How Do Odds Work?

NFL Player Saquon Barkley and Sportsbook Image

Did you know there is a 2% probability that Dwayne Johnson will win the next U.S. Presidential Election in 2020, according to one of the well-known betting websites?

So, what this means is that you can get 50/1 odds on “The Rock” for POTUS.

If you plan to begin betting, be it online casino games, sports betting, or any other type, it’s imperative to comprehend the odds. It would be at best in poor judgment to consider placing bets without having a firm grip on the main types of betting odds and the ability to read and interpret the various associated odds.

The three main types of betting odds are fractional odds, decimal odds, and Moneyline odds.

These are simply different ways of presenting the same thing and hold no difference regarding the payouts. This means that a chance, percentage probability, of an event occurring can be converted and presented in any of the aforementioned styles of odds.

How Fractional Odds Work

Fractional odds (aka British odds, UK odds, or traditional odds) are most common among British and Irish bookmakers. These are usually written with a “slash” or a “hyphen,” i.e. 6/1 or 6-1, and announced as “six-to-one.” Fractional odds are used by some of the world’s largest bookmakers, making them the most used odds across the globe.

A fractional listing of 6/1 odds would mean that you win $6 against every $1 you wager, in addition to receiving your dollar back, i.e. $1, the amount you initially bet. To put it simply, this is the ratio of the amount of profit won to the original wager, which means that you will receive your stake in addition to the profit, resulting in the sum of both for a win. Therefore, if you stake $20 at 6/1, you get a total return of $140 ($120 profit + $20 stake).

Essentially, the total (potential) return on a stake can be stated as:

Total Return = [Stake x (Numerator/Denominator)] + Stake

where numerator/denominator is the fractional odd, e.g. 28/6.

For instance, one of the major sports betting websites listed the following fractional odds for futures betting on the team to win the 2019 World Series. Below is a selection of the three teams that had the lowest odds.

  • Houston Astros: 10/11
  • Los Angeles Dodgers: 9/4
  • Chicago Cubs: 7/1

It can quickly be determined that the Houston Astros were the favorites while the odds on Los Angeles and Chicago winning are longer. That is, one wins only $10 against every $11 wagered on Houston to be the champions. Meanwhile, one wins $9 against each $4 (i.e. 3.25 times) put at stake for Los Angeles to win, which is a bit less probable. For Chicago, one wins $7 against each $1 bet.

In the above example, if you bet $100 on the Astros to win, you could make a $90.91 profit [$100 x (10/11)], and could get back your initial stake of $100, resulting in a total return of $190.91. However, if you wager $100 on L.A. to win, you could receive a profit of $225 [$100 x (9/4)], in addition to the $100 initial stake leading to a total payout of $325. The potential profit for a Chicago win would be even higher, as you could make a profit of $700 [$100 x (7/1)]. With the initial stake of $100 then returned, it would make for a total payout of $800.

How Decimal Odds Work

Decimal odds (aka European odds, digital odds, or continental odds) are most popular in continental Europe, Australia, New Zealand, and Canada. These are a bit easier to understand and work with. The favorites and underdogs can be noticed right away by looking at the numbers.

Sports Betting Room With Couches

The decimal odds number represents the amount one wins for every $1 wagered. For decimal odds, the number represents the total return, rather than the profit. In other words, your stake is already included in the decimal number, taking the math out of it for you, which makes its total return calculation more simple.

The total return on a wager can be calculated as:

Total Return = Stake x Decimal Odd Number

For instance, one of the most popular online betting sites prices several candidates to win the 2020 U.S. Presidential Election. Here, we list the decimal odds for the top three candidates and the biggest long shot among the candidates listed by the bookmaker as of December 2019.

  • Donald Trump: 3.00
  • Joe Biden: 11.00
  • Elizabeth Warren: 13.00

And American media personality and sports businessman that just won’t go away LaVar Ball: 251.00

These numbers merely represent the amount one could win against each $1 put at stake. Therefore, if one bets $100 on Donald Trump to be re-elected as President, this person could make a total return of $300 ($100 x 3.00). This amount includes the initial stake of $100, giving a net profit of $200.

Similarly, a bettor could make a total return of $1,100 ($100 x 11.00) if they successfully bet $100 on Joe Biden or $1,300 ($100 x 13.00) if a bettor gambles on Elizabeth Warren. Subtracting $100 from these returns gives the bettor the net profit won.

Reviewing the prices that the bookmaker has set for each candidate, it can be determined that according to the bookmaker, the probability of Donald Trump (the favorite) winning the election is higher than that for any other candidate. The higher the total payout (i.e. the higher the decimal odd), the less likely (and riskier) it is for the listed candidate to win.

How American/Moneyline Odds Work

American odds, sometimes called Moneyline odds or US odds, are popular in the United States. The odds for favorites are accompanied by a minus (-) sign, indicating the amount you need to stake to win $100.

Meanwhile, the odds for underdogs are accompanied by a positive (+) sign, indicating the amount won for every $100 staked. In both cases, you will get your initial bet back, in addition to the amount won. The difference between the odds for the favorite and the underdog widens as the probability of winning for the favorite increases.

Sportsbook Betting Stations

Let’s understand this better by looking at the following example:

One of the popular betting websites priced the NCAA “Sweet 16” men’s basketball game between Duke and Virginia Tech, with the following Moneyline odds.

  • Virginia Tech: +585
  • Duke: -760

The bookmaker has offered odds of +585 for Virginia, which indicates that the bookmaker has placed a much lower probability (about 15%) on Virginia Tech winning the game. One needs to risk $100 on VT to make a potential win of $585. However, if Syracuse can pull out the win, one gets back their initial stake of $100, in addition to the $585 won, giving a total payout of $685.

If you were to bet Duke, who is obviously the favorite, which has a higher implied probability of winning the game according to the bookmaker, one would need to bet $760 to win $100. If Duke is victorious, one wins $100 with a total payout of $860 (initial stake $760 + profit won $100).

In this matchup, there is a big difference between the two odds, indicating a much higher probability of Duke winning the game and advancing to the next round of the NCAA Tournament.

Things to Remember

  • The 3 main types of betting odds are fractional odds, decimal odds, and American or Moneyline odds. These are simply different ways of presenting the same thing and hold no difference in terms of payouts.
  • Fractional odds are the ratio of the amount (profit) won to the stake; Decimal odds represent the amount one wins for every $1 wagered; and American odds, depending on the negative or positive sign, either indicate the amount one needs to wager to win $100 or the amount one would win for every $100 staked.

Conclusion

If you are planning to enter the betting or the gambling world, you absolutely must be able to understand and interpret all types of odds at a glance. After you have mastered the three popular types of odds (fractional, decimal and American), you can move towards a more detailed read on this topic and find out how the house always wins.

The conversion between the different formats of odds, the conversion of odds into implied probabilities, and the differences between the true chances of an outcome as well as the odds are key aspects to understand.

Sports gambling is immensely popular across the globe and continues to earn more and more market share annually. As a result it has become much more convenient for gamblers to lay their bets. The United States sports betting market is poised to launch like a rocket in the coming years.

Understanding how odds work will help you to mitigate your risks and enable you to clearly know your potential winnings. Gamble on.