Betting odds explained
If you’re looking to get into online sports betting, one of the first concepts you’ll have to wrap your head around is that of betting odds. Knowing how to read odds and what they mean exactly is the cornerstone of making winning wagers, let alone more advanced betting strategies like value betting.
No pressure, though – Betting Fellow will explain everything you need to know about betting odds in this simple, beginner-friendly betting guide.
What are Betting Odds and how do they work?
At their most basic level, betting odds are a mathematical representation of how likely something is to happen. They are a measure of probability, intended to depict what the most likely outcome is, and how other outcomes compare in terms of likelihood.
However, that’s not the full extent of it. Measuring likelihood can be seen in many other parts of life, like when you say that something has a 20% chance of happening. In betting, this is called perceived probability, and it plays a huge part in determining betting odds. Betting, on the other hand, has always been about money. Ie, it’s not just a matter of how probable something is – thinking about how that would affect a wager is just as important, if not more.
When talking about probability, usually a bigger number means that something is more likely to happen. For example, a 50% chance is bigger than a 20% chance, so we usually say that the former has better, or greater odds to happen. Odds in betting, on the other hand, are more accurately described as the ratio of stake versus winnings, or how the amount you’ve wagered relates to the amount you’ll win if your bet succeeds. As you might have guessed, the less likely something is to happen – the bigger the payout the bookmaker will offer for it, precisely because it is a relatively unlikely outcome.
As such, bigger betting odds mean that something is less likely to happen.
That is why, to avoid any confusion about what “bigger odds” means, most punters prefer the terms “long” and “short” odds. As such, long odds mean that the ratio of stake to winnings is bigger, meaning the outcome you’re betting on is less likely to happen. Conversely, short odds mean that you’ll get smaller returns for your investment, which means that an outcome will bring you smaller profits if you bet on it.
Betting Odds Formats Explained
This ratio of investment to potential profits, ie. Betting odds are generally represented in one of three ways: decimal, fractional, and US Moneyline. Note that there is no inherent advantage to using one over the others. Essentially, they are just different styles of representing the same thing. We’ll now go into each of them separately, and explain how these formats are used to calculate both returns and implied probabilities.
Decimal Odds Explained
Decimal odds are much more popular in mainland Europe and are generally the most popular format in the world. The popularity is largely due to how decimal odds work, which makes it easy to calculate both returns, profits, and implied probabilities.
Essentially, decimal betting odds represent the ratio of total returns to the initial stake. For decimal odds, you need to make the distinction between returns and profits: returns take into account both what you won from the bet and the stake (which is returned to you on a winning bet, obviously.)
For example, if you were to place a £10 stake on a bet at odds of 2.00, your total returns would be £20. The calculation is as simple as it gets: just multiply the stake with the odds, and you have your returns: 10 x 2 = 20
If you want to calculate your profits, just do it the same way you always would – subtract the stake from the total returns. 20 – 10 = £10 of profit.
In this example, your stake is doubled, which means an implied probability of 50% for the chosen outcome. That means that anything between 1.0 and 2.0 is more than 50% likely to happen, while odds above 2.0 are less likely than 50 – 50.
American Moneyline Odds Explained
As the name might imply, this odds format is most popular in the United States and is rarely used anywhere else. For this reason, it is sometimes referred to simply as American odds or US odds.
Firstly, you need to make a distinction between the favourite and the underdog – which outcome is more likely to happen, and which is less likely. For favourites, Moneyline odds are accompanied by a minus, indicating the amount you need to wager to win $100 of profit. Conversely, the odds for underdogs are accompanied by a plus sign, indicating the amount won for every $100 staked.
In both cases, the fact that your stake is fully returned is already taken into account, meaning it is not represented by the numbers. As you can see, this format takes some getting used to, so we’ll use an example. Underdog odds of, for instance, +350 mean that, if you were to stake $100, you would win a profit of $350. That means a total return of $450. Conversely, favourite odds of -350 mean that you would need to bet $350 to make a profit of $100.
Calculating probability is a bit trickier here. Let’s use even odds or 50% as a starting line. Both +100 or -100 odds indicate a probability of roughly 50%. Anything above +100 indicates a smaller than 50% probability, and anything below -100 indicates an outcome more likely to happen.
As a final note, converting betting odds is easy enough with the right formula, or the right tool. You can find additional information, along with Betting Fellow’s free betting odds converter on this page.
What is Probability in Betting?
So, if odds in betting usually measure the relation between stake and winnings, what about the actual, statistical likelihood of something happening? Well, that is often talked about too, especially in terms of value bets. Usually, you can always extract the probability of something happening just by looking at the odds. The process of this depends on the format of betting odds, and we’ll explain each one in detail.
For now, it’s important to understand that, while we as customers might use odds to determine probabilities, the bookmakers do it the other way around – they use the chance of something happening to determine odds. So, how do bookmakers calculate betting odds? Well, it’s not an easy process. They usually have experts, statisticians, and whole teams of people who set the betting odds based on various factors.
For football betting odds, for example, these would be:
Statistics How many times the outcome has occurred in the past?
Head-to-head statistics which take into account specifically.the success of one team against another.
Current form.
Human opinion Their own, of other experts, public opinion, etc.
How customers are betting
We would like to point out the last one as especially interesting. Why? Because it is a perfect example of why betting odds are not always an accurate representation of how likely something is to happen. First of all, not even all the most reliable data in the world can predict likelihood with 100% certainty. Secondly, even the best bookmakers out there shift the odds as the event draws nearer. Sometimes, this is due to new information emerging – but generally, it’s because people are betting a certain way.
For instance, if the odds on one outcome are getting shorter, it usually means a lot of people are betting on it. This can either mean that the bookie is realizing the outcome is somewhat more likely than they first estimated… Or that they just want to pay out less on a popular choice. Realistically, though, the odds have to be shifted, because if everyone wagers one way and wins that bet, the company takes a huge financial loss. Either way, this is why it’s called perceived chances or likelihood. When it comes down to it, it’s just someone’s opinion.
This phenomenon can be good or bad for punters, depending on how you make use of it. For instance, it leaves room for different odds for the same outcome of the same selection with different bookmakers. Some punters take advantage of this fact in a practice called arbitrage betting, abusing the different odds to make sure that they win no matter the outcome. Keep in mind, though, most bookies frown upon this, and betting arbitrage is likely to lead to your account being suspended.
The difference between probability and betting odds is made even bigger if you take into account bookmaker margins.
What are Bookmaker Margins?
First of all, we need to remember that bookmakers are a business and need to be successful. While yes, they do make money from players losing money, they also have to hand out winnings to players who win bets. If betting odds were a completely faithful representation of probability, these two would eventually balance out. While generally, bettors lose more than they win, this is a risky thing to count on if you’re a multi-billion dollar business. Instead, bookies employ a margin to guarantee they always make a profit.
And no, this margin is not a straight percentage of bets made (although betting exchanges, for example, do just apply a simple “cut” of all bets.) Instead, the odds presented are always somewhat lower than the actual probability. So, for instance, if an outcome has 50% probability, the bookie will offer odds of, say, 1.95, implying a probability of around 52.6%. In essence, the bookmaker would be paying out less than they should be at such a chance of an outcome because they are treating the outcome as if it were more likely than it is.
As such, if you were to add up the odds for opposite outcomes of the same selection, the implied probabilities usually end up higher than 100%. This is usually referred to as overround in betting, or a bookmaker margin. The size of this margin depends on the bookmaker. Different companies provide different odds for different sports, events, and markets. In general, football betting odds for the 1X2 market range between 2 and 6%, while for exotic markets it can get as high as 20%.
Calculating bookmaker margins uses a complicated formula, and you still get inconsistent results. With that in mind, BettingFellow always takes into account the quality of a bookie’s margins in our online bookmaker reviews – calculating them so you don’t have to.
That’s pretty much all you need to know about how betting odds work. We hope you found everything you wanted to in our betting odds guide.