Explained: How Betting Odds Are Calculated
In any sports bet, there is a set of odds attached and they are here to tell us two things. Odds are an indication of the probability of a specific outcome taking place. In addition, they tell us how much payout we will receive in the event of a winning bet.
Odds are essential in betting and, everyone involved in the practice, from the bookmaker to the bettor, depends on them. But how, exactly, are they calculated?
Basics of Sports Betting Odds
As mentioned, odds are there to tell us the probability of an event happening. In any market, there will be a favourite and an outsider, and the odds are there to illustrate this point.
Odds can be shown in three different ways:
Moneyline (also known as American)
A typical fractional set of odds may be shown as 2/1. The decimal equivalent here would be 3.0. In Moneyline terms, this is shown as +200. When you sign up with a bookmaker, you will have the opportunity to set the odds that you are more comfortable with.
There are many odds conversion sites online. Just enter one set of odds and they will automatically convert to the other methods. In time, and with experience, you may also be able to do the calculations in your head.
How Sports Betting Odds Are Calculated
When a sporting event comes up, the odds setters will assess the chances of each possible outcome taking place. They will do some calculations, come up with a favourite and an outsider, and then they will decide what the exact odds should be.
In each set of odds, there is implied probability and details of potential payouts. The numbers tell you the likelihood of the event happening, and how much you will receive if the bet wins.
As an example of probability in action, let’s say that a bookmaker is assessing an upcoming football match. They decide that Team A has a 50% chance of winning against Team B.
As a fraction, this would be expressed as 1/1. This can also be referred to as an ‘Even Money’ bet.
In decimal terms, this is shown as 2.0 and in moneyline odds it’s +100.
If you stake £10 on the outcome and it wins, you will receive £20. With fractional odds, you receive your stake back. This doesn’t happen with decimal or moneyline odds, but the return is still the same.
How to Read Betting Odds
This is best explained using fractional odds. Let’s say that an event is coming up and the bookmaker has listed odds of 7/1.
Essentially, the 1 in this figure is the amount that you would stake. If the bet wins, the figure 7 is the amount that the bookie pays out.
So, you are betting £1 to win £7 and your stake is also returned with fractional odds.
Obviously, the vast majority of bets will be placed at levels higher than £1.00, but you can use these numbers to do some calculations. For example, using the above illustration, a £10 bet returns £70 plus the original stake.
If you don’t want to read the odds yourself, there are many online sites that will do the work for you.
Bookmakers Vs Betting Exchange Odds
There are two ways to bet on sports: One is through a traditional bookmaker where you are betting against the house. The bookie sets the odds, and you decide whether you want to accept them.
The second, newer concept is the sports betting exchange. Here, you are staking against other customers of the exchange itself. The exchange begins to work after they list upcoming events. Let’s say one customer decides that they want to bet on Team A to beat Team B. They stake £10 on the outcome.
The next customer believes that Team A won’t win, so they take on the first customer and bet on Team A not to win. This is known as a lay bet. As many bettors become involved, the odds will settle, and they can often have more value than a traditional sportsbook.
When you win a bet in this way, the exchange takes a small commission and this is how they make their money.
Probability in Sports Betting
The theory of probability is the essence of sports betting. We know that we have favourites and underdogs, but how likely are they to win? That’s what odds tells us. Each set of odds has implied probabilities attached to them – how likely are we to get a winner?
We’ve given you an example with that Even Money bet, but all odds underline the probability. You can do the maths yourself, or you can go online to find a calculator to do the work for you.
Probability can also be an indicator of betting value which we will come to in a later section.
Understanding Betting Markets
In the days leading up to an event, the betting markets can tell us a lot about what may happen. Once a bookmaker lists a set of odds, they are not permanent, and they can fluctuate in that period before the event begins.
The experienced bettors will all follow news updates, so let’s say that an important football match is coming up and there are reports of an injury to a key player. There may follow a flurry of bets on the opposition team.
The market will react to these extra bets and the odds will change as a result. They are not fixed in place and can always shift depending on that type of update. In some cases, there could even be a flurry of bets on a certain outcome, and the reasons may not always be obvious at first. That’s why it can be important to follow the markets. If there is a shortening of odds, that tells us that the probability of the event happening has now increased.
Do All Bookmakers Offer the Same Odds?
Betting odds produced by bookmakers will be similar, but they will not be identical across the industry. In some cases, there will be one sportsbook quoting marginally better odds than anyone else.
Some bookmakers will also list better odds for certain sports. For example, they may be strong on football, while their odds for tennis and golf are much weaker. Another factor to consider is that there will be special events such as the football World Cup final where odds are more competitive. There may also be regular, everyday price boosts.
Bettors can keep up with all this in a number of ways. Firstly, there are odds comparison sites where you can look up an event and see who is providing the best prices. You can also check our recommendations, or you can do the work yourself.
In time, as you gain a bit of experience, you will come to know which bookies offer competitive odds on a regular basis.
Value and Risk in Sports Betting
There is constant talk of value in sports betting but what does it really mean? Essentially, value occurs when the probability of the odds is out of sync with the likelihood of an event taking place.
Let’s look at something basic like the coin toss in cricket. There really is a market for this and, as we can work out, it’s a 50/50 call between heads or tails.
Bookmakers will usually list both options at odds of around 1.9 in decimal terms – so that’s 50/50 less their house edge. But what if that bookie listed the odds at 2.5? That’s an implied probability of 40%, but we know that the actual probability figure in this case is 50%.
Those 2.5 odds won’t appear in the coin toss market, but value can appear elsewhere. Let’s say that your research suggests that a Both Teams to Score Option in a football game has a 50% chance of coming in and the implied probability is 40%.
Many professional gamblers work with value bets to make a living, but there is still risk involved and this shouldn’t be tackled full time until you have many years of experience.
Predictive Odds and Betting on Sports Events
Predictive probability is quite a complex math equation, but it can be another way of describing how odds are calculated. It’s about the odds setters who assess an upcoming event, decide on a favourite and an underdog, and then finally set the odds for each possible outcome.
If Liverpool are playing Exeter City in an FA Cup tie, then we know that Liverpool should be the favourites. We don’t need to understand maths, we only need to know our football to work that out.
But what is the likelihood that Liverpool will win? It’s not going to be a complete 100% chance, but we could say that it’s around 90%.
A 90.9% probability in this case equates to odds of:
It’s also good to consider whether it’s worth your while backing such a small price. If you bet £10 and you receive £1 back, you have made a small profit, in return for larger exposure. This balance of exposure and potential profit is another important point to keep in mind for all of your betting.