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How Are Sportsbook Odds Calculated?

Taking the time to understand and learn to calculate odds is something that anyone who is placing bets on sports should do. At the end of the day, the odds are what reflect your selection’s chance of winning in the eyes of the sportsbooks and how much money you stand to win if your wager is correct. 

Believe it or not, odds are not just set to reflect the probabilities of an outcome. They actually also reflect the bookmakers’ own exposure. As you may know, the goal of any sportsbook is to ensure that each result is backed in the right proportion so that they can make a profit regardless of the outcome. 

There are a variety of formats for which odds are displayed. Three main types of betting odds are:

  1. Fractional odds
  2. Decimal Odds
  3. American(plus/minus)

One vital concept to know is that while probability and odds are both related and may seem quite similar, they are not actually the same thing. 

On the one hand, we have the probability that represents the likelihood that something will happen and is calculated by dividing the number of wanted results by the total number of possible outcomes. 

On the other hand, we have odds that present a ratio of wanted results to unwanted outcomes. All of the above-mentioned forms for which odds are displayed essentially represent the same exact thing. 

With the number of people who wager on offshore sportsbooks growing by the day,  you must take extra precautions when gambling online and ensure that the site you put your bets on is reliable, legitimate, and safe to use. 

#1 American Odds

The format for betting odds can vary dramatically depending on which part of the world you live in. The three most common ones are American, Decimal, and Fractional. So what is the difference between them, and how do you calculate and convert from one to the other? 

American odds are the default format used in America, and they start either with a negative or a positive sign. A positive number indicates how much one might profit if one bets a certain amount of money. A negative number indicates the amount of money one must stake in order to make a profit. 

There are numerous odds calculators available where you can convert the odds to a specific format. However, if you want to calculate it yourself, you can use particular equations for a particular format. 

#2 Decimal Odds

Decimal odds are predominantly used in continental Europe, Canada, New Zealand, and Australia. They are a bit easier to understand as well as work with. 

Basically, the decimal odds number represents the amount someone wins for every $1 wagered. For decimal odds, your stake is already included in the decimal number, so there’s no need to add back your stake. 

In order to calculate your potential winning with decimal odds, all you have to do si multiply the amount of money you’re wagering with the odds attached to the team you’re putting your hopes on. 

#3 Fractional Odds

Fractional odds are predominantly used in the United Kingdom and Ireland. However, we don’t know how long that will last because we are starting to see that decimal odds are slowly taking over, understandably so. 

As with American odds, fractional odds show how much potential profit you can make. Even though calculating potential profits and payouts can be a little tricky, it’s far from impossible. You can undoubtedly get the hang of it pretty quickly. 

As you may already know, the odds displayed on sportsbooks never reflect the actual probability of an event. The payoff in a win is always less than what one should have received if the odds had reflected the actual chances. 

With that said, one should consider betting only if the probability assessed for an outcome is higher than the implied probability estimated by the bookmaker. At the very least, now you know why the house always wins.

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