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Betting Odds Guide: How Do Betting Odds Work?

08.05.2024, 08:03

Betting odds are the lifeblood of sports betting. Understanding betting odds is key to placing accurate wagers, financing your bets, and raking in massive winnings if your wager is a success.

Bet Odds TIPS.GG

Sports betting odds might look confusing at first, especially when we start adding probabilities and whatnot to them. Worry not: it's not the probability theory you'd learn in university. Everything is much simpler, especially with the help of our sports betting guide.

What Are Betting Odds?

The most important definition of betting odds is that they're statistical representations of bookmakers' confidence in the likelihood of a certain event. The "confidence" part is vital—remember that odds are never the perfect mathematical representation of an outcome. They're just the opinion of some sports analysts and fans, and they're prone to mistakes.

Odds And Probability of An Event

Odds and probability go hand-in-hand. The difference between them is the presentation.

The probability of an event occurring is expressed as a percentage (as in, 50% of a coin toss being either heads or tails), while odds go a bit more in-depth to represent all the factors that come into them (like the bookmaker's margin).

How is the Probability of Winning Calculated

Remember - the odds you see on sportsbooks are not the perfect objective representation of an event's probability. Sports betting sites employ analysts to monitor sporting events and public opinions on competitors to then formulate the approximate chances each team has in the head-to-head. Here are some things that form the odds:

  • Teams' statistics. The biggest thing that determines betting odds is the team's stats: their current streak, player performance, and match history. All these things are also what every punter should look at before putting their money down.
  • Public interest. Bookmakers often tinker with the betting odds depending on how many punters are interested in the event. For smaller events, bookmakers often decrease their margin to make them even more bet-friendly. For big, premium events like the FIFA World Cup, it's the opposite—the bookies know these will always attract a crowd, so they sometimes get away with shortening the odds instead.
  • Competition. Sportsbooks often look at their competitors' homework while setting the odds. Still, some of the odds provided are better than others - so make sure to use the betting strategy known as line shopping to get the most value out of your bets.

What Is a Bookmaker's Margin

Every bookmaker takes a fee for each wager—it's just invisible! That fee is called a bookmaker's margin, or vigorish, or vig, or juice, depending on where you're from. This "hidden cost" is in every bet—after all, if it didn't exist, bookmakers would never be able to make any money since every wager would simply transfer funds between the punters. Sports betting sites are not charity, after all.

Bookmaker's Margin

The best way to demonstrate a bookmaker's margin is with the tired coin toss analogy. A "fair" bookmaker would have to put the odds on a coinflip at 2.0/2.0 (using the decimal odds system; more on that later). Instead, what is done in the real world is setting these even money odds at 1.9/1.9. This missing 0.1 is the bookmaker's margin.

Calculating Bookmaker's Margin

There is a simple formula to find the margin. In the case of these coin-flip odds, we'd find it like this:

((1/1.90) + (1/1.90) - 1) * 100

In this instance, after some boring math (ask ChatGPT for it if you're lazy), we end up with a bookmaker's margin equal roughly to 5.26%. Remember that bookmaker margins come in different shapes and sizes, so find the one that's more reasonable by browsing multiple sports betting sites.

Calculating Implied Probability

In the same vein, we can use similar math to find the probability of an event.

Probability=(1+1.9/1​)/1​

When we calculate this formula, we see that the implied probability of this outcome will be approximately 52.5%. It's not a mistake—even though the coinflip is supposed to be 50-50, the bookmaker's margin makes it not add up to 100%.

Pick 'Em Odds

Sometimes, we come across what experienced bettors call pick 'ems - wagers where both teams are evenly matched. Our coin toss is one such example of a pick 'em. In case of pick 'ems, handicaps will not be listed on the match.

Underdog Bets vs Favorites Bets Odds

If the match is not even (which is the majority of the games across traditional sports or esports), then every wager has a favorite and an underdog of the bet. Since sports betting works on the inverse basis - the bigger the risk, the more the payout (or vice versa) it pays off to know which one is which. The favorites and the underdogs are represented differently depending on what betting odds format you favor.

Depending on the size of the skill difference between the teams, the significant favorite of the event is sometimes called "chalk." A favorite whose betting odds are in the area of 1.1 is definitely the big chalk.

Betting Odds Formats

So far, we've been dealing with betting odds in a single format—decimal odds. But to understand how betting odds work, we need to realize there are many other formats. Some of them are straight-up confusing. Beginners often ask what + and - mean in betting. Without a guide, it's hard to figure out, so let's take a look at some of the most popular odds formats.

Decimal Odds

Decimal odds are most commonly found on European-based (or Australian) sportsbooks, although they are so easy to understand that it would make sense to use them everywhere. No bias at all here!

TIPS.GG Baseball

Baseball is one of the things the USA is known for. When Americans bet on it, they use American odds!

The decimal point represents the amount won for each $1 spent. It's simple to calculate because it already includes the initial wager, so there's no need to subtract it when calculating manually. In our coin-flip example (1.9/1.9), it would mean that for every $100, you'd get back $190.

In decimal odds, the favorite is usually the team represented by odds from 1.01 to 1.99, while the underdog is anything above 2.0+.

Fractional Odds

Fractional odds are popular with the old-school British bookmakers, hence they're also often called British or UK odds.

Fractional odds are also quite intuitive to understand, although a bit harder than decimal odds. In fractional odds, our coinflip example will look like 9/10 - as in, for every 100 dollars you bet, you win $90.

In fractional odds, the favorite is the team whose odds are displayed with the denominator bigger than the numerator - just like in our example, 9/10. For the underdog, flip those odds upside down - the numerator is now bigger - for example, 6/1.

What do 15 to 1 odds mean?

This question is often asked by beginners and refers to fractional odds. In this common example, 15 to 1 (or 15/1) is a heavy underdog bet. For every dollar put down on a wager with these odds, the payout is $15 plus the initial stake. However, the implied probability of winning in this case is only around 6%.

American Odds

American odds, also called moneyline odds, are North America's favorite and the most unique of the bunch.

Unlike the previous odds formats, American odds are calculated based on $100 dollar wagers instead of $1. This makes them slightly more confusing for beginners, especially for the fellows accustomed to decimal odds.

The odds for favorites are indicated with a minus sign (-) next to them, while the underdogs are marked with plus (+). It's easier to show an example than to explain how the American odds work, so there it is:

What Do + and - Mean in Betting?

The moneyline odds for an LPL 2024 match between Ninjas in Pyjamas and ThunderTalk Gaming are set to -333 and +220. Applying what we've learned about what + and - mean in betting, we know that Ninjas in Pyjamas are favored to win the match, while ThunderTalk Gaming are the underdogs.

If we bet $100 on Ninjas in Pyjamas, we stand to win $30, plus the initial stake of $100, for a total of $130. If we bet the same amount on ThunderTalk, we'd be winning $220, plus the initial stake, for a total of $320 in our pocket.

Converting Odds Formats

All the different odds formats ultimately mean the same thing, just in different visuals. While it's possible to calculate everything yourself, it's more handy to use odds converters like ours.

Odds converter

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