A guide to odds
How do Odds work? What is the difference between fractional & decimal odds?
Understanding betting odds, what they are & how they are calculated, is one of the most important things in online betting.
Odds are used to determine the amounts paid out on winning bets. They can be either odds on, or odds against.
Odds On – The potential amount you can win will be less than the amount staked.
Odds Against – The potential amount you can win will be greater than the amount staked.
You’ll still make a profit from winning an odds on bet, as your initial stake is returned too, but you have to risk an amount that’s higher than you stand to gain. Big favourites are often odds on, as they are more likely to win.
Odds can also be even money. A winning even money bet will return exactly the amount staked in profit, plus the original stake. So you basically double your money.
The higher the odds, the less likely a wager is to win, but the greater the rewards will be.
This is the simplest odds format. Decimal odds, which are usually displayed using two decimal places, show exactly how much a winning wager will return per unit staked.
£10 bet @ 3.0 odds = £30 potential return (including your original £10 stake)
£10 bet @ 3.5 odds = £35 potential return (including your original £10 stake)
The calculation to work out the potential return when using decimal odds is very simple:
Stake x Odds = Potential Return
In order to work out the potential profit just subtract one from the odds:
Stake x (Odds – 1) = Potential Profit
Note – 2.00 is the equivalent of even money. Anything higher than 2.00 is odds against, and anything lower is odds on.
Fractional odds are commonly used in the UK, which is much a legacy thing, and is gradually being replaced by the European decimal format (all bookmakers’ sites will have the option to change the default odds from fractional to decimal).
Here are some simple examples of fractional odds.
2/1 (two-to-one) – an example of odds against
10/1 (ten-to-one) – an example of odds against
1/5 (one-to-five) – an example of odds on
Note that even money is expressed as 1/1, but typically referred to as “evens.”
Working out returns can be overwhelming and thankfully there are odds converter tools to help. However, it is useful to have a basic understanding, to help make a quick/instant judgement on whether the odds on offer are good or bad (& then work in the decimal format for a more accurate picture).
Each fraction shows how much profit you stand to make on a winning wager, but you need to remember to add in your initial stake. So, for odds of 2/1, this shows that for every £1 you stake, you will win £2. You then add your stake back onto this to get your final returns.
Stake x (a/b) = potential profit
£10 bet @ 2/1 odds = £20 winnings plus your original £10 stake = £30
£10 bet @ 5/2 odds = £25 winnings plus your original £10 stake = £35
Odds and probability
The odds given by a bookie aren’t necessarily a direct reflection of the chances of something happening or not.
Probability in sports betting is subjective. Both bettors and bookmakers are going to have a difference of opinion when it comes to predicting the likely outcome of a game.
Probabilities typically vary by 5% to 10%: sometimes less, sometimes more. Successful sports betting is largely about making accurate assessments about the probability of an outcome, and then determining if the odds of that outcome make a bet worthwhile.
To make that determination, we need to understand implied probability
Implied probability is what the odds suggest the chances of any given outcome happening are. It can help us to calculate the bookmaker’s advantage in a betting market. More importantly, implied probability is something that can really help us determine whether or not a bet offers value.
Value exists whenever the odds are set higher than you think they should be. Implied probability tells us whether or not this is the case.
Imagine there’s a match between two tennis players of an identical standard. A bookmaker gives both players the exact same chance of winning, and so prices the odds at 2.00 for each player.
However, in reality a bookmaker would never set the odds at 2.00 on both players. But, for this example, let’s assume they did:
What these odds are telling us is that the match is essentially the same as a coin toss. There are two possible outcomes and each one is just as likely as the other. In theory, each player has a 50% chance of winning the match.
This 50% is the implied probability. And there is a formula for converting decimal odds into implied probability:
Implied Probability = 1 / decimal odds
This gives a number of between zero and one, which is how probability should be expressed (but, it’s easier to think of probability as a percentage though, so multiplying the result of the formula by 100).
The odds in the tennis players example are 2.00. So, 1 / 2.00 is .50, which multiplied by 100 gives 50%.
If each player truly did have a 50% chance of winning this match, then there would be no point in placing a wager on either one. You’ve got a 50% chance of doubling your money, and a 50% chance of losing your stake. Your expectation is neutral.
However, you might think that one player is more likely to win. Perhaps you have been following their form closely, and you believe that one of the players actually has a 60% chance of beating his opponent.
In this case, value would exist when betting on your preferred player. If your opinion is accurate, you’ve got a 60% chance of doubling your money and only a 40% chance of losing your stake. Your expectation is now positive.
If your view is that the actual probability is higher than the implied probability, then you’ve found some value.
Finding value is key to successful sports betting, and one that you should always have an eye on.
Bookmakers aren't charities
How do bookmakers make money? It is simple really; they try to take more money in losing bets than they pay out in winning bets. In reality, though, it isn’t quite that simple.
If they offered completely fair odds on an event then they would not be guaranteed a profit and would be potentially exposed to risk. Bookmakers do not expose themselves to risk (there’s a reason why the founder of bet365 is one of the richest women in the UK!) Their goal is to make a profit on every event. And this is where a balanced book and the overround come in play.
For every event that they take bets on, a bookmaker will always look to build in an overround. They’ll also try to ensure that they have balanced books.
A balanced book
When a bookmaker has a balanced book for a particular event, it means that they stand to pay out roughly the same amount of money regardless of the outcome. So, usng the example of the tennis match with odds of 2.00 of each player. If a bookmaker took £10,000 worth of bets on each player, then they would have a balanced book. Regardless of which player wins, they have to pay out a total of £20,000.
Of course, a bookmaker wouldn’t make any money in the above scenario. They have taken a total of £20,000 in bets, and paid the same amount out. Their goal is to be in a situation where they pay out less than they take in.
This is why, in addition to having a balanced book, they also build in the overround.
The Overround or Vig
The overround is also known as vig, juice, or margin. It’s effectively a commission that bookmakers charge their customers every time they place a bet. They don’t directly charge this fee – they just reduce the odds from their true probability. So the odds that you would see on a tennis match where both players were equally likely to win would be about 1.91 on each player.
If you again assumed that they took £10,000 on each player, then they would now be guaranteed a profit whichever player wins. Their total pay-out would be £19,100 in winning wagers against the total of £20,000 they have taken. The £900 difference is the overround.
This above scenario is an ideal situation for any bookmaker. The volume of bets they take is important to them, because their goal is to make money. The more money they take, the more likely they are to be able to create a balanced book.
The overround and the need for a balanced book is also why the odds for sports events are ever changing. If a bookmaker is taking too much money on a particular outcome, they will probably reduce the odds to discourage further bets (& vice versa).
Bookmakers are not always successful in creating a balanced book, and they do sometimes lose money on an event. In fact, bookmakers losing money on an event isn’t uncommon by any means, BUT they do generally get close to being balanced far more often than not.
Just because bookmakers make sure they turn a profit in the long run, doesn’t mean they can’t be beaten. You don’t have to make them lose money overall, you just have to concentrate on making more money from your winning bets & by taking full advantage of odds boosts, free bets, etc, etc.