How are odds calculated? explanation and examples

Have you always wondered how bet odds actually come about? Especially for beginners or beginners in sports betting, it is important to understand how betting odds work. But even as an experienced tipster, he can help you learn how bookmakers calculate their odds. Find out everything you need to know about it below.

Basic betting principle

First of all, betting odds are based on mathematical considerations or calculations. The concept uses the principle of probability.

Different formats are used for specifying betting odds depending on the betting provider and, above all, on the respective country. In Asia, decimal odds (eg 2.50) are mostly used to indicate odds.

But what does a certain probability really mean? From the bettor's point of view, betting odds essentially provide two pieces of information:

  • Indicates how much money you will receive if you win
  • This gives an idea of ​​how likely the event is to occur.
  • To illustrate this, we use our 2.50 odds example below.

Calculate profit

The profit from a bet always depends on two factors and is calculated using the following formula:

  • Profit = Stake x Stake Multiplier.
  • With a bet of 20 euros and a bet odd of 2.50, the possible profit is 50 euros.

From the point of view of the teller, you should ask yourself one important question before placing a bet:

  • How likely is event X to occur?

Because this question is ultimately also the basis for determining betting odds by sports betting providers.

Calculate Probability

The quoted betting odds also indicate this. As mentioned above, bookmakers determine their betting odds on based on probabilities. This means that betting providers calculate or determine the appropriate probability for each possible betting option they offer.

For example, betting on football takes into account factors such as the appropriate form of the teams, the overall quality of the squad, the venue, and more. analyzed and used for evaluation.

The probabilities are then converted into betting odds. This is done using the following formula:

  • Betting odds = 100/probability of event X.

For our 2.50 odds example, we can calculate the approximate probability that the bet provider used as the basis for event X:

  • 2.50 = 100/probability of event X
  • Probability of event X = 100/2.50 in percent
  • probability = 40%

Essentially, this leads to the well-known principle that the higher the odds, the less likely your bet will work.

Fair betting odds vs real betting odds

In addition, it is important to note that when specifying the actual odds of bets, in addition to the probability of various events, the amount of profit is also taken into account.

From the bookmaker's point of view, this is a guarantee that you will not incur any losses in the long run. In this regard, a distinction is made between fair and real betting odds.

As an example, let's take a fictitious "3 way" bet on the match between Schalke and Borussia Dortmund. There are 3 betting options in total: Schalke win, draw, Dortmund win.

As per the above explanation, for each of these events, the probability is determined and then the corresponding betting odds are calculated (the sum of the probabilities must be 100%):

  • Schalke win: 100/45 = 2.22
  • Draw: 100/20 = 5.00
  • Dortmund win = 100/35 = 2.86

Now we are talking about fair betting odds. What does it mean? Assume that all the bets made in the game have been distributed among the three bets according to their respective probabilities. Then all bets from losing bets would have to be paid out to the winners and the bookies would not make a profit.
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