Did you know there is a 0.1% probability (1,000/1 odds) that Kim Kardashian would become the next US president, according to one of the renowned betting websites?
If you are planning to start betting, be it casino gambling, sports betting, or any other type, it's important to understand the odds. It would be preposterous and absurd to think about playing bets without having a good grip on the main types of betting odds and the ability to read and interpret the various formats thereof.
The three main types of betting odds are fractional (British) odds, decimal (European) odds, and American (Moneyline) odds. These are simply different ways or forms to present the same thing, and hold no difference in terms of payouts. This means that a chance (percentage probability) of an event occurring can be converted and presented in any of the aforementioned types of odds.
Fractional odds (a.k.a. British odds, UK odds or Traditional odds) are popular among British and Irish bookies. These are typically written with a “slash (/)” or a “hyphen (-),” e.g. 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 preferred odds across the globe.
A fractional odd of 6/1 (six-to-one) would mean that you win $6 against every $1 you stake (in addition to receiving your dollar back, i.e. $1 – the amount you wagered). In other words, this is the ratio of the amount (profit) won to the stake, which means that you will receive your stake ($1) in addition to the profit ($6), resulting in a total return of $7. Therefore, if you stake $10 at 6/1, you get a total return of $70 ($60 profit + $10 stake).
Therefore, 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 renowned sports betting websites shows the following fractional odds for the Barclays Premier League match, Crystal Palace vs. Man City on April 7, 2015.
Crystal Palace: 4/1
Man City: 8/13
(For related reading, see: A Quick And Dirty Look At Sports Gambling)
It can quickly be discerned that Man City are the favorites while Crystal Palace are the underdogs. That is, one wins only $8 against every $13 put on stake for Man City to win. Meanwhile, one wins $4 against each $1 (i.e. 4 times) put on stake for Crystal Palace to win, which is less probable. One is offered a high return temptation for the high risk they bear, based on the basic concept of "high risk, high return.”
In the above example, if I bet $100 on Man City to win, I could make a $61.53 profit [$100 x (8/13)], and could get back my initial stake of $100, resulting in a total return of $161.53. However, if I wager $100 on Crystal Palace to win, I could receive a profit of $400 [$100 x (4/1)], in addition to the $100 initial stake (total return = $500).
Decimal odds (a.k.a. European odds, Digital odds, Continental odds) are popular in continental Europe, Australia, New Zealand, and Canada. These are rather quicker and easier to understand and work with. The favorites and underdogs can be spotted instantaneously by looking at the numbers.
The decimal odd 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 (no need to add back your stake), which makes its total return calculation easier.
The total (potential) return on a stake can be calculated as:
Total return = Stake x Decimal odd number
For instance, one of the renowned betting websites prices several candidates to win the 2016 US Presidential elections. Here, we list the decimal odds for the top 4 candidates and the lowest probability among the 50+ candidates listed by the bookmaker as of April 2015.
Hillary Clinton: 2.20
Jeb Bush: 5.00
Marco Rubio: 11.00
Scott Walker: 11.00
and Kim Kardashian: 1001.00 (yes, you read it right!)
These numbers merely represent the amount one could win against each $1 put on stake. Therefore, if one bets $100 on Hillary Clinton to be the next president, this person could make a total return of $220 ($100 x 2.20). This amount includes the initial stake of $100, giving a net profit of $120.
Similarly, a bettor could make a total return of $500 ($100 x 5.00) if they bet $100 on Jeb Bush or $1,100 ($100 x 11.00) if a bettor gambles on Marco Rubio or Scott Walker. Deducting $100 from these returns gives the bettor the net profit earned.
Reviewing the prices that the bookmaker has set for each candidate, it can be ascertained that according to the bookmaker, the probability of Hillary Clinton (favorite) wining the elections is higher than that for any other candidate. The higher the total payout (i.e. the higher the decimal odd), the less probable (and more risky) it is for the candidate to win.
American odds (a.k.a. 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 get your stake 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. Let’s understand this with the help of an example:
One of the renowned betting websites prices the two finalists of ICC Cricket World Cup 2015 final match on March 29, 2015, with the following odds:
New Zealand: +200
The bookmaker has offered odds of +200 for New Zealand, which indicates that the bookmaker has placed a lower probability of New Zealand winning the World Cup final. One needs to risk $100 on New Zealand to make a potential win of $200. If New Zealand wins, one gets back their initial stake of $100, in addition to the $200 won, giving a total payout of $300.
If you decide to bet on the favorite (Australia), which has a higher implied probability of winning the World Cup according to the bookmaker, one would need to bet $250 to win $100. If Australia wins, one wins $100, for a total return of $350 (initial stake $250 + profit won $100).
Here, there is a big difference between the two odds, indicating a higher probability of Australia winning the 2015 World Cup.
More Insights Into The Mechanics Of Betting Odds
Once you have mastered the three popular types of odds (Fractional, Decimal and American), you can move towards a more interesting read on this topic. Please refer to Understand The Math Behind Betting Odds & Gambling for 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 on display, and find out how the house always wins.
The Bottom Line
Betting odds are expressed in three popular formats: Fractional (British), Decimal (European) and American (Moneyline). These formats hold no difference in terms of final pay-offs. 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 stake to win $100 or the amount one would win for every $100 staked. So, if you are planning to enter the betting or the gambling world, it is important to understand and interpret these types of odds well.