While the majority of people will know just what betting odds are, a full understanding of what they represent and how they are calculated may not be quite as much common knowledge. Odds are fully in the realm of the bookmaker, and it is the operator who determines how much risk (and therefore value), your stake is going to be up against in a wager.
Explaining betting odds, to get a deep understanding of them, isn’t a straightforward thing. On the surface, there are the basics. For example, if you are presented with 5/1 odds on the outcome of an event then that means you would win 5 units for every 1 staked. So if you staked 3 units that would be 15 won, plus the stake. You always get the stake returned to you in a winning bet.
But betting odds are generally never that simple. Newcomers to betting may find themselves tripped up by odds presentations of things like 2/5, 9/10 and 11/7, which can be hard to figure out the value of at a quick glance. How does a bookmaker even come to a given conclusion in setting such odds? How do they make their money? What is the difference between Fractional and Decimal Odds?
These are all things we explain in our guide to understanding how betting odds work.
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How do betting odds work?
Betting odds are not just random numbers that a bookmaker pulls out of their hat. They are calculated to give the bookmaker the best chance of winning and making money. While you as a punter are risking a stake, they have a massive amount of liability in their day to day activities. It is worth remembering that, so the bookie isn’t going to keenly take unnecessary risks. However, many bookies are keen to offer competitive odds to attract punters. We’ll explain how bookmakers make their money in a later section.
To set odds, the bookmaker will assess the probability of an outcome. This of course will vary from event to event. Take for example the Premier League winner market. The bookmaker will take as much information as they can and make an informed judgement of who is the most likely to win. Let’s say it is Manchester City. That means the bookmaker isn’t going to risk rewarding punters with a chance at high profit (long odds) if the Citizens did win the league.
They would be presented as short odds instead because the bookmaker knows that a lot of people will back them in the market. So the value on Manchester City may not be great in this instance. For example if the bookmaker quoted them at 1/5 odds then that means you would win 1 unit from every 5 staked.
The reverse of that means that a team like Southampton, who the bookmaker would deem to have little chance of winning the league, perhaps could be as big as 300/1 chance. That naturally is a bet that would yield way more profit compared to the Man City bet, but of course, the large odds means that it is highly unlikely to happen.
Here are some key beginner betting terms:
|Odds On||Even Money||Odds Against|
|The term “odds on” represents any quote where you would win less than the value of a unit stake.|
For example, winning 0.50 per 1 unit staked.
It generally applies to a favorite in an event.
|Even money odds represent an equal chance of winning and losing.|
The amount won will be exactly the same as the value of a unit stake.
|The term “odds against” represents a quote on an event where you would win more than what you staked, per unit.|
For example, winning 2 per every 1 stake.
This generally applies to an underdog in an event
|1/2, 8/11, 2/5||1/1, Even Money||2/1, 11/8, 5/2|
How to read odds
So let’s get into how to read odds. Why is this important? The ability to quickly recognise the value of a wager is important. First of all, this is crucial for when you are betting live (in-play) and the odds on a market are updated frequently. You want to be able to know and understand what is being presented to you.
The other aspect of this is finding your best value. It’s not uncommon practice for punters to be a customer with more than one bookmaker. Why? That is because everyone wants to get as much value for money as they can get, so it is good to shop around. So when you are comparing odds it’s important to know where the best value is.
Just as a very basic example, if you want to back a horse called Running Star to win a race and they are 2/1 at one bookmaker, but then they are 3/1 at say Bet365, you would back the horse at the bookmaker which is presenting the longer odds (3/1). In being able to read odds, you can spot the variance in value of presented odds and in turn, get the most bang for your buck.
|Short Odds||Long Odds|
|The term “short odds” just means that a selection, say Barcelona in a football match, were favourites to the game. They would be at “short odds” to win.|
That means the bookmaker recognises they are likely to win, so offers a low price on them, for example 1/2.
|The term “long odds” means that a selection would be the underdog in a match, say Chelsea to beat Barcelona for example. They would be at “long odds” to win the game.|
So that means the bookmaker knows they are unlikely to do so, so offer higher odds on them, say 4/1 knowing that the risk for them is low.
To further help you to read betting odds, learn all about the different types below with examples;
Fractional / Decimal / American lines
There are three common ways that betting odds are presented. There is fractional, decimal and money lines. At the end of the day they are all the same thing, so picking a format is basically a matter of personal preference.
The traditional way in betting is the fractional method (i.e. 2/1). If you were to head to any racecourse in the UK and Ireland, you would still see bookies offering fractional odds. Fractional Odds do not include the stake return in the quote. The stake does come back from a winning bet still, but when you calculate returns from Fractional Odds, you are working out profit only.
How to quickly calculate fractional odds
|5/4 odds with a 10 stake||10 x (5/4) = 12.50 Profit|
Decimal odds mean the same thing, just represented in a different way. The key difference is for beginners, they are perhaps a little easier to read than Fractional odds, as well as calculating them. Decimal odds also include the stake return (whereas fractional odds don’t). So the equivalent of 2/1 fractional odds is 3.00 decimal. You will commonly see decimal odds used on betting exchanges.
How to quickly calculate decimal odds
|3.00 odds with a 10 stake||10 x 3.00 = 30.00 returns (includes 10 stake)|
American Money Lines
Then there is the American Money Lines which are the staple of betting markets in North America. In Moneylines you will see + and – numbers for an event. Let’s say Shergar is at +250 and Red Rum is -300. What does that mean?
|Negative Money Lines||= Favourites||Quoted odds is how much you have to stake to win 100 profit.|
|Positive Money Lines||= Underdogs||Quoted odds is how much you will win if you bet 100.|
A negative Moneyline price is how much you have to stake to win 100. So in the example above, Red Rum is at -300 and therefore the favourite. That means you have to stake 300 to win 100 back. You don’t have to stake 100 of course to bet on that option, if you put down 10 your profit would 30 as it’s worked out proportionally just as any odds are.
A positive Moneyline price is how much you win if you stake 100. So in the example above, if you stake 100 on Shergar at +250 then you would win 250. Again you can bet in non-100 increments, but then you have to calculate your returns. A 50 bet would have returned 125 for example.
How to quickly calculate money lines odds
(note the difference in the two equations, one multiplies, the other divides)
|Positive Money Lines||10 stake at +250||10 x (250/100) = 25 Profit|
|Negative Money Lines||10 stake at -300||10 / (300/100) = 3.33 Profit|
Understanding Fractional Odds
Let’s take a look at the commonly used fractional odds. The first number in fractional odds is how much per unit stake that you are going to win. The second number is the base number of how much you are going to stake per unit.
Think of it in very simple terms as: how much you win / how much you bet
It’s always worth thinking of betting odds in terms of single unit stakes – how much one unit of stake is going to return you in terms of profit. Then you can build from there, increasing your stake as necessary to the level that you want to risk. Doing it by one unit will give a clear picture of how much each 1 played is really worth.
That in turn helps you assess risk. Let’s look at some further examples. Remember that with any bet you can play whatever stake you like, you don’t just have to stick to multiples of 1 unit. You can play a 50p bet for example, or a 1.75 bet or whatever. It just needs a little more calculating to figure out the returns.
|4/1||Odds Against||For every 1 staked you win 4|
|2/5||Odds On||For every 5 staked you win 2|
|8/11||Odds On||For every 11 staked you win 8|
|1/1||Even Money||For every 1 staked you win 1|
|10/1||Odds Against||For every 1 staked you win 10|
For example in the table above, it’s easy to see that if you put a 10 stake on 4/1 odds that would be a 40 profit. A 5 stake would mean that you returned 20. It is less immediately apparent what your profit would be if you played a 5 stake on 2/5 odds. Just for reference it is 2 (remember the fractional odds equation 5 x (2/5) = 2).
Thinking in Fractions to understand odds
But what if our horse Running Star (from the earlier example in “How To Read Odds”) were 2/1 at one bookmaker but another has them at 11/4, where do those odds stand against the 2/1 quote? It’s these slightly off-putting, unbalanced fractions which are not nice user friendly whole fractions, is where betting beginners can get tripped up.
But, again, armed with a bit of knowledge, its where reading odds can be a huge asset to a punter. You know that at 2/1 odds for each unit of stake you are going to collect 2 in profit. But what about 11/4 odds? Is that better or worse value than the 2/1 odds? Let’s read those odds.
A quick way to read odds that aren’t whole fractions (like 2/1, 5/1 etc), is to literally think in fractions. Don’t worry, it’s not as scary as it sounds.
If odds of 11/4 have been presented then it basically means that your profit will be eleven fourths of a 1 unit stake. So if you split the 1 unit stake into four, that’s 0.25 and then multiply that by 11 (because the odds are eleven fourths) then you end up with 2.75 profit per unit stake.
It’s exactly the same as if you were looking at 3/5 odds as an option. That translates as three fifths of a 1 unit stake. That 1 unit stake divided by 5 gives 0.2, so it’s 0.2 multiplied by 3 (because you want three fifths) and that equals a 0.60 total return per unit stake.
Betting exchanges offer sports betting through a slightly different format to that of a regular sportsbook. The way that odds are presented in exchange betting can be a little confusing at first glance for beginners.
Betting exchanges offer peer to peer wagering which means that as a punter, you can request the odds. Then another punter would match that bet. You can of course just take odds that have already been requested. This by nature allows for potentially stronger odds than can be found at a traditional bookmaker, to happen.
There’s no middle-man of a bookmaker with betting exchanges, instead, commissions are paid. Another popular feature of betting exchanges is being able to Lay bets, backing outcomes to not happen.
|Select an outcome to happen||Selecting an outcome to NOT happen|
|Place a stake on for example, Man Utd winning a game. If they win, you are paid out at the odds at which the selection was backed.||Place a stake on Man Utd not to win a game. If they don’t win, you will be paid out at the odds at which the selection was made.|
If they were to win the match however, you would have the liability of having to payout on the loss. You are essentially acting as the bookmaker in a peer to peer transaction.
But while betting exchanges like Betfair offer a good alternative to traditional bookmaking, there is a bit of learning curve when it comes to exchanges including the full risk of liability. For a full detailed explanation of what Exchange betting is and how betting odds work, check out our full guide (coming soon).
You of course don’t have to totally get your math on to deal with all of these numbers flying around. So as a beginner to betting there is no need to get overwhelmed by any of this. You can quickly and easily use a bet calculator. There are plenty out there available for the exact purpose of not having to have to spend time figuring this out.
These examples of equations are to help explain just what the betting odds are and what they mean to you. So it is useful to understand from that perspective because you get to see how they work.
How do bookies calculate / set odds?
There are different things which affects how a bookie calculates and sets odds. This section should help get betting odds explained further. The first thing a bookmaker looks at is probability. For a horse race for example, they will asses who is the favourite, the horse most likely to win. To do that they have to look at all the competitors in the field of course.
Everything has to be put into perspective. Think of a football team. One week Manchester United could be red hot favourites to win a match against Burnley and then the following week are underdogs as they face Real Madrid in Europe. So everything is in perspective when it comes to betting. A favourite in a horse race is only so not just because of their own form, but of how strong they are expected to be against the other runners in the race.
So there is the probability factor. The other thing is trading action. Let’s say Chelsea are the favourites to win the FA Cup. Then all of a sudden, a bookmaker receives a flurry of betting action backing Arsenal to win the tournament. The bookmaker has to react to that. In that instance they would make the odds on Arsenal shorter. Why? Because suddenly their risk has increased dramatically because of a flood of punters backing the Gunners.
The bookmaker would stand to lose more because of all the wagers placed on Arsenal. So they would cut the odds, making them less appealing for any further punters to back for starters, as well as cutting their own risk on future bets taken on them. So they have to work out odds in response to market activity. You will also see, when a situation like that occurs, other teams in the market may drift, ie get longer in price.
This is a much used term in betting and it’s well worth beginners getting an understanding of what it is. That is because implied probability relates to the odds that will be seen at a bookmaker. We previously mentioned that bookmakers will look at factors to determine who the most likely winner is going to be, in for example, a tennis match.
It’s not as straightforward as having Roger Federer v Rafael Nadal and only one of the two players can win, namely a 50/50 chance. It’s not. Where you have a 50/50 exact chance on the flip of a coin, there are factors that determine the probability of who would win that match between Federer and Nadal.
Let’s say that Federer has beaten Nadal in the last three meetings. The match is being played on a hard court which suits Federer more than Nadal. Federer has won each of his last ten matches on that very surface. Nadal hasn’t played for a month because of a hamstring problem. Suddenly things don’t look to be such a 50/50 situation anymore.
Federer looks the more likely to win the match given all those factors. So the bookmaker sets odds of 8/13 (1.62 decimal) on Federer, leaving Nadal at 13/10 (2.3 decimal). Within those odds are implied probability that the bookmaker has assumed on the outcome of this game. Federer is the favourite but how much so?
Time for a little more math action to convert odds to implied probability. Depending whether you are using fractional or decimal, there’s a different calculation.
|Fractional Odds||Decimal Odds|
|Denominator / (Numerator + Denominator)|
x100 = implied probability
|1 / Decimal odds|
x100 = implied probability
|Starting Odds: 8/13|
13 / (8 + 13)
Equivalent of 13 / 21 = 0.62
100 x 0.62 = 62%
|Starting Odds: 1.62|
1 / 1.62 = 0.62
100 x 0.62 = 62%
So the odds of 8/13 by the bookmaker on Federer, implies (in the eyes of the bookie) that he has a 62% chance of winning. Just out of interest, if you calculate out the implied probability of Nadal winning this match you get 43%. At this point you may notice something strange going on.
62% plus 43% = 105%. How does the implied probability of all outcomes of one tennis match (basically Federer or Nadal winning) equal more than 100%? Surely if Federer has a 62% chance of winning, Nadal’s chance should be at 38%.
This is a great point for beginners to recognise. In the real world yes things would add up to 100%, but in the betting world, not quite. The extra 5% on the total is the bookmaker’s edge (see “Bookmakers Edge” section below) and it is another way to see what betting margin the operator is running at on a market. In this instance it is that 5% and this helps them earn their money.
How does betting work?
Betting is a process of actions. It is a flow. It all starts with you picking a selection, an outcome that you think is going to happen. Perhaps England winning the World Cup. Punters operate in different ways and as a beginner you will naturally find your own preferences over time.
The more experienced bettors will certainly spend a lot of time studying things like form as well as markets, to try and eek out every last drop of value that they can get. Other people just stick with one football team for example and back them week in, week out to win.
Others will build or play betting strategies and systems. Whatever it is, you find an online bookmaker like Bet365 and then you play your stake on your selection. This is basically handing over some cash to the operator and saying “I bet you this much that this outcome is going to happen”.
That’s your risk. It is a challenging enterprise in making the right predictions. The bookmaker is basically there to take your money. It is always worth remembering that they are a business. Their main principle is to collect more money on a market than they have to pay out. While an operator can’t control what the outcome of a football match is, they control the odds on it and how much in turn, they stand to win or lose from the outcomes.
For the beginners, the basics of betting is that you play your stake and if your bet wins, the bookmaker pays you out. At the end of the day, a win is a win and all of the other factors in betting like the bookmakers edge and how odds are created, don’t really become big issues at that point. But still, the more that you are informed about how betting works, the richer the experience of doing it, is likely to be.
How do bookmakers make money?
On the surface of things it seems to beginners as if bookmakers are just handing out money. But of course, they are getting their cut of things, but if you are new to betting then it may not be quite clear how. Bookmakers most certainly are not losing out, even when they are paying out.
Think of a horse race with seven runners in it. The favourite wins at 2/1 odds. The bookmaker has to pay out on all the winning bets on that one horse. However, they get to keep the money from every other single bet that was placed on each of the other six runners in the race.
The bookmaker hopes that all of those other bets combined, more than covers the payout on the favourite. So that’s one way they make their money. The other is by the bookmaker edge. This is called vigorish (or just vig), the cut, the take or the juice. It goes by many different names. But what is it?
Even though the punter won’t really ever notice, the bookmaker basically charges the punter for placing a bet with them. What this does is secure profit for them regardless of what happens in the outcome of an event. It’s like a commission that they take for running the services that they do. Common bookmaker edges can for example be between 4% and 5% on football matches.
When do bookmakers lose the most? You may think that is when a 20/1 horse wins a race against the odds. It stands to reason that they would have to pay out more per unit stake on that winner than one at 2/1. That’s true, but there will have been far less bets that the bookmaker has taken on the 20/1 horse compared to the 2/1 runner.
As an example, if they took 1,000 bets of a 1 stake on the 2/1 winner they would pay out 1,000. If they took 30 bets at a 1 stake on a 20/1 winner they would pay out 600. So it is the extremely well-supported favourites winning that really hurt the bookmaker in the pocket the most.
The Bookmaker’s Edge
Understanding the bookmaker’s edge is another good thing to understand about how betting odds work. There’s a football match between Liverpool and Everton. You take a look at the Over/Under 2.5 goals market and both options are at 10/11 odds. There’s a 50/50 chance of the game ending up one way or the other.
If you were betting against a friend, where you pick Over 2.5 and the friend has Under 2.5 you would just put 100 each into a pot and whoever wins the bet would get the full 200.
It’s not quite the same when you use a bookmaker.
To explain the bookmaker’s edge, let’s use a bookmaker instead of betting against a friend. Your Over 2.5 goals bet is at 10/11 odds and you play your stake of 100.
Your friend plays their 100 stake on Under 2.5 goals which is also at 10/11 odds.
Let’s assume that the game end over 2.5 goals, you won. However, your 100 stake would only take a return of 90.91 profit at 10/11 odds and this is how the bookmaker wins. Even though this is a 50/50 outcome you aren’t getting a 50/50 chance reflected in the odds that the bookmaker is giving you.
In this simple example, the bookmaker keeps the 100 stake that your friend lost. The bookmaker pays you your profit of 90.91 out of your friend’s 100 lost stake and keeps the change. So, no matter what the outcome of the Over/Under, the bookmaker has made 9.09 profit.
The bookmaker has not paid out anything out of their own pocket. Multiply that over the high volume of bets from different punters placed on that very same market on the very same match and the bookie stands to make a very nice profit. That’s their operating edge and it is worth keeping in mind as this explains how bookmakers set the odds.
So that, in a big nutshell, explains how betting odds work. The odds that are presented by a bookmaker are essentially their interpretation of probability. Within those odds will be a bookmaker’s edge which is a way that they make money.
The knowledge included above should allow you to go forth and understand how those odds work by being able to read them. That will help you assess risk and value of odds being presented to you in a market.
You can refer back to the guide for useful information like how to calculate and convert odds, and if the information above was useful to you on your betting journey, then why not take a look at some of our other available beginner betting guides!