To become a smarter bettor, it is important to understand how odds work in betting. Odds are not just random numbers – they reflect the bookmaker’s assessment of the likelihood of an outcome while also determining how much you can win.
Whether you’re a casual bettor or aiming to win, knowing how to read and calculate payouts based on odds can give you a significant advantage. Let’s break it all down.
How betting odds work
Betting odds serve two purposes: they indicate the probability that an event will occur and they determine the payout you will receive if your bet wins.
Different regions and platforms use different formats for odds, but the underlying principle remains the same. The three most common odds formats are:
- Fractional odds (e.g. 5/1, 2/3)
Fractional odds are popular in the United Kingdom and Ireland. The first number (numerator) indicates how much profit you will earn if you bet the amount of the second number (denominator). For example:
- At odds of 5/1 you will win £5 for every £1 wagered. A £10 bet returns £60 (£50 win + £10 stake).
- Odds of 2/3 mean you win £2 for every £3 staked. A £15 bet returns £25 (£10 win + £15 stake).
- Decimal odds (e.g. 6.00, 1.67)
Decimal odds are commonly used in Europe, Australia and on online platforms. They are simple: the number represents the total return (profit + stake) per unit staked. For example:
- Odds of 6.00 mean a £10 bet will return £60 (£50 win + £10 stake).
- Odds of 1.67 mean a £10 bet will return £16.70 (£6.70 profit + £10 stake).
To calculate winnings with decimal odds, use this formula:
Profit = (odds x stake) – stake
- American odds (e.g. +500, -150)
American odds or moneyline odds are standard in the USA. Positive odds (+) show how much profit you will make on a $100 bet, while negative odds (-) show how much you have to bet to win $100. For example:
- Odds of +500 mean a $100 bet will return $600 ($500 win + $100 bet).
- Odds of -150 mean you need to bet $150 to win $100, for a total return of $250.
Probability and Implied Odds
The odds also reflect the implied probability, which is the probability that a bookmaker believes an outcome will occur. The lower the odds, the higher the perceived probability. For example:
- Fractional odds of 1/1 (even) mean a 50% chance of winning.
- A decimal odds of 3.00 means a 33.33% chance.
To calculate the implied probability, use these formulas:
- Breakage rates: Probability = denominator ÷ (numerator + denominator)
- Decimal odds: Probability = 1 ÷ decimal odds
For example:
- Fractional odds of 5/1: Probability = 1 ÷ (5 + 1) = 16.67%.
- Decimal odds of 2.50: Probability = 1 ÷ 2.50 = 40%.
Bookmakers often build a margin (called an overround) into the odds to ensure they profit regardless of the outcome. This means that the combined implied probabilities for all outcomes in a market typically exceed 100%.
How to calculate payouts
Calculating your payout is crucial to managing your bets and determining value. To calculate the total return and profit for each odds format:
- Breakage rates:
Total return = stake x (numerator ÷ denominator + 1)
Example: £20 at 4/1 = £20 x (4 ÷ 1 + 1) = £100 (£80 win + £20 stake). - Decimal odds:
Total return = stake x decimal odds
Example: £20 at 5.00 = £20 x 5.00 = £100 (£80 win + £20 stake). - American odds:
For positive odds: Win = (Stake x American odds) ÷ 100
Example: $100 at +400 = ($100 x 400) ÷ 100 = $400 profit.
For negative odds: Win = (Stake ÷ |American Odds|) x 100
Example: $200 at -150 = ($200 ÷ 150) x 100 = $133.33 profit.
Recognize the value of quotas
Understanding odds isn’t just about payouts; it’s also about recognizing the value. A value bet is when you believe an outcome is more likely than the odds suggest.
For example, if a bookmaker offers odds of 3.00 (33.33% implied probability) on a team that you estimate has a 50% chance of winning, it is a value bet.
Final thoughts
Mastering how odds work and calculating payouts is essential to smart betting. Whether you use fractional, decimal, or American odds, the principles remain the same: understand implied probability, calculate your potential return, and pay attention to value.
With this knowledge, you will have a clearer path to smarter and more strategic betting.