services of a bookmaker. Each person is willing to risk $100 to win $100. After each person pays his $100, there is a total of $200 in the pot. The person who loses receives nothing and the winner receives the full $200.By contrast, when using a sportsbook with the odds set at −110 vs. −110 (10 to 11, 1.9090..) with vigorish factored in, each person would have to risk or lay $110 to win $100 (the sportsbook collects $220 "in the pot"). The extra $10 per person is, in effect, a bookmaker's commission for taking the action. This $10 is not in play and cannot be doubled by the winning bettor; it can only be lost. A losing bettor simply loses his $110. A winning bettor wins back his original $110, plus his $100 winnings, for a total of $210. From the $220 collected, the sportsbook keeps the remaining $10 after paying out the winner.
Discussion
In the above example, the bookmaker has taken a rakeRake (poker)
Rake is the scaled commission fee taken by a cardroom operating a poker game. It is generally 5 to 10 percent of the pot in each poker hand, up to a predetermined maximum amount. There are also other non-percentage ways for a casino to take the rake. Some cardrooms will not take a percentage rake...
, or scaled commission fee, of $10 ÷ $220 = 4.55%. Since the winning bettor got his full $110 wager back, plus $100 in winnings, many observers will assert that only the losing bettor paid the vigorish. Others would attest that the winner — who had risked $110 and only received $210 in the end, instead of doubling his money to $220 — is the only bettor who paid the vigorish. To discuss how the bettors are affected by the vigorish, we must first define what they would have bet at fair odds (without the presence of vigorish) or else there is no way to compare how much tax is placed on the winner or loser due to the vigorish. There are unlimited possibilities for how the presence of vigorish could affect the amount wagered by a bettor, since a bettor is free to bet in any arbitrary way based on the odds. There are, however, several natural options to consider which give different results on how vigorish affects a bettor.
- The gambler has a target amount he wants to win, which is independent of the presence or absence of vigorish. As an example, for an even match we would have −100 vs. +100 for fair odds and the gambler wagers 100 to win 100. Under proportional vigorish the odds would become −110 vs. +100 and so gamblers must wager 110 to win 100. In this case, losers lose 110 under the juiced odds compared to 100 under fair odds, so the loser pays 10 extra. The winner gets back his 110 plus 100 profit, compared to getting back his 100 plus 100 profit under fair odds. The winner has no net difference since he is up 100 either way. So the loser pays the full vigorish of 10 under this assumption.
- The gambler has a given amount he is willing to risk, independent of vigorish. Under fair odds the gambler risks 100 to win 100. Under vigorish, the gambler still risks 100 to win 100 × (100 ÷ 110) = 90.9. Under this behavior, the loser loses 100 in both cases, so pays no vigorish. The winner wins 100 net under fair odds and 90.9 net under vigorish, so he pays 9.1 in vigorish. The winner pays the full vigorish under this assumption.
- The gambler bets more when he has a greater edge (better payout for a given chance of winning). A KellyKelly criterionIn probability theory, the Kelly criterion, or Kelly strategy or Kelly formula, or Kelly bet, is a formula used to determine the optimal size of a series of bets. In most gambling scenarios, and some investing scenarios under some simplifying assumptions, the Kelly strategy will do better than any...
gambler is one such gambler, who seeks to maximize his rate of bankroll growth in the limit of infinite bets placed over time. This type of gambler will bet more when the payout reflects a bigger advantage for him. The fact that he bets at all indicates that he thinks he has an advantage in the bet, so the presence of vigorish reduces this edge by reducing the payout for a given amount wagered. Therefore, these gamblers on either side of the wager will both bet less than they would have at fair odds (assuming proportional vigorish). The losers therefore lose less than they would have under fair odds, so counter-intuitively these losers do better with vigorish. The winners not only receive a lower payout factor on their bet, but they also risked less than they would have at fair odds, so they pay the full rake of the bookmaker, plus the amount saved by the losers, since (amount cost by winners) − (amount saved by the losers) = (full vigorish raked by the bookmaker). So for these gamblers, the losers pay negative vigorish, while the winners pay more than the full vigorish raked in by the bookie.
These are three examples of possible gambler behaviors that all give different answers to the distribution of vigorish fees amongst winners and losers. One therefore cannot say precisely whether winners or losers or both are paying the vigorish until the gamblers' behaviors with respect to the fair odds and juiced odds is defined.
Vigorish percentage
Vigorish percentage can be defined in a way independent of the outcome of the event and of bettors' behaviors by defining it as the percentage raked in a risk-free wager. This definition is the rake of the bookie as a percentage of total bets received if the bookie has balanced the wagers so that he makes equal profit regardless of the outcome of the event.For a two outcome event, the vigorish percentage, v is
where the p and q are the decimal
Fixed-odds gambling
Fixed-odds betting is a form of wagering against odds offered by a bookmaker, an individual, or on a bet exchange.-Calculating fixed odds:It is customary with fixed-odds gambling to know the odds at the time of the placement of the wager , although this category also includes wagers whose price is...
payouts for each outcome.
This should not be confused with the percentage a bettor pays due to vigorish. No consistent definition of the percentage a bettor pays due to vigorish can be made without first defining the bettor's behavior under juiced odds and assuming a win-percentage for the bettor. These factors are discussed under the debate section.
For example, −110 side pricing of an even match is 4.55% vigorish, and −105 side pricing is 2.38% vigorish.
Casino games
Vig may generically refer to the built-in house advantage on most bets on any game in a casino. The term may also refer to, and be applied in specific ways to, particular casino games.- BaccaratBaccaratBaccarat is a card game, played at casinos and by gamblers. It is believed to have been introduced into France from Italy during the reign of King Charles VIII , and it is similar to Faro and Basset...
, in the house-banked version of baccarat (also mini-baccarat) commonly played in North American casinos, vigorish refers to the 5% commission (called the cagnotteCagnotteCagnotte is a commune in the Landes department in Aquitaine in south-western France....
) charged to players who win a bet on the banker hand. The rules of the game are structured so that the banker hand wins slightly more often than the player hand; the 5% vigorish restores the house advantage to the casino for both bets. In most casinos, a winning banker bet is paid at even moneyEven moneyEven money describes a wagering proposition with even odds - if the bettor loses a bet, he or she stands to lose the same amount of money that the winner of the bet would win . The term has come to have meaning in the wider English usage beyond actual gambling, however, as a way of describing an...
, with a running count of the commission owed kept by special markers in a commission box in front of the dealer. This commission must be paid when all the cards are dealt from the shoe or when the player leaves the game. Some casinos don't keep a running commission amount, and instead withdraw the commission directly from the winnings; a few require the commission to be posted along with the bet, in a separate space on the table. - BackgammonBackgammonBackgammon is one of the oldest board games for two players. The playing pieces are moved according to the roll of dice, and players win by removing all of their pieces from the board. There are many variants of backgammon, most of which share common traits...
, the recube vig is the value of having possession of the doubling cube to the player being offered a double. - CrapsCrapsCraps is a dice game in which players place wagers on the outcome of the roll, or a series of rolls, of a pair of dice. Players may wager money against each other or a bank...
, vigorish refers to the 5% commission charged on a buy bet, where a player wishes to bet that one of the numbers — 4, 5, 6, 8, 9 or 10 — will be rolled before a 7 is rolled. The commission is charged at the rate of $1 for every $20 bet. The bet is paid off at the true mathematical odds, but the 5% commission is paid as well, restoring the house advantage. For many years, this commission was paid whether the bet won or not. In recent years, many casinos have changed to charging the commission only when the bet wins, which greatly reduces the house advantage; for instance, the house advantage on a buy bet on the 4 or 10 is reduced from 5% to 1.67%, since the bet wins one-third of the time (2:1 odds against). In this case, the vig may be deducted from the winnings (for instance, a $20 bet on the 4 would be paid $39 — $40 at 2:1 odds, less the $1 commission), or the player may simply hand the commission in and receive the full payout. This rule is commonplace in MississippiMississippiMississippi is a U.S. state located in the Southern United States. Jackson is the state capital and largest city. The name of the state derives from the Mississippi River, which flows along its western boundary, whose name comes from the Ojibwe word misi-ziibi...
casinos, and becoming more widely available in NevadaNevadaNevada is a state in the western, mountain west, and southwestern regions of the United States. With an area of and a population of about 2.7 million, it is the 7th-largest and 35th-most populous state. Over two-thirds of Nevada's people live in the Las Vegas metropolitan area, which contains its...
. - Poker
- In pai gow pokerPai gow pokerPai Gow poker is an Americanized version of Pai Gow . The games of Pai Gow poker and Super Pan-9 were created by Sam Torosian and Fred Wolf.The game is played with a standard 52-card deck, plus a single joker...
, a 5% commission charged on all winning bets is referred to as vigorish. Unlike baccarat, the commission is paid after each winning bet, either by the player handing in the amount from his stack of chips, or by having the vig deducted from the winnings. - In table pokerPokerPoker is a family of card games that share betting rules and usually hand rankings. Poker games differ in how the cards are dealt, how hands may be formed, whether the high or low hand wins the pot in a showdown , limits on bet sizes, and how many rounds of betting are allowed.In most modern poker...
, the vigorish, more commonly called the rakeRake (poker)Rake is the scaled commission fee taken by a cardroom operating a poker game. It is generally 5 to 10 percent of the pot in each poker hand, up to a predetermined maximum amount. There are also other non-percentage ways for a casino to take the rake. Some cardrooms will not take a percentage rake...
, is a fraction of each bet placed into the potPot (poker)The pot in poker refers to the sum of money that players wager during a single hand or game, according to the betting rules of the variant being played...
. The dealerPoker dealerA poker dealer distributes cards to players and manages the action at a poker table.-Professional dealers:Any casino with a poker room must hire a staff of dealers. Casinos generally pay dealers minimum wage. However, a dealer's primary source of income is not salary, but tips from players*...
removes the rake from the pot after each bet (or betting round), making change if necessary. The winner of the hand gets the money that remains in the pot after the rake has been removed. Most casinos take 5-10% of the pot, typically capping the total rake at $3 or $4.
- In pai gow poker
- Slot machines - the payouts and winning combinations available on most slot machines and other electronic gambling systems are often designed such that an average of between 0.1% to 10% (varying by machine and facility) of funds taken in are not used to pay out winnings, and thus becomes the house's share. Machines or facilities with a particularly low percentage are often said to be loose.
Other uses
- In investment banking, "vig" is sometimes used to describe profits from advisory and other activities.
- In sports, Pittsburgh PiratesPittsburgh PiratesThe Pittsburgh Pirates are a Major League Baseball club based in Pittsburgh, Pennsylvania. They play in the Central Division of the National League, and are five-time World Series Champions...
announcer Bob PrinceBob PrinceRobert Ferris Prince was an American radio and television sportscaster and commentator best known for his 28-year stint as the voice of the Pittsburgh Pirates Major League Baseball club, with whom he earned the nickname “The Gunner” and became a cultural icon in Pittsburgh, Pennsylvania.Prince was...
coined the term "hidden vigorish" to describe an underdog's ability to beat the odds in a given situation. - The term is also used in reference to an auction house's buyers and sellers fees.