October 21, 2020

Sports Betting As An Investment

SPORTS BETTING/TRADING – Understanding the odds

 

SPORTS BETTING/TRADING – Understanding the odds

In this article, we discuss the different types of odds that are offered by different bookmakers and sports exchanges and which often depends on in what country the company is based.

 

DECIMAL ODDS

 

The decimal odds are the most prevalent odds used at exchanges and are, in general, the most used way to show odds today, certainly outside the US and the UK.

Decimal odds are odds like 1.95, 2.25, 3.50, etc.

What it means is that if you win your bet, your total return (including your stake) is the odds shown times your stake.

  • So, if your stake is $10 and the odds are 1.95, your total return is $10 x 1.95 = $19.50, i.e. a profit of $9.50, if your bet wins, If it doesn’t win, you will have lost the stake, in this example $10.

The decimal odds are easily converted to probabilities, as the estimated probability of something happening is 1/(decimal odds) – that is, if the odds are 1.95, the estimated probability is 1/1,95 = 51.28% (based on the odds being 100% ”fair”, which they obviously aren’t at bookmakers, as they make their profits by providing lower odds than the estimated probability actually is – read more about that here).

 

THE MONEYLINE

 

The Moneyline is another way to provide odds and is mostly used in the USA.

If you want to bet on an NFL match, you might get offered the following (theoretic example):

New England Patriots: -170

New Orleans Saints: +150

 

The Moneyline works like this:

If the number is positive (as for the Saints in the example), the number shows what you get for a 100 stake, so if you back the Saints to win for $100, you will receive a profit of $150 if, in fact, they do win. If they don’t win, you will obviously lose your $100 stake.

 

If the number is negative (as it is for the Patriots in this example), the number shows how much you have to stake in order to win 100 – so, if you want to win $100 by backing the Patriots to win, you need to bet $170 in the example above.

 

You can obviously scale your stakes to whatever suits you.

 

If you want to compare the Moneyline odds with the decimal odds, the formula is this:

Positive Moneyline:

Decimal odds = (Moneyline+100)/100

So the Moneyline at +150 for the Saints equals 2.50 decimal odds.

 

Negative Moneyline:

Decimal odds = 1-(100/Moneyline)

So the Moneyline at -170 for the Patriots equals 1.59 decimal odds.

 

FRACTIONAL ODDS

 

The fractional odds have been the main way to deliver odds in the UK & Ireland but there is a trend towards using decimal odds there as well, undoubtedly spearheaded by sports exchanges like Betfair.

You will see odds show as 1/10, 10/11, 5/2, 3/1, etc.

The fractional odds show your potential profits vs your stake.

So a 1/10 means that you will win 1 for a stake of 10. Compared to decimal odds, the main difference is that fractional odds show your (potential) profits while decimal odds show your (potential) return, incl. the stake.

 

The formula for getting from fractional odds to decimal odds is simply this:

If the fractional odds can be shown as X/Y, the decimal odds are (X+Y)/Y.

So, if the fractional odds are 1/10, the decimal odds will be (1+10)/10 = 11/10 = 1.10

Likewise, the fractional odds of 5/2 will be (5+2)/2 = 3.50 as decimal odds.

 

You will sometime see ”Evs” show where there would otherwise have been fractional odds expected. This simply is an abbreviation of ”evens” and is the same as 1/1, i.e. your potential profits are exactly the same as your stake, which as decimal odds equals 2.0 or would show on the Moneyline as +100.

 

When an ”Odds on” favorite is mentioned, it means that the odds on the favorite are below evens/2.0 (or have a negative figure on the Moneyline).

 

CONVERTING ODDS TO PROBABILITY

 

We’ve already mentioned how decimal odds ”translates” to probability, as the formula is 1/Decimal odds.

Positive Moneyline odds equal fractional odds based on a stake of 100, so a Moneyline at 150 is the same as a fractional odds of 150/100 (that is what it shows in reality). This fraction would usually be shown as 6/4 if shown as fractional odds, but the result, of course, is the same. It corresponds to the decimal odds for 2.5.

 

The probability for a positive Moneyline is:

Probability = 100/(Moneyline + 100)

 

So a Moneyline at +150 equals a probability of 100/(150+100) = 100/250 = 40%.

 

The probability for a negative Moneyline is calculated as:

Probability = Moneyline/(Moneyline – 100)

 

So, if you have a Moneyline at -170, the estimated probability of it happening is -170/-270  = 62.96%

 

Converting the fractional odds to probabilities is somewhat similar to the Moneyline conversion. As stated above, a positive Moneyline equals a fractional odds stated as x/100, so the probability calculation is much the same.

Probability = 1/(Fractional odds+1)

You’ll notice that it’s the same formula as the positive Moneyline formula, only with 1 as the ”stake” instead of 100. Alternatively, the formula can also be written as:

Probability = Y/(X+Y)

where the fractional odds are stated as X/Y.

 

Using the same example as before, if the Moneyline odds were 150, this corresponds to the fractional odds 150/100 or 6/4, as it would usually be shown. And so, we get the following probability: 4/(6+4) = 4/10 = 40%.

 

SUMMARY

 

So, by now you should hopefully have a pretty good idea of what the odds show and how they relate to each other. At this site we much prefer the decimal odds as we feel it’s much more intuitive and also makes it much easier to calculate alternative stakes, given it’s based on the 10-scale, plus the calculation of potential ROI is also more straight forward (it’s just the odds minus 1).

Generally, therefore, we use decimal odds for most, if not all, the articles we write on this site. You will also find that if you start using trading software, the odds ladders are based on decimal odds, so the sooner you familiarize yourself with decimal odds, the better.