What Are Odds In Sports Betting? Understanding Betting Odds Basics
UNIT 2.1 – WHAT ARE ODDS IN BETTING
Introduction To Sports Betting Odds
You’ve likely seen betting odds written in one of these three formats: 1.5, ¾, or +110. This is because odds can be represented as Decimal odds, Fractional odds, or American odds, where the chosen format usually depends on where you live. Decimal odds are typically used in Europe, Fractional odds are used in the United Kingdom and Ireland (which is why they’re also called UK odds), and American odds are used in the United States and Canada.
Understanding betting odds is one of the most important steps in learning to bet. Odds in betting allow players to understand the risk they’re taking, and calculate the profit they could earn from their bet. At the same time, sportsbooks use betting odds to communicate the probability of an event occurring. In turn, this helps bettors assess the likelihood of various outcomes occurring, and helps them make informed decisions about how to spend their money. This article covers what betting odds are, and the following:
What Are Odds in Sports Betting?
In sports betting, odds are used to communicate the likelihood of an event happening, and how much a bettor will win if successful. An event, also called an outcome or a betting market, is anything that can happen during a sports game that you can bet on.
Betting Odds and Probability
Betting odds primarily communicate the probability of an event being successful. They allow players to understand and predict the answers to questions like: “How likely is Team X to win the Stanley Cup?” or “How likely is Player A to score a goal?”. If a sportsbook simply said these outcomes were “pretty likely”, that wouldn’t tell you much about the true probability, and therefore how much money you should risk.
Instead, sportsbooks and bettors alike use odds to quantify that likelihood; they attribute a tangible number to the probability involved so that we can bet on it. In summary, odds in sports betting are a single number given to an event that tells the sports bettor, “what is the likelihood of that event happening?”.
Betting Odds and Profitability
In addition to probability, odds in betting represent how much you could win based on how much money you bet. In sports betting, it’s important to understand that the more money you wager, the more you could potentially win – it just depends on what you’re willing to risk.
Whether the odds are written in fractional, decimal, or American format, they all communicate the same thing: for every X dollars you bet, you’ll win X amount of money. When deciding how much to bet, it’s important to remember that your stake (the amount of money you initially bet) should depend on how much you can afford to risk. In other words, never bet more than you can afford to lose.
We discuss how to read each format of betting odds in the following sections:
- Unit 2.2: How To Read American Odds.
- Unit 2.3: How To Read Decimal Odds.
- Unit 2.4: How To Read Fractional Odds.
How Are Odds Determined?
Most sportsbooks employ analysts to determine the odds. Sportsbook analysts assign odds to each possible event by looking at factors like a team’s performance, their success history, current injuries, and how they stack up against their opponent. From there, the sports analysts use an odds calculator to quantify that likelihood, which returns a number that represents the chance of success.
Betting Odds And Risk: What Are Good Odds?
So, how do odds communicate both probability and payout? As we said before, once an event has been assessed for how likely it is to happen, it is given a quantifiable number (odds) that communicates that probability to bettors. At the same time, that number represents how much you could win based on how much money you bet. These two ideas are connected through the concept of risk.
Typically, odds with a high payout indicates a risky bet. The sportsbook is willing to promise more money in winnings because they don’t believe they will have to fulfil that promise.
This is because the sportsbook believes the event, or outcome, is not likely to succeed, and is therefore a safe bet for them to make. Remember that when you’re betting, you’re not betting against a team – you are betting against the sportsbook.
On the flip side, when an outcome is very likely to succeed, the sportsbook will want to minimize the amount they have to pay out in winnings. If a thousand people bet on a safe bet, and the sportsbook promises to pay out 6 times each bettor’s stake, the sportsbook would run out of money pretty quickly. Instead, they will offer much lower payouts which require the bettor to stake an amount greater than they’ll win in profit. This method of changing the odds based on the risk involved ensures that the sportsbook, on average, will always generate revenue – a concept called The Vigorish.
In short, this is how sports bettors can use odds to determine the probability (and risk) of an event occurring. If the odds offered have a high potential payout, the likelihood that you will win is much lower. If the odds offered won’t pay out very much in winnings, you’re more likely to win this bet. As a bettor, you have to decide what your risk tolerance is, and do your own research when it comes to learning about the teams you’re betting on.
Identifying The Favourite Vs. Underdog
In situations where there are two teams or two players competing against each other, one team will usually be less likely to win and therefore the riskier bet, while the other is the safer option. In these instances, the safe bet is called “the favourite” while the risky bet is “the underdog”.
Generally, the favourite offers a lower payout than the underdog because they’re seen as more likely to win. When you bet on the favourite, you typically have to stake more than you could win back. For example, you may have to bet $100 just to win $50 back (plus your $100 stake returned for a total amount of $150). In other words, you have to be willing to risk more money because the chance of success is in your favour.
On the flip side, the underdog typically comes with a more lucrative payout, but the likelihood of winning is lower. The underdog is not expected to win, so if they do, your payout will be bigger than your stake. You may only have to bet $50, and you could win $100 in profit (for a total return of $150). Betting on the underdog is riskier, but the potential reward is greater, so always take the time to assess if the risk is worth the reward.
Sportsbooks and Betting Odds Example
We can compare the way sportsbooks set odds to a bet you may make with your friends. Let’s say you bet your friend $100 that he completes 100 pushups. You know that your friend is not physically capable of doing 100 pushups. In this scenario, you are like a sportsbook. You have assessed factors like the physical fitness of the athletes involved to determine how likely they are to succeed, and the subsequent risk involved.
For you, this is a safe bet because the likelihood of the event occurring – that your friend completes 100 pushups – is low. For your friend, this would be a risky bet. He also knows that he would have trouble completing 100 pushups – so why would he take the bet knowing he’s likely to lose $100? He probably won’t, so you need to improve the deal for him.
Instead, you say that if he completes the pushups, you’ll give him $100. If he doesn’t complete the pushups, he only has to pay you $10. This evens out the risk involved for your friend by offering the opportunity to win more money, at the risk of losing only $10.
Now let’s pretend a third party wants to wager on our pushup scenario, but they have no idea how physically fit your friend is. To make an informed decision, they could look at the odds being offered. They would see that you are willing to risk $100 for the chance of winning only $10. A rational person would only offer these kinds of stakes if they were very confident in winning the $10 and keeping their own $100.
So the third party, assuming they’re risk-averse, takes the safer bet and wagers $100 hoping that they too will win $10 in profit, and have their $100 stake returned. That said, maybe our third party loves the thrill of a risky bet, and is not too concerned about losing $10. This person decides to bet on your friend for the chance to win $100, because in the worst case scenario they will have to pay you $10.
Sportsbooks Shift Odds to Incentivize Betting
Sports betting operates much the same way when it comes to balancing odds and risk. Like in our scenario above where you lowered the stakes to $10 for your friend to incentivize them to take the bet, the sportsbook will offer a higher return to make it worth it for the bettor. For instance if the bettor only has to put in $10 and has the potential to make $10,000, they’ll probably spend the $10. That said, an event that is willing to pay out so much in winnings for such a small stake also indicates it is very unlikely to succeed.
Sportsbooks will promise to reward risk because they are more likely to make a profit – should the event not succeed and the bettor loses, the sportsbook keeps the stake. A risky bet for a sports bettor is a safe bet for a sportsbook, and vice versa.
What Are Competitive Odds? Odds Shopping Meaning
You may frequently hear the term “competitive odds”, particularly in reading sportsbook reviews. Remember, odds represent how much money you earn back for the stake that you put in. In this context, competitive odds simply means odds that give you the best payout for betting.
Remember, sportsbooks are a business. Like any business, they want to offer the best prices to their customers, or offer a better product to try and win your business. Sportsbooks generally all offer the same product, so they have no choice but to compete with each other on price. Think of it like stores competing to have the lowest prices and best deals on popular items – but in this case, it’s about offering the best bets and payouts.
For example, Sportsbook A and Sportsbook B give you the chance to bet on your favourite hockey team winning the Stanley Cup. Sportsbook A says if you bet $10 and win, they’ll give you $50 plus your stake back. Sportsbook B says if you bet $10, they’ll give you $100 plus your stake back. In this case, we would say Sportsbook B has more competitive odds than Sportsbook A.
So, bottom line, competitive odds mean sportsbooks want your attention. They’re trying to outdo each other with better odds and cooler features to get you to bet on their site. So, before you commit to one sportsbook, be sure to shop around for the best odds you can find.