How Do Betting Odds Work?

If you are new to sports betting, one term you have probably seen in multiple forums is odds and you are probably wondering how do betting odds work. Understanding how to read odds is important if you want to start placing smarter bets that yield good profits.

Although odds might look confusing at first, this guide will help you understand the different types of odds commonly used by sportsbooks and how to interpret them. Understanding the odds will serve you well because betting odds will be placed on any event bookmakers take bets on. This means everything from football to horse racing and even political events.

Not just that but we’ll explain everything you need to know about interpreting, calculating probabilities, and even tabulating potential winnings before placing a bet.

Sports bet: Betting Odds Explained

In each game you want to bet on, you will be wagering on the likelihood of something happening or failing to happen. For example:

· The team likely to win

· The number of points likely to be scored (over/under market)

· The chances of a team scoring

· The likelihood that an event will end without a team scoring

· The possibility of certain players scoring goals

Simply put, odds are used to reflect the probability of an outcome in the eyes of bookmakers. They also tell you how much you stand to win should your chosen outcome actually happen.

Odds are displayed as fractions (2/1) or decimals (0.3). Fractions are common in the UK market, while Europe mainly uses decimal odds. Regardless of the format, the displayed number indicates probability.

There are also moneyline odds shown with a plus (+) or minus (-) sign in front of the odd (+/-150). While these display styles are different, they represent the same thing, meaning the payouts hold the same value across the board.

Once you get to understand the different odds and their correlation, you will also be able to take odds in one format and convert them into any of the other formats like a pro.

Odds can be signed to a particular game, prop, or even a future event. A future odds could be the Buffalo Bills are +400 to win the Super Bowl at the beginning of the season. A bettor who takes this bet has to wait until the playoffs and then the result will be graded.

Probability in sports betting odds

We have seen that odds display the probability of something happening in an event. But what is probability?

Probability is how likely an event is likely to happen. So if a bookmaker has an outcome to an event with a higher probability, the specified event is more likely to happen than not.

On the other hand, an event with a lower probability indicates it’s less likely to occur than not.

The simplest way to explain this is with the coin toss analogy. You have two possible outcomes whenever you toss a coin: heads or tails. The chance of getting heads or tails is a one-in-two chance. This gives either option a 50% chance of winning. This 50% or one in two can be represented in a fraction, a decimal, or by American odds. 

How To Read Betting Odds

Learning how to read odds correctly allows you to read between the lines and determine how likely different sportsbooks perceive an outcome to be. This is a crucial skill in betting because it helps you find the most valuable bets and, in turn, increases your chances of betting profitably and making a return on your investment. 

Odds tell us the likelihood of an outcome. The more likely an outcome is, the less you make on that bet. The reverse is also true; the less likely an outcome is, the more you stand to make by wagering on that outcome.

Because odds can be displayed in three different formats, it helps to understand how to convert them to a percentage regardless of their format. A percentage helps you clearly see the likelihood of an event and, by extension, enables you to pick your bets better.

Sports Odds Explained: Types of Betting Odds & How They Work

Let’s look at the different betting odds, how they work and how a sports bettor can convert them into percentages.

American Odds

American betting odds are very popular in the United States. You will rarely find decimal and fractional odds in online sportsbooks catering to the American market.

You know you have American odds whenever odds are displayed with a plus or minus sign, followed by a number. The minus (-) sign, or negative odds, signifies that a team is a favorite, while the plus (+) sign or positive odds indicates the underdog.

How To Read American Odds

The minus sign on American odds indicates the amount of money you need to wager to win $100. Conversely, the plus sign tells you how much you stand to win should you wager $100.

Let’s take a look at the following matchup between the Patriots and the Dolphins. Here are the moneyline odds. As a bettor you are picking a team to win:

• New England Patriots -145
• Miami Dolphins +130

Now, should you wish to bet on the underdog (Dolphins), the +130 means you win $230 for every $100 you stake. So this is $130 plus your stake of $100. If you stake $10, you walk away with $23 ($13 profit plus your original $10 stake).

What if you were betting on the favorite (Patriots)?

The minus sign means the Patriots are the favorite on the betting line, and the calculations are slightly different.

The -145 means you would win $100 for every $145 you wager. This translates to $16.90 on a $10 bet ($10 stake and $6.90 profit).

Calculating Implied Probability With American Odds

You can calculate the implied probability of American odds easily. However, you go about these odds differently. There is a formula for calculating the probability for a negative number and another one for games with positive sports odds.

For example, lets a look at this tennis matchup;

• Novak Djokovic -500
• Andy Murray +450

To work out the implied probability of negative American odds, use the formula: The implied probability of an outcome = negative American odds / (Negative American odds+100) ×100.

So the probability of a Djakovic win is calculated as:

• 500/ (500+100) × 100 = 83.3%

If you have a + sign, use the formula: The implied probability of an outcome = 100/ (Positive American odds+100) × 100

In the above example, a Murray win would be calculated as:

• 100/ (450 + 100) × 100 = 18.1 %

Calculating Potential Winnings With American Odds

Another thing you should be able to do, aside from put odds in a percentage, is to calculate how much you stand to win from different wagers. We again have two formulas for positive and negative odds. Let’s use the following event:

• Buffalo Bills +115
• Kansas City Chiefs – 135

For positive American odds with a $50 stake: Potential profits = Stake × (odds/100)

To calculate your profit, should you back Buffalo Bills: $50 × (115/100) = $57.50

This bet will yield $107.50. This is your $50 wager and $57.50 as profit.

For negative American odds with a $50 stake: Potential profits = Stake/ (Odds/100)

$50/ (135/100) = $37.03 You would cash out $87. This is your $50 wager and $37 in profit, should you win your bet.

Decimal Odds

Decimal odds are also known as digital, European, or continental odds. These odds are most commonly used in Europe, Canada, New Zealand, and Australia. Punters find these odds much easier to read and understand. You can also tell favorites from underdogs just by looking at the numbers.

How To Read Decimal Odds

Decimal numbers give you the potential profit for every dollar waged on a correct bet. Favorites have lower numbers, while underdogs have higher numbers.

In short, you earn more from underdog bets that you win than you would from favorites. Also, it’s important to note that the number on decimal odds represent the total payout, not just the profit. In other words, the decimal number already includes your stake, which makes it easier to calculate your payout.

Calculating Implied Probability with Decimal Odds 

Converting decimal odds to implied probability is easy and can help you make informed choices. Off course, this should not be the only consideration when placing bets, but it’s an important consideration just as well.

To covert the odds to find their implied probability, the formula: Implied Probability = (1 ÷ Decimal Odds) × 100

For example, we have the game below;

• Minnesota Vikings: 1.80
• Indianapolis Colts: 2.25

For a Vikings win: (1 ÷ 1.80) × 100 = 55.56%

Looking at the underdog the Colts: (1 ÷ 2.25) × 100 = 44.44%

Getting odds into a percentage like this makes it easier to see which outcome is more likely. In this case, the team with a 55.56% has a better chance than the other team. Essentially, the lower the decimal figure, the higher the probability of winning.

Calculating Winnings with Decimal Odds

So how do you know what you win if you bet using decimal odds? You can easily calculate sports betting winnings with this formula: Your payout = Wager × Decimal Odds)

For example, if we have:

• Minnesota Vikings: 1.80
• Indianapolis Colts: 2.25

We, therefore, need to multiply the wager by the odds. So, for a Vikings win on a $100 wager: $100 × 1.80 = $180

To calculate your profit: Profit = (Wager × 1.80) – Wager

As such if the Vikings win the game: ($100 × 1.80) – $100 = $180- $100 = $80

Your profit, in this case, is $80. With time, this calculation becomes increasingly easy to understand. so much so that pro bettors will at times work backward. They can compute how much they would need to bet to win a certain amount at given odds.

Fractional Odds

Fractional odds are displayed in a fraction form, which is essentially one number over another. These two figures are separated by a slash (/) or hyphen (-).

Fractional odds are among the oldest forms of betting odds and are commonly used in the UK and Ireland. Let’s look at how to read them, calculate winnings, and how to convert the odds from a fraction to implied probability.

How to read fractional odds

The big question you must be wondering is how to interpret these fractions. Let’s take 4/5. The top number, or the one on the left (4), represents your winnings. The bottom number or one on the right will indicate how much you need to risk to win an amount specified by the numerator.

The number on the left is also known as the numerator, and the one on the right is the denominator. When reading fractional odds out loud, you start with the numerator, then the denominator. So 4/5 would be read as 4 to 5 or 4 out of 5. Fractional odds displayed as 1/1 are known as evens because the bet amount and potential win are of equal value.

In our example (4/5): 4 is the amount you will win and 5 is the bet amount you need to place. In short, you need to bet $5 with the above odds to win $4.

Calculating Implied Probability with Fractional Odds 

What about probability? Converting fractional odds to a percentage is pretty easy as there is only one conversion formula. This formula is:

Fractional odds implied probability = (1[(Fractional odds) +1 )] × 100

Let’s say you want to compute implied probability from the game below:

• LA Galaxy 5/6
• Los Angeles FC 6/5

For LA Galaxy at 5/6: (1÷ [(5/6)+1) ] × 100 = 54.55%

Let’s do the same with Los Angeles FC: (1÷ [(6/5)+1) ] × 100 = 45.45%

As such, bettors backing the LA Galaxy will be riding on a 54.55% chance for their team to win, while the Los Angeles FC will have a 45.45% chance. Being able to calculate probability in this way helps you look at odds differently, and draws you closer to placing winning tickets.

Calculating winnings with fractional odds

Let’s use the following example to calculate the amount you could win when using fractional odds.

• LA Galaxy 5/6
• Los Angeles FC 6/5

The formula to use is: (Numerator × Bet amount) ÷ denominator = Winnings

So if you have your eyes on LA Galaxy and a $100 wager: (5 × $100) ÷ 6 = $83.33

Your winnings will be $83.33. Plus your original $100 wager back, the total cash out is $183.33.

Let’s say a different bettor wants to back Los Angeles. They would go about it as follows: (6× $100) ÷ 5 = $120

Again, your profit is $120, plus your original wager of $100, you cash out $220.

How do bookmakers set the odds?

Sports betting today is legal in many states in the US. However, it wasn’t always that way. Before betting became what it is today, it was dominated by backroom bookmakers and Las Vegas sportsbooks.

Sports bettors would place wagers over the phone, and odds would change as the weight of cash shifted between underdogs and favorites. Bookmakers would then lay bets on every outcome bettors were wagering on to help them balance out all the bets that would cost them money. These bets were recorded in a physical book and kept within the premises.

Bookmakers would assign probabilities tallying up to 100% to form the book. They would then add a 5-10% vig or juice on each betting outcome to cover their profit. As long as bookmakers’ books remained balanced, they were assured of a profit.

Then came technology. Today, compiling betting odds is about number crunching and database usage to set the market. First, traders analyze multiple sports to try and correctly assess the probability of each outcome. Once this is done, a vig is applied to help set the bookmaker’s price.

The information used in analyzing sporting events can take numerous forms. For example, one way is to analyze a team’s previous results when playing another team away and at home. Such information is then run through odd compilers and mathematical tools to calculate odds in real time quickly.

The odds are not cast in stone

Something else you will notice is that odds are not static. Odds will change from when they are first posted to right before an event. They also change during a game for live betting. For starters, odds will change to reflect the weight of the cash moving around.

If the underdog in a game is suddenly getting a lot of money, a betting site will likely decrease the odds to protect its profit margin. If the favorite attracts the bulk of cash, the odds can change to increase the odds for the underdog. Analysts will also consider other changes like player injuries, the weather, changes in venue, and unusual team selections.

Conclusion

As you enter the betting world, it helps to understand how to read different odds in specific formats. To be direct, you need to know more about how do betting odds work.

In fact, being able to read odds is a crucial skill in betting. While you might not be required to make these calculations and odds conversions yourself, it doesn’t hurt to be able to tabulate probabilities, winnings, and other conversations when making bets.

This and other information you have regarding betting always comes in handy when making bets. Not just bets but well-thought-out and winning bets.

Betting Odds FAQ

Here are some commonly asked questions.