How To Calculate Odds (With Examples)

By Jack Flynn - May. 25, 2021
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No doubt, betting can be a nerve-wracking process. Regardless of what you’re betting on, you want to make money, not lose it. That’s why it’s important not to go in blind. After all, your money’s on the line!

Given that, understanding odds is your first step toward betting success. Instead of going into the casino with one foot already in the grave, having a good grip on odds will give you the ability to read different betting situations and make the best decisions.

Luckily, you can calculate odds on your own, which will allow you to make smarter bets. Even though there are a few different types of odds, you can easily use your mastery of one to understand the others.

With that in mind, this article will examine how to properly calculate odds, as well as provide examples of its use.

What Are Odds?

In simple terms, odds can be defined as measuring the likelihood of any particular outcome. Depending on the format you use, this is accomplished through calculating a ratio, decimal, or fraction.

Due to its predictive nature, odds are typically used in gambling, sports, or statistics. This is because you can make a more informed prediction when you compare the number of favorable outcomes to the number of unfavorable ones.

Consider a six-sided die. When you roll it, you’ll have a 5:1 chance of receiving any particular number. Further, this chance completely resets each time you roll the die. While applying this logic to sports or poker becomes far more complicated, it’s the same general concept.

Overall, weighing the likelihood of certain outcomes can help you predict the odds of you winning or losing a bet. While you’re never guaranteed a win, it’s definitely better to make an informed decision, especially when it involves your hard-earned money.

Different Types of Odds

Depending on where you are and what you’re betting on, there are different odds calculation formats used. Fortunately, all of these formats are simply different ways of presenting the same information. Therefore, if you understand one, you’ll be able to understand the others.

  1. Fractional odds. Most commonly used in the UK and popular around the world, fractional odds can be written with a slash (/) or hyphen (-).

    More specifically, 6/1 (six-to-one) odds would indicate that on top of winning back what you wager, you’d also win $6 against every $1. In this instance, you’d win $7 total.

  2. Decimal odds. Decimal odds are often used around Europe, Australia, and Canada. Compared to the other formats, this odds calculation method is generally considered more approachable. For example, the numbers will immediately make you aware of who’s the favorite and who’s the underdog.

    Overall, decimal odds represent the total payout instead of profit. The number you receive can tell you the amount won for every $1 wagered.

  3. American odds. Popular in the United States, this format is based on winning $100 for any given bet. This is calculated using a minus (-) sign to indicate the amount you need to stake in order to win. At the same time, an underdog’s odds will be represented with a plus (+) sign, which will still indicate the amount won for every $100 staked.

    In both instances, you would get your original wager back and whatever extra you’ve won. However, the system widens the difference between the odds for the favorite and the underdog as the probability of the favorite winning increases.

Odds vs. Probability

While odds and probability are related mathematical concepts, the two are also distinctly different. The probability of something occurring represents the fraction of times you’d see it happen over several trials. If you have a 50% probability of catching the bus, that number represents the idea that you will catch the bus half the time.

On the other hand, odds are a bit more complicated and represent the probability that something will occur, divided by the probability that it will not occur. Think about it as though you were betting on an underdog racehorse, and your odds compare the chance of that horse winning against the other horses.

In this way, odds are more useful for betting than probability is.

How to Calculate Odds

Regardless of which format you’re using, there are some initial steps you should take before you calculate your odds. Consider the following steps:

  1. Determine the number of favorable and unfavorable outcomes.

  2. Use a ratio to understand those initial odds. (e.g., if there are five favorable outcomes and three unfavorable ones, your chance of winning would be 5:3)

  3. Consider the difference between dependent and independent events (e.g., the odds of your favorite team winning one game is independent, whereas the odds of that same team participating in the championship is dependent on them winning multiple games.)

  4. Determine if all outcomes are equally likely (e.g., if a six-sided die has two of the same number on it, then your chance of getting that number is higher than all other numbers.)

Now that you’ve taken those factors into consideration, here’s how to calculate odds for each of the formats previously mentioned.

Examples of How to Calclulate Different Odds

  1. Fractional Odds

    Total Payout = [Stake x fractional odd] + Stake

    Imagine you’re at a horse race, and you’re going to bet on a horse. Here are a few of your options:

    Seabiscuit: 8/5
    Tater Tot: 9/10
    Majesty: 6/1

    From these numbers, you could determine that Tater Tot is the favorite, whereas Seabiscuit and Majesty have longer odds. For instance, you would win $9 against every $10 wagered on Tater Tot to win the race. On the other hand, you’d win a more considerable $8 against every $5 put at stake for Seabiscuit to win, which is more profitable but less probable.

    As you can see, the more of an underdog one of the horses is, the more you’ll be paid out for your bet.

    For example, if you bet $50 on Taterot, you could make a $45.05 profit [$50 x (9/10)], which, added on top of your initial stake, would be $95.05.

    But, if you were to wager the same amount on Majesty, you could win a whopping $300 [$50 x (6/1)], leading to a total payout of $350. While this outcome is less likely, it’s also far more profitable in the event of a win.

  2. Decimal Odds

    Total Payout = Stake x Decimal Odd

    Let’s say you want to bet on a particular hockey team. Here are two of your options:

    Pittsburgh Penguins: 2.7
    Colorado Avalanche: 1.4

    These numbers represent the amount you’d win for every $1 put at stake. The higher the number, the more you’d win. However, a higher number also indicates that the team is an underdog.

    Therefore, if you bet $100 on the Pittsburgh Penguins, you would receive a payout of $270 if they win. ($100 x 2.70). Keep in mind that this includes your initial stake, so your net profit would be $170.

  3. American Odds

    American odds can be a bit more complicated than the other two, but the most important thing to note is that everything relates to a $100 bet.

    For example, consider these football odds:

    New England Patriots: -775
    Denver Broncos: +450

    In this instance, the bookmaker offered odds of +450 for the Denver Broncos, signifying that they’re the underdog in this game. You would need to risk $100 on the Broncos to make $450 if they win. This would give you a total payout of $550.

    Instead, the negative number indicates that the New England Patriots are the favorite, and so reverse the calculation. In this case, you would need to bet $775 to win $100. Though you’re betting more money, you’re actually making less in profit (initial stake $775 + profit won $100 = $875).

Implied Probability and Odds

Implied probability can be paired with odds, as odds correlate with the chance of a team winning. In the case of gambling, the implied probability is a percentage chance that will predict how likely a team is to win.

Using the American Odds example above, we can calculate how likely each team is to win using these formulas:

Implied Probability = Negative Odds ÷ (Negative Odds + 100) x 100
or
Implied Probability = 100 ÷ (Positive Odds + 100) x 100

For instance, using these formulas, we could determine that the Denver Broncos have an 18% chance of winning [100 ÷ (450 + 100) x 100]. On the other hand, the New England Patriots have an 88% chance of winning the same game [775 ÷ (775 + 100) x 100].

With that in mind, you can use implied probability to clearly outline the chance of your bet being successful.

Final Thoughts

Knowing what odds are and how it works is an important part of making a successful bet. You can even apply these formulas to business or statistics.

Either way, whether you’re trying to show up your friends in Fantasy Football or simply want to make better bets, play it smart by analyzing the odds first!

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Author

Jack Flynn

Jack Flynn is a writer for Zippia. In his professional career he’s written over 100 research papers, articles and blog posts. Some of his most popular published works include his writing about economic terms and research into job classifications. Jack received his BS from Hampshire College.

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