How Odds Work
The betting odds are probably one of the most popular parts of gambling, so much so, that 'odds' have become a household term. Have you ever wanted to truly understand how odds work, though? That's right, despite the fact that the term 'odds' is being used vastly in our daily lives, the majority of people really don't know how the betting odds work. As part of our Betting Guide series, here we will explain in great detail how the odds work, how one can take advantage and what's the difference between 'betting odds' and 'betting lines'.
In Summary Betting odds represent the probability of an event to happen and therefore enable you to work out how much money you will win if your bet wins. As an example, with odds of 4/1, for every £1 you bet, you will win £4. There is a 20% chance of this happening, calculated by 1 / (4 + 1) = 0.20.
In the simples form of speaking, betting odds are the probability of an event correlated to a wager (also called a 'bet'). Right away one must realize the difference between simple probability of an event to happen (or not), which is usually expressed as 'percentage', i.e. '50% chance of the event occurring' vs. the betting odds, which are always correlated to a wager, i.e. 2/1 or 'will pay two for every 1 wagered if the event happens'.
Why is this part so important? Because one must adjust their way of thinking if they plan on engaging into sports betting. If we take a simple example, a flip of a coin will yield tails 50% of the time, that's simple math, but there is no math when two football teams meet on the field and the odds are set. Every sportsbook will most often post different betting odds, based on many factors which influence the decision of the odds maker, i.e. a guy working for the sportsbook setting the odds for the event. So 2/1 odds for one team and 4/1 for the other doesn't mean that the first team has 50% chance to win the game, but that the sportbook believes that the team is more likely to win the game and will pay out $2 for every $1 wagered on that team. Bottom line in understanding how odds work here is that: odds are not simple probabilities, but a payout on a wager.
Now that we've understood the most basic part about sports betting odds, time to move on to the most important part - reading the odds, i.e. what the odds numbers mean. There are three types of betting odds: American odds (lines), fractional odds and decimal odds ( also called 'European odds' or'coefficient'). The American and fractional odds are the two types of betting odds one is most likely to encounter in the USA, especially when betting online, although most online sportsbooks will give you the option to set the odds to be expressed in any way you want. Let's take a closer look at each type and how the odds work:
American Odds: Called this way because this form of betting odds is used exclusively in the United States. Another term for American odds is 'line' or 'betting line', which has been misused a lot, but we will get to this a bit later into our article. The form American odds (or lines) take is a plus '+' sign or a minus '-' sign in front of a number. For example, the line on the New York Giants to win the game against the Green Bay Packers is '-150', while the odds on the Packers to win are '+230'. Here is the simplest way to read the betting odds from this example, which also covers the American odds in general: If there is a minus sign in front of the number, the number indicates how much you have to wager to win $100, while if there is a plus in front of the number, the number itself indicates how much you will win if you bet $100. As you can see there is a clear difference in reading odds with minus sign (favorite) and plus sign (underdog).
As an exercise, let's take the odds from the above example and read them. The -150 on the Giants means that the bettor will have to bet $150 to win $100, i.e. if you have $150 in your bookmaker's account and you bet them all on the Giants, after winning you will have the total of $250 in your account ($150 wager + $100 winnings). The +230 odds on the Packers on the other side show that if a bettor wagers $100 on Green Bay, the winnings will be $230. If your sportsbook account had only $100 and you bet them on the Packers and they won, your bankroll will be total of $330 ($100 wager + $230 winnings). What if you bet $150 on the Packers odds? Then you will win $345 for a total in your player's account of $445.
Fractional Odds: These are the most popular form of odds and unless you've lived under a rock you've heard someone mention fractional odds. Naturally they are expressed as a fraction of two numbers, for example 2/1, which should be read as 'two to one' and means that the sportsbook will pay 'two' to every 'one' bet by the customer. Clearly these are the easiest odds to read and understand how odds work - the 'first number' (in our case '2') shows how much the sportsbook will pay for every 'second number' (in our case '1') wagered. So, if the sportsbook says that Boxer 1 has 3/1 odds to win against Boxer 2, it means that for every $1 bet by the customer the bookmaker will pay $3. Keep in mind, however, that the $3 will be the total payout, i.e. you would actually make only $2 profit. Let's have a real money example to better understand the correlation. Imagine you have $10 in your sportsbook account and you bet them all on Boxer 1 to win the match at 3/1 odds. If this happens, your account will be credited back with only $30 ($10 wager and $20 winnings) and NOT with $40 ($10 wager + $30 winnings). Luckily, this is the only iffy aspect of the fractional odds.
American Odds are the default odds at American sportsbooks. These odds are based on winning $100 for a given bet. Betting a Favorite: The odds for favorites will have a minus (-) sign, and represent the money you need to risk to win $100. So if you're betting on the Packers at -140 against the Vikings, that means Green Bay is a slight favorite. That’s just how these odds work. American Odds show how much you’ll win with a $100 bet (odds with +) or how much you need to bet to win $100 (odds with -) In other words, the lower the number, the more likely they are to win, and the less money you win. WInning a bet marked at -220, means that you would win an extra $100 if you placed $220.
Decimal Odds: Also called European odds or referred to simply as a coefficient in some parts of the world, the decimal odds are the easiest to work with. These odds take the form of a simple decimal number, for example 1.25, which is simply multiplied by the wager to give you the total for the bet (winnings + wager). Often used in Europe and Asia, an example would be a 2.45 odds on a soccer team to win the game. If you bet $100 you simply multiply it by the odds, i.e. 2.45x100=$245 or in other words, $100 wager + $145 winnings.
And there we have it about how odds work. After reading this you should not only understand how odds work, but be able to perform simple winnings calculations with the betting odds at the sportsbooks. As always, we welcome feedback and if you have an idea how we could improve our guide to how the betting odds work, you are more than welcome to contact us below. And don't forget to bookmark this page for a quick reference when you need it.
Many people start their betting journey with the same question. How do odds work? The answer to this question is incredibly important if you want to become a successful bettor, but it’s also only the start of a long journey. Read on to find out why all bettors need to know how odds work.
There is a conversation that all seasoned bettors will have had numerous times with friends and relatives who want a casual bet on a major sporting event. What are the odds on x? What do they mean? What will I win if I bet x amount?
The answer you give to these types of questions will vary depending on how much detail you want to go into, but they will centre around the same concept. Probability.
What do odds represent?
Bookmakers present their odds in decimals, fractions or an American format. They all look different but they all mean the same thing. All odds are a representation of the probability of something happening.
The fact that there are many different odds formats - American, Decimal and Fractional - illustrates the point that odds are simply a means to an end, i.e. offering betting. Bookmakers really deal in risk measured by probability.
Betting is about assessing the chance or probability of an event happening and bookmakers like Pinnacle use odds because it translates implied probability into a more usable form in order to offer betting.
Using implied probability in betting can also help you compare odds between bookmakers. However, if you consider betting to be just about odds, you're missing the bigger picture. To really expand your understanding of odds and betting, you must also understand how to calculate probability.
With a good understanding of how to calculate probability yourself and how it compares to the odds provided by the bookmaker, you can begin to make more informed decisions when it comes to what you should bet on, when you should bet and how much you should stake for the bets you make.
Basics of Betting How does betting work? - Episode 1
The basics of probability
Considering how we are faced with a problem to solve or an assessment of risk every single day of our lives, it is surprising how unfamiliar the average person is with being able to calculate probability.
How often do you think: “What are the chances of me making that train on time?” or “How likely is it to rain?”
We rarely attribute a numerical figure to answer these questions but we are still dealing with a question of probability.
Using implied probability to calculate a bookmaker’s margin is easy and very useful as few, if any, bookmakers publicly share it.
In the simplest of terms, probability is a scale running from 0 (where there is no chance of an event occurring) to 1 (a certain future event). The likelihood of all other potential outcomes fall somewhere in between those two end points of the probability spectrum.
A coin toss is a great way to explain how to calculate probability because we know the true probability for each outcome. The coin will definitely land on either heads or tails, which taken together provide us with the certain event. We now know this certain event has a probability of 1.
Of course as a bettor what you really want to know is the probability (or chance) of your chosen call, which we will say is heads. To do this there is a simple equation:
Favourable outcomes / all possible outcomes
If you are calling heads, then the favourable outcome will be heads. Therefore to get your probability value, you divide the favourable outcome (in this case there is one, heads) by the number of possible outcomes (this is two as it will either be heads or tails). This leaves us with a probability of 0.5.
In general people are more comfortable with percentages, so by multiplying the probability of your event (0.5 for heads) by 100 you can say that there is a 50% chance of the coin landing on heads, and you winning your bet.
How to calculate betting odds
Getting a handle on how to calculate probability yourself and converting it into odds is the first step in developing your own assessments of betting value.
Once you know how to calculate probability, turning that figure into odds is a straightforward process. Decimal odds are one of the three main formats used by bettors and bookmakers alike.
You can arrive at the Decimal odds value for your coin toss choice with the simple equation:
So the Decimal odds for a coin being heads is 1 (certainty) divided by the probability of it occurring which we know is 0.5, producing decimal odds of 2.0. At this point you can equally take odds and reverse engineer the implied probability with the inverse of the equation for turning probability into odds:
How Odds Work Uk
1/decimal odds = probability
Take your newly found knowledge and work out the implied probability for your coin toss with your friend and you'll see the aggregate implied probability of both outcomes in the coin toss is 100% - (0.5/1+0.5/1)*100 - no surprises as a certain event is 1 (100/100).
Betting Odds Explanation
However, performing the same calculation for actual odds from your favourite bookmaker will produce a value greater than 100%. So what is happening here?
Calculating a bookmaker’s margin
In simple terms the odds don't reflect the true likelihood of the outcomes concerned with an event. The amount by which the implied probability diverges from 100% is the margin the bookmaker has added to that particular that market.
This is an essential piece of information for a value-seeking bettor as it highlights the true cost of placing a bet with a bookmaker. Using implied probability to calculate a bookmaker’s margin is easy and very useful as few, if any, bookmakers publicly share it.
While it is important you are able to use the above information to convert odds into probability and calculate a bookmaker’s margin, you don’t have to do it yourself for every single bet. If you want a quick way to calculate how much margin a bookmaker has applied to the odds, you can use Pinnacle’s Margin Calculator.
Using odds to calculate your payout
Calculating odds and probability opens up a new world for calculating value but you also want to know what your bet will payout if you win. For our coin toss example this requires a simple multiplication:
So if you bet €10 on heads with odds of 2.0 your return including stake is 2.0 x €10 which equals €20 (this includes your €10 stake + €10 profit).
- Read: Do you know how difficult betting is?
Being able to calculate probability and understand where odds actually come from is an essential part of evolving as a bettor because it enables you to calculate your own expected frequency for an event - starting to model your own odds - and then compare what you think will happen with what odds are available.
Where the two diverge you can potentially turn that edge in your favour, and generate profit, which is what a bettor should be focused on.
If you want to calculate the return and profit of your bet, Pinnacle's Bet Calculator will do the work for you.
How Odds Work In Vegas
Now that you know how to calculate betting odds, you can take advantage of Pinnacle's low margin odds or read more expert betting articles to help make more informed betting decisions.