If your goal is to just have a little fun betting on a football game, you can ignore things like break-even percentages and hold percentages in sports betting.
But, if your goal is to be an informed sports bettor – or even a “sharp” sports bettor – the starting point is understanding break-even percentages and hold percentages.
In this post, I’ll explain those concepts as simply as I can.
The Classic Example of a Break-Even Percentage
For the purposes of this post, I want you to understand that a bet’s break-even percentage is the same thing as “implied odds.” I’ll just stick with the terminology “break-even percentage,” but you’ll see many sports gambling writers using the latter expression.
What is a break-even percentage?
It’s the percentage of times you’ll need to win a bet to break even in the long run. “Breaking even” means you won’t win money or lose money. The net effect on your bankroll, in the long run, will be 0.
What’s an even-money bet?
It’s a bet where you win the same amount you’d lose. For example, if you win $100 if you guess right, and you lose $100 if you guess wrong, you’re making an even-money bet.
Most bets don’t pay at even money, but the coin toss begins to illustrate the concept of break-even percentage.
A More Complicated Example of a Break-Even Percentage
A more complicated and interesting example of a break-even percentage is a bet on a single die roll. In this instance, someone offers to pay you 5 to 1 odds on guessing the outcome of a six-sided die roll.
The break-even percentage, in this case, is 16.67%, which is also the probability of winning that bet. When the probability of winning the bet matches the payout odds for the bet, you have a break-even bet.
You could change the payouts for a winning bet to get a different break-even percentage. For example, you might have someone willing to off you a 4 to 1 payout to guess the roll outcome. In that case, the break-even percentage is 20%, but the probability of winning the bet is still 16.67%.
That would be a losing bet in the long run.
If someone offered you 6 to 1 odds, the break-even percentage would become 14.29%. The probability of winning the bet is still 16.67%, so you’d be in a profitable situation with this bet.
If the probability of winning the bet is higher than the break-even percentage, you have a winning bet.
If the probability of winning the bet is lower than the break-even percentage, you have a losing bet.
More about the Importance of Break-Even Percentage in Sports Betting
When you’re placing bets on your favorite casino game, you have no control over your win percentage. In fact, your win percentage is always less than the break-even percentage, which is why the casino has a mathematical edge over the player.
But in games like poker and activities like sports betting, you might be able to make better analyses than your opponents. For a specific sporting event, you might estimate your probability of winning a bet at 60%. If the break-even percentage for that bet is lower than 60%, you have a profitable opportunity.
Nothing is more important than being able to calculate the break-even percentage and then compare it to your estimate of a bet’s probability of winning.
How These Numbers Relate to Sports Betting Odds
I write for a predominantly American audience, so I’ll primarily discuss American odds in this post. When you look at an American-targeted sportsbook online or a live tote board at a sportsbook, you’ll see a big list of numbers next to the bets.
Understanding those numbers is critical. In the United States, those numbers are usually representing the American odds on a sporting event.
American odds are always a positive or negative number, and they’re always a number of 100 or greater.
If the odds are listed as a negative number, it means that the bet is on the favorite – the team the oddsmakers think is likelier to win.
If the odds are listed as a positive number, it means that the bet is on the underdog – the team the oddsmakers think is likelier to lose.
The number after the plus sign is the amount you’ll win if you bet $100 on the underdog. For example, if the odds are listed as +200, you’d risk $100 with the opportunity to win $200.
The number after the minus sign is the amount you need to risk to win $100 on the favorite. For example, if the odds are listed as -200, you’d need to risk $200 to win $100.
You’re not limited to betting in increments of $100, though. The odds just represent a payout ratio. You could bet $10 to win $20, or $20 to win $10, in the examples I just listed.
Converting American Odds to a Break-Even Percentage (Implied Odds)
The odds only matter when converted into a break-even percentage. When deciding how good a bet is (or isn’t), all your thought processes stem from this break-even percentage.
Luckily, converting American odds into a break-even percentage is easy.
If it’s an underdog (a positive number), you divide 100 by 100 added to the listed number.
So, for a bet on a team with American odds of +150, you divide 100 by 250 (100 + 150). Converting 100/250 to a percentage is easy – just divide, and you get 40%. If you win that bet 40% of the time, you break even.
So if the favorite has odds of -150, you would divide 150 by 250, and the results would be a break-even percentage of 60%. If you win this bet 60% of the time, you break even.
A simple way to think of it is risk divided by risk + win.
Why the Break-Even Percentage Is So Important
You should always convert all of the American odds you see into a break-even percentage before placing a bet. In fact, you should get used to using this metric to compare bets.
If you want to win at sports betting, your goal is to only make bets where your probability of winning is higher than the break-even percentage. If you can do that, you’ll be profitable in the long run.
That’s easier to do when comparing percentages because you’re comparing apples to apples. You’re comparing a percentage to another percentage, which is an intuitively easy thing to understand.
Compare that with trying to compare the fair price of 2 bets with radically different odds. Let’s say you find a -120 bet where you think the fair price is -150. Let’s also say you find a -350 bet that you think the fair price is -390.
How do you compare those?
Some people would suggest that you have a 30 cent difference with the first bet and a 40 cent difference with the 2nd bet. The problem is that this line of thinking doesn’t account for the difference in terms of scale.
The break-even percentage for a -120 bet is 120/220, or 54.55%.
The break-even percentage for a -350 bet, on the other hand, is 350/450, or 77.78%.
That’s a far more critical difference than comparing 30 cents and 40 cents would lead you to believe. Having to win a bet almost 80% of the time is a LOT different from winning a bet a little over 50% of the time.
The only way to get deep into that reality is to immediately convert everything into a break-even percentage.
What about the Hold Percentage?
Most people know that a sportsbook makes its money from its hold percentage – it’s the sportsbook equivalent of the rake in poker or the house edge in a casino game. The hold percentage is the difference between what a book is willing to buy a bet for and what it’s willing to sell a bet for.
Let’s say that you’re betting on a football game between the Cowboys and the Redskins, and the book has the Cowboys at +140 and the Redskins at -160.
This means that a bet on the Cowboys has a break-even percentage of 41.67%, and the Redskins have a break-even percentage of 61.54%.
Notice how those 2 percentages add up to more than 100%?
They total 103.21%.
In other words, if the book had no risk at all – the bets on one side all cover the bets on the other side and vice versa, the book is guaranteed a profit.
This hold percentage is also often called vigorish, or “the vig.”
All bets at sportsbooks have a hold percentage built-in. This doesn’t guarantee that the sportsbook will earn a profit on every bet, though. That’s because they’ll inevitably wind up with lopsided action on each side of the match.
But, in aggregate, if the sportsbook is doing an excellent job of pricing its odds, they’ll come close to guaranteeing themselves a profit.
Your goal is to beat the hold percentage and then some.
Our Thoughts on These Sports Betting Terms
I’ll cover decimal odds and fractional odds in a future post. Still, I want to reiterate again how important it is that you quickly convert American odds into a break-even percentage.
You can then compare the probability of winning with the break-even percentage to see how good a bet is.
Your goal is to have a higher percentage of winning the bet than the break-even percentage. The bigger the difference, the more profitable you’ll be.