Exploring the Role That Odds Play in Betting

Posted by Harry Kane on Friday, December 22, 2023

Whether you’re an avid sports bettor or someone who likes to wager on casino games such as roulette, you need to develop a comprehensive understanding of odds and precisely how they work. Without this, it can be hard to effectively manage your bankroll or understand your prospective returns.

Make no mistake; odds can reveal a great deal about your wager: from the amount you can expect to recoup in relation to your stake to the likelihood of your chosen outcome actually occurring. But how can you successfully analyse odds and identify value when comparing various betting markets.

Understanding Odds – How are They Structured and Calculated

When you place a sports bet online, you should know that this will wager will comprise both ‘back’ and lay ‘elements. The back bet describes the typical sport wager that you’ll place with a remote sportsbook, while it requires you to stake a desired amount of money on a particular outcome occurring.

The betting site then effectively ‘lays’ your back bet at the same specified odds, which means that they’re banking on the outcome that you’ve predicted not occurring. If you’re right and the outcome occurs, the bet will succeed and the sportbook will payout at the published odds. If the lay bet is successful, the operator will bank your stake as profit.

For example, you may choose to back Bayern Munich to win the Champions League in 2023/24, at a price of around 4/1. In this instance, the bookmaker (who is represented by the first number) is willing to lay 4x your stake amount that the Bavarians won’t achieve this goal. If successful, you’ll subsequently earn a four-time return on your stake (which is represented by the second number).

This brief introduction highlights how sports bets are structured, and the initial role that odds play in facilitating back and lay bets and determining your potential returns. Of course, odds can be insightful in other ways too, but have you ever wondered how they’re calculated by sportsbooks? Here are some of the key criteria used in this regard!

• The Probability of a Specific Outcome Occurring: Sportsbooks are always preoccupied with probability, so they review a diverse range of datasets before ascribing odds to specific events. The most important data includes recent form (including a distinction between home and away form in some sports), historical performances and even head-to-head statistics from previous meetings. Such insights help bookies to accurately price individual outcomes, while odds will also be influenced by the number of potential winners (especially in outright betting markets) and likely wagering volumes. Interestingly, this also explains why odds can be used to calculate implied probability, but we’ll touch on this later in the piece!
• Accounting for the Vig or Vigorish: You may have heard of the so-called “vigorish” or “vig”, which refers to a bookmaker’s margin. Make no mistake; this is factored into the final odds calculation, with sportsbooks usually applying a price premium of between 5% and 10% to ensure that they bank a viable profit. Of course, there are variable business models deployed by sportsbooks, while bookies also strive to keep their pricing as balanced as possible in order to optimise betting volumes across all markets.
• The Likelihood of Bettors Placing Wagers: The latter point is key, as bookmaking is essentially a low margin industry in which sportsbooks tend to rely on volume to optimise profitability. Because of this, sportsbooks also consider the likelihood of people betting on specific outcomes, based on the profile of the event in question, the competing teams or players and how many options are available to punters. Interestingly, as betting commences and volumes fluctuate, sportsbooks will also react by adjusting their prices and maintaining desirable odds.

What are the Odds? How is Sportsbook Pricing Presented?

Another key element of reading and understanding sports betting or casino odds is the format that they’re presented in. There are three primary formats used by sportsbooks in different parts of the world, while they each relay similar information and datasets in slightly different ways. Here’s a breakdown of the mains odds formats:

Fractional Odds

If you compare betting markets and place wagers in the UK, you’ll most likely encounter fractional odds. Here, you’ll see two numbers that are separated by a slash, with the first digit telling you how much you’ll win in relation to the second (your stake) if the bet is successful.

If you use the previous example of successfully backing Bayern to win the UCL at fractional odds of 4/1, for example, a £10 stake will see you bank £40 in profit and £50 in total (inclusive of your returned stake amount). Fractional odds are relatively easy to read, while they’re also commonly deployed by UK comparison sites such as Oddschecker.

Decimal Odds

Irish and European punters will recognise decimal odds, which are depicted as single digits to two decimal places. This number relays how much you’ll win for every £1 that’s successfully staked (inclusive of your wager). Because of this, decimal odds are considered to be the easiest to read and compare at-a-glance.

Using the same example of betting on Bayern Munich to win the 2023/24 UEFA Champions League, you’ll see that the Bavarians can be backed at 5.00 to prevail. So, the same £10 stake will deliver a total return of £50, comprising £40 in profit and your initial £10 bet.

As you can see, there’s clear correlation between fractional and decimal odds, while it’s relatively easy to convert the former format into the latter. In the aforementioned example, simply divide the fractions (4/1) and add one, to create the decimal price of 5.00. If you bet at fractional odds of 7/2 and want to convert them, you can divide 7/2 (3.50) and add one to create a decimal price of 4.50.

American Odds

As the name suggests, ‘American’ odds are usually found at US sportsbooks. They’re represented by three-figure numbers and either a ‘minus’ or a ‘plus’ sign, with these symbols indicating whether you’re backing a betting favourite or an underdog. This can be particularly insightful when engaging in match betting.

If you see a team or outcome accompanied by a minus sign, this indicates a betting favourite, while the corresponding number tells you how much you’ll have to stake to win £100. Conversely, a plus sign is associated with a betting underdog, with the accompanying number relaying the amount you’ll win if you successfully stake £100.

For example, you may choose to back the Las Vegas Raiders to defeat the LA Chargers in the NFL, at a pre-game price of –160. In this case, you’ll have to wager an initial £160 to win £100, while a smaller, £80 stake will bank you £50 if successful. Ultimately, American odds are a little harder to comprehend and compare, but fortunately you’ll only really encounter them in the US (although some sites enable you to toggle between various odds formats).

Implied Probability – How to Find Value in Odds

We’ve already written a shorter blog post focused on odds and implied probability, but understanding this is key if you’re to successfully identify value in published prices. It’s also relatively easy to calculate the implied probability of a particular outcome occurring using alternative odds formats, especially when using decimal odds. There’s even a formula that enables you to successfully calculate implied probability. This reads as follows:

• (1/ decimal odds) * 100 = implied probability

To explain this further, let’s consider the previous example of betting on Bayern to win the Champions League at a decimal price of 5.00. To calculate the implied probability of the Bundesliga outfit prevailing, you initially divide 1 by 5.00 to create a value of 0.2. This should then be multiplied by 100, confirming that Thomas Tuchel’s side have a 20% chance of winning the competition.

Of course, you’ll also have to read implied probability values in the correct context. After all, backing an outcome with an implied probability of just 20% may not be appealing at first glance, but in this instance, it should be noted that as many of 16 teams can still win the competition at the time of writing.

This creates a much more favourable value proposition, and one that’s wildly different to backing a team to win with an implied probability of 20% in an individual match. So, it’s important to calculate implied probability and evaluate this based on the number of potential outcomes in question, before determining the viability of a bet and your stake amount.

How Implied Probability Plays into Your Betting Strategy

Clearly, implied probability can play a seminal role in your wider sports betting strategy. More specifically, it helps you to understand the most likely outcomes when betting on specific games or tournaments, while making it much easier to set optimal stake amounts that reflect the risk and potential rewards in play.

When wagering on outcomes that have a relatively low implied probability in relation to the number of potential results, for example, you should maintain a modest stake amount. This is because such a wager is fraught with risk and unlikely to come on, while the potential returns will also be higher and deliver a viable profit even when wagering a small percentage of your bankroll.

Conversely, when you bet on outcomes that have a much higher implied probability, you’ll notice that the odds are considerably shorter as the team or player in question is considered more likely to win. This is a lower risk bet that should encourage you to stake more, while a higher value wager will also boost the potential returns on offer.

Creating Value – How to Access Enhanced Odds and Optimise Returns

At this stage, you should have a much better understanding of odds and how they’re presented, as well as the ways in which they can be read to reveal implied probability values and potential returns. However, no guide of this type would be complete without exploring how you can create value in betting odds, through different wager types and strategies. So, let’s get into it!

• Explore Handicap Betting: Handicap or ‘spread’ betting is incredibly popular in the UK, while it works by applying a virtual handicap to a betting favourite and allowing you to bet at significantly enhanced odds. In football betting, you can usually apply variable handicaps of between –1.25 and –5.5 goals to short price favourites, while your chosen team will have to then win by the specified margin for the wager to be successful. There’s a delicate balance between risk and reward in play here, so you should strive to use this strategy sparingly and set the right handicap if you’re to optimise value.
• Review Available Odds Boosts and Promotions: When you compare available betting sites and sportsbooks, you’ll see that each one has their own unique welcome bonus and range of promotions for existing players. The latter often include daily or recurring odds promotions, which are usually made available for a limited period of time and often exclusive to specific sports or events. Leveraging such promotions can be highly rewarding, however, whether you access guaranteed odds that are measured across many sportsbooks or enhanced prices that create instant and considerable values.
• Build Considered Accumulators: Accumulator betting also enables you to create value when engaging in match betting. This allows you to combine between two and 20 individual selections in a single wager, with the odds of each outcome multiplied to create an extended price. Like with handicap betting, this sees the potential risk of loss increase incrementally with every selection, especially as each pick must win for the wager to pay out. So, we’d recommend building considered acca bets with between six and 10 different selections, depending on the market that you’re wagering on. Be sure to prioritise short price favourites too, while looking out for so-called “acca” insurance that will deliver a payout even if one of your accumulator legs fails.