Odds express the likelihood of an event happening and indicate how much money you can win relative to your stake if you bet on that event.
How Odds Work
- Odds as Probability Ratios: Odds represent the ratio of the probability that an event will occur to the probability that it will not. For example, if an event has a 40% chance of happening, the odds in favor might be expressed as "2 to 3" (2:3), meaning for every 2 chances it happens, there are 3 chances it does not
- In Gambling: Odds show the potential profit relative to the amount wagered. If you bet 2 units at odds of "3 to 2," you win 3 units plus your original 2 units back, totaling 5 units
Common Formats of Odds
- Fractional Odds (British Odds): Written as a fraction like 6/1, meaning you win 6 units for every 1 unit wagered, plus your stake back. For example, betting $10 at 6/1 returns $70 ($60 profit + $10 stake)
- Decimal Odds (European Odds): Represent the total payout for each unit wagered, including the stake. For example, decimal odds of 4.00 mean you get $4 for every $1 bet (including your stake), so a $100 bet returns $400 total
- Moneyline Odds (American Odds): Expressed with a plus (+) or minus (−) sign. A minus sign (e.g., -150) shows how much you need to bet to win $100, indicating the favorite. A plus sign (e.g., +200) shows how much you win on a $100 bet, indicating the underdog. For instance, betting $100 on +200 odds wins $200 profit plus your stake back
Bookmakers and Profit Margin
Bookmakers set odds not only based on true probabilities but also include a profit margin called the "overround." This means the total implied probabilities exceed 100%, ensuring the bookmaker profits regardless of the outcome. For example, in a race with true probabilities of 50%, 40%, and 10%, the bookmaker might adjust these to 60%, 50%, and 20%, respectively, to secure profit
. In summary, odds quantify the chance of an event and determine how much you can win relative to your bet. Different formats express this in various ways, but all serve to communicate risk and reward in betting contexts
