Before jumping into the world of betting, it’s important to understand the basics. So before you leave your job, buy a flash car and call yourself a professional gambler, take a few minutes to get your head around what bookmakers’ odds actually represent and how they gain an edge over us helpless punters.
For even the most amateur of bettors, it is obvious that the amount you win is based on the bookies’ odds and the amount of money staked. What a lot of people either don’t know or forget though, is that odds actually represent probability.
Let’s remind ourselves of GCSE Maths. If you toss a coin, you will have two possible outcomes which have an equal chance of happening and add up to a probability of 100% – this would be a 50% chance of heads and 50% probability of tails. Not all outcomes are equal though – if you had a biased coin where one side was weighted, you may find that the probability of heads increases to 70%, whilst tails decreases to 30%.
Rather than display the actual probabilities, bookmakers convert this into odds, which can then be written in different ways depending on factors such as location and sport. These different odds – such as Decimal (2.0), Fractional (1/1) or American (+100) – all mean the exact same thing despite looking different. All they are showing is the probability of something happening (an outcome) within a wider something (an event).
For example, if we take a football match (an event) between Manchester United and Manchester City, you may see the following outcomes and odds in the Full Time Result market:
Manchester United Win (2.50)
Manchester City Win (2.87)
This indicates that the bookie believes that a United win is the most likely outcome, a City win is next, then the draw is the least likely result. If you bet £20 on a United win, you would receive £50 back (£30 profit with the original £20 stake) if they were to beat their rivals. It is good practice to use a simple calculation to ascertain the probabilities associated with these odds to give you extra information:
(1 / Decimal Odds) x 100
By using this calculation, we can see that the bookmaker has provided the following probabilities for this match:
Manchester United Win (1 / 2.50) x 100 = 40%
Draw (1 / 3.30) x 100 = 30.3%
Manchester City Win (1 / 2.87) x 100 = 34.84%
We can see that even though United are favourites, they still only have a four in 10 chance of actually winning the game. You may find looking at the probability more enlightening than just seeing the odds.
You may also notice that adding up all three outcomes for this event gives a total probability of 105.14%, which is higher than the expected 100%. This margin is called an overround and is where the bookie makes their edge to guarantee profit. For this game, the bookie will make 5.14 units of profit if they receive stakes in the same proportion to the book, i.e. they receive 105.14 units from bettors, but only ever pay out a maximum of 100 units, leaving the rest as profit for them.
Prior to kick-off, you will see odds fluctuate as the bookies attempt to balance their books and ensure the overround remains in place no matter how much has been staked. If, for example, a lot of money is placed on the United victory, the odds of a home win will drop at the same time that the odds for a City win would increase.
Although there is so much more involved in becoming a successful bettor, understanding the basic concepts and building upon these is very important. Knowing what odds represent, how bookies’ calculate them and what the overround is, ensures that you understand the difficult environment in which you are betting.
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