How are Betting Odds Calculated?
When you place a bet with your bookmaker, the betting odds you take are vitally important to your profit and loss. You should always do your research to take the best odds available by having multiple accounts with a variety of bookmakers to get the most out of your betting slip. Looking deeper into betting is important for you to know what you are risking your money on. Our aim in this article is to give an answer to commonly asked questions: What do Betting odds mean?, How are betting odds calculated by bookmakers?, Why do they all offer different odds?
Behind the scenes a lot of complicated and important work goes into producing the odds that you take, and understanding them will make you a better gambler that appreciates value even more than you do now.
What do the Betting Odds Mean?
When you are taking the odds on a selection to win, no matter what price you are taking, this is what the bookmaker feels is the chances of that selection winning. However, on top of this they also add in their own margin, this is how they make a profit from taking bets.
For example, if you are taking the price of evens (2.0) you are betting on something that has been given a 50% chance of winning by the bookmakers. However, what they are really thinking is that your selection has around a 47% chance of winning, with a little extra added to give them their margin.
Compare the odds you are taking to the probability of your selection winning to see if you are getting value. This is something the very best punters do, and something that you should adpot. Using the example above, if you are getting evens on a selection, do you really believe that they have a 50% chance of winning? If you are giving the odds of 1/3 (1.33) then that means your selection should have a 75% chance of winning, do they?
One of the hardest things to understand as a punter, but something you really need to understand is the odds and how they can offer value. By looking at the odds on offer and comparing them with the perceived chances of winning will show you whether you are getting value on your bet. If you think something has a 50% chance of winning then you should get odds of evens. If you are only being offered 1/3 by your bookmaker, then that bet is a poor value bet, and one that you should probably avoid.
How are Betting Odds Calculated by Bookmakers?
When a bookmaker calculates the odds they are going to offer, they create the odds without their margin in and then add that later on.
For example, if a bookmaker is looking at a football games that is a three way market, they may think it will look something like this:
Team A – 40% chance of winning
Team B – 40% chance of winning
Draw – 20% chance of winning
This all adds up to 100%, which means there is no margin in for the bookmakers. The true betting odds for this event are:
Team A 6/4 (2.5)
Team B 6/4 (2.5)
Draw 4/1 (5.00)
What the bookmakers do at this stage is they add in their margin, lets say they want a margin of 6%, which means the prices on offer have to change to reflect that. Team A and B will be worked out on a 42% chance of winning, while the draw is worked out on a 22% chance of winning.
This chance moves the prices to the following:
Team A 11/8 (2.38)
Team B 11/8 (2.38)
Draw 3.55/1 (4.55)
These odds are slightly lower than the original odds with no margin, and this is how the bookmakers will make their money.
If you placed a total of £100 on the three outcomes then this is what would happen:
£40 on Team A = £95.20 back
£40 on Team B = £95.20 back
£20 on Draw = £91 back
As you see you do not get your full stake money back by betting on these prices, because the bookmaker has worked in their cut.
Why do Different Bookmakers Offer Different Odds?
When you are placing a bet with your bookmaker, there are two reasons why the betting odds will be different.
The first thing is that bookmakers will take a different margin. Each bookmaker will be fixed in the margin they work things out to, but this will vary from bookmaker to bookmaker and sport to sport. For example, one bookmaker may take 6% on football bets, while they take a margin of 10% on horse racing. Another bookmaker may take a cut of 10% on football and only 6% on horse racing.
The second thing to think about is that bookmakers all have an opinion on the sporting events. They employ odds compilers to work out what they would like to take bets on and what they would like to avoid. If a bookmaker is offering better odds on a certain team than most others then that is because their odds compilers are happy to take bets, and think they will get beat.
Just like you have an opinion on the sporting events you are betting on, so do the bookmakers. However, they use their opinion to form the odds, you use your opinion to bet on the odds. They are experts and to beat them you will need to be an expert yourself, also having expert knowledge on betting odds and how they work, and what value is. When you are placing a bet with a bookmaker who is the top price about a selection you are backing, essentially they are having the complete opposite view on the event to what you have.
By understanding how betting odds work and what happens before you are presented with them you will have a better betting knowledge. This is only going to help you work out what bets are deemed as good value bets, and what you need to avoid because bad value is on offer. To become the best possible gambler not only should you be looking for the best odds, but you should always be looking for value. Think about what is on offer, and compare it to the percentages you have worked out on the game.