# Margin Calculation Methods

### What Are Margin Calculation Methods

In sportsbook pricing, margin calculation methods are used to distribute your built-in profit (margin) across odds. They directly shape how odds are calculated from implied probabilities, impacting competitiveness, profitability, and risk exposure. Unlike a fixed margin percentage applied uniformly, margin calculation methods determine how the margin is spread across outcomes based on the underlying probability distribution.

**TRADE supports three industry-standard Margin Calculation Methods.**

### Why Margin Calculation Methods Matter

Margin isn't just "a number" you add — it affects:

* Price competitiveness — how attractive your odds are relative to competitors.
* Profit behavior — which odds contribute most to your expected hold.
* Risk balance — how pricing behaves in imbalanced or extreme probability scenarios.

Choosing the right method helps you balance market appeal with long-term margin protection.

### Supported Margin Calculation Methods

#### **Multiplicative Margin**

**How it works**

Scales the margin in proportion to the implied probabilities — higher probability outcomes get proportionally more margin and lower probability outcomes get proportionally less.

**Use Case**

Best for common markets with relatively balanced probabilities. It's straightforward and often comparable with simpler pricing models.

#### **Power Margin (LSports Recommended)**

**How it works**

Applies a normalization exponent to redistribute margin more efficiently using a power multiplier.

**Use Case**

Ideal for particularly high-odd markets.

#### Additive Margin

**How it works**

Applies the same fixed margin amount to every outcome, subtracting evenly regardless of underlying probability.

**Use Case**

Simple markets and basic use cases where you want the same margin impact across all bets.

### Comparing Margin Calculation Methods

| Method         | Accuracy | Suitability | Probability Control  | Bias Handling |
| -------------- | -------- | ----------- | -------------------- | ------------- |
| Multiplicative | Moderate | Common bets | May exceed 100%      | Weak          |
| Power          | High     | All bets    | Always within \[0,1] | Strong        |
| Additive       | Low      | Basic use   | Equal distribution   | Weak          |

### Examples

#### Example 1

| Raw odd | Raw prob | Multiplicative | Additive | Power  |
| ------- | -------- | -------------- | -------- | ------ |
| 1.18    | 0.847    | 1.277          | 1.219    | 1.208  |
| 7.15    | 0.139    | 7.740          | 8.901    | 9.518  |
| 10.5    | 0.095    | 11.366         | 14.766   | 14.782 |

*sum 1.082 | total\_margin 0.0825*

#### Example 2

| Raw odd | Raw prob | Multiplicative | Additive | Power  |
| ------- | -------- | -------------- | -------- | ------ |
| 1.224   | 0.817    | 1.359          | 1.282    | 1.268  |
| 5.91    | 0.169    | 6.565          | 7.562    | 8.045  |
| 8.02    | 0.1247   | 8.909          | 11.399   | 11.511 |

*sum 1.11 | total\_margin 0.11*


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