How Do Betting Odds Work?

how betting odds work

Sports betting odds are more than the probability of a team winning or losing. Betting lines offer additional insight into our favorite sports teams, allowing every fan to take part in the live action of their favorite games. In the end, the thrill of victory or agony of defeat can always be found in the numbers. 

If you are new to sports betting, you may be wondering how do betting odds work? Understanding the numbers and getting the inside scoop can be unlocked by signing up for a Sports Information Traders starter package. To get started now, continue reading to learn the basics of reading the odds.

Sports Betting Odds Explained

Before you put your money down, understand how betting odds work and how to read them to your advantage.

Every sportsbook uses a set of algorithms to analyze the potential outcome of every game based on several statistics. In most cases, the odds between sportsbooks are affected by two factors: the cost of placing the bet (or the “cut”) and the implied probability.

The “cut” represents how much of the wager the sportsbook will take as a fee and will vary between sportsbooks. Unfortunately, bettors have no control over this variable. On the flip side, anyone can calculate implied probability to determine the chances of any expected outcome.

Types of Betting Odds

In the U.S., the three most common ways sports bets are presented are the American Plus/Minus odds, fractional odds, and decimal odds. Each one presents the wagering stakes in different ways. Here’s a quick explanation of how betting odds work:

  • American Plus/Minus odds: Most associated with NFL news, American Plus/Minus odds shows the stakes and potential winnings using positive and negative numbers.
  •  Fractional odds: Compared to plus/minus odds, fractional odds show the expected outcome as one number over another. Fractional odds are popular in the United Kingdom and can be most often found in America with horse racing.
  • Decimal odds: Also called European odds, decimal odds show stakes using a whole number and two decimal places. Decimal odds are often used in international competitions, including tennis tournaments.

How to Read Betting Odds

While it’s critical to understand how betting odds work, it’s equally critical to know how to read them, calculate implied probability, and apply the best sports betting tips. Using math and your own understanding of sports data can give you the edge when placing your bets.

How do American Plus/Minus Odds Work?

While it may seem counterintuitive, American Plus/Minus odds show the favorite with the negative number and the underdog using a positive number. The number also represents how much you could stand to earn based on your wager. 

American Plus/Minus Odds Example

TeamsBetting Odds
Team A-175
Team B+150

In this situation, Team A is favored to win the game over Team B. Because Team A is predicted to have a better chance of winning, more people will statistically bet on them to beat Team B. Therefore,  you will need to wager more to come out ahead.  A successful wager of $17.50 on Team A would net a $10 payout, while a $10 wager on Team B would result in a $15 payout.

Calculating sports betting odds implied probability depends on which team you bet on to win. Because American Plus/Minus Odds are based on a $100 return, start by adding 100 to the odds. From there, the formula changes based on which team you want to bet on. 

If you are putting money on the underdog — in this case, Team B — you would divide the odds plus 100 over 100 because they have a lower predicted chance of winning:

Underdog Implied Probability = 100/(Odds + 100)
Implied Probability = 100/(150+100) = 40%

That said, if you are betting on the favorite team (Team A), you divide the odds by the odds plus 100:

Favorite Implied Probability = Odds/(Odds + 100)
Implied probability = 175/(175+100) = 63%   

In this situation, the favorites have a 63% chance of winning, which could make betting on the underdogs more attractive. 

Using American Plus/Minus sports betting odds, the total probability will always exceed 100 percent because the extra represents the “cut” for the sportsbook. In this scenario, the sportsbook stands to earn three percent off all the wagers.  

How do Vegas Odds Work?

The term “Vegas Odds” doesn’t refer to a different numeric system you need to understand. Instead, “Vegas Odds” are simply another name for the American Plus/Minus Odds system. That’s because the Plus/Minus system was developed in the gaming capital of the world: Las Vegas. While most international sportsbooks prefer decimal odds or fractional odds, American books favor the Vegas way to bet. If you understand the American Plus/Minus Odds system, you’re ready to get started betting in any book in the U.S.

How do Decimal Odds Work?

Decimal odds are created with simplicity in mind. The numbers show how much someone would win for every $1 bet. 

Decimal Odds Example

Team A4.50
Team B2.00

Here, Team B is the favorite to win, as a successful $10 bet would only return $20. But if Team A (the underdog) wins, those bettors would win $45 on a $10 bet.

Calculating implied probability is simple with fractional odds: simply divide 100 by the decimal odds to determine the implicit chances of either team winning.

How Do Fractional Odds Work

Fractional sports betting odds look complex at first but are easy to read once you understand them. The two numbers added together indicate the number of times an outcome is predicted. The top number suggests how many times the team is predicted to lose out of the total outcomes, while the bottom number shows the estimated positive outcomes. Odds are calculated using research and proprietary models at different sportsbooks. In other words, the number of outcomes and chances to win will vary between books.

Fractional Odds Example

TeamsBetting Odds
Team A1/5
Team B5/1

In the above situation, the betting odds explain both the implied probability as well as the payout for bettors. In this situation, Team A is the favorite because the sportsbook estimates out of 6 predicted matchups, they would win 5 times. On the other hand, Team B would only win in 1 out of a total of 6 matchups.

Using the above scenario, a $10 bet would return $5 if Team A wins. But if Team B wins, anyone who bet $10 on them would see a return of $50.

By knowing how betting odds work, you don’t have to place any wager blindly. Instead, between the odds and your own research, you can maximize your overall chances of winning every time. Contact us today to get started on the winning path. 

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