Fixed-odds betting is a form of
wagering against
odds
Odds provide a measure of the likelihood of a particular outcome. They are calculated as the ratio of the number of events that produce that outcome to the number that do not. Odds are commonly used in gambling and statistics.
Odds also have ...
offered by a
bookmaker
A bookmaker, bookie, or turf accountant is an organization or a person that accepts and pays off bets on sporting and other events at agreed-upon odds.
History
The first bookmaker, Ogden, stood at Newmarket in 1795.
Range of events
Bookm ...
or an individual or on a
bet exchange
A betting exchange is a marketplace for customers to bet on the outcome of discrete events. Betting exchanges offer the same opportunities to bet as a bookmaker with a few differences. Gamblers can buy (also known as "back") and sell (also known ...
. It involves betting on an event in which there is no fluctuation on the payout. In Australia, the practice is usually known as "SP betting".
Calculating fixed odds
It is customary with fixed-odds gambling to know the odds at the time of the placement of the wager (the "live price"), but the category also includes wagers whose price is determined only when the race or game starts (the "
starting prices"). It is ideal for bookmakers to price/mark up a book such that the net outcome will always be in their favour: the sum of the probabilities quoted for all possible outcomes will be in excess of 100%. The excess over 100% (or
overround) represents profit to the bookmaker in the event of a balanced/even book. In the more usual case of an imbalanced book, the bookmaker may have to pay out more winnings than what is staked or may earn more than mathematically expected. An imbalanced book may arise since there is no way for a bookmaker to know the true probabilities for the outcome of competitions left to human effort or to predict the bets that will be attracted from others by fixed odds compiled on the basis personal view and knowledge.
With the advent of Internet and
bet exchange
A betting exchange is a marketplace for customers to bet on the outcome of discrete events. Betting exchanges offer the same opportunities to bet as a bookmaker with a few differences. Gamblers can buy (also known as "back") and sell (also known ...
betting, the possibility of fixed-odds
arbitrage
In economics and finance, arbitrage (, ) is the practice of taking advantage of a difference in prices in two or more markets; striking a combination of matching deals to capitalise on the difference, the profit being the difference between t ...
actions and
Dutch book
In gambling, a Dutch book or lock is a set of odds and bets, established by the bookmaker, that ensures that the bookmaker will profit—at the expense of the gamblers—regardless of the outcome of the event (a horse race, for example) on which ...
s against bookmakers and exchanges has expanded significantly. Betting exchanges in particular act like a
stock exchange
A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for t ...
, allowing the odds to be set in the course of trading between individual bettors, usually leading to quoted odds that are reasonably close to the "true odds."
"The best of it"
In making a bet where the expected value is positive, one is said to be getting "the best of it". For example, if one were to bet $1 at 10 to 1 odds (one could win $10) on the outcome of a coin flip, one would be getting "the best of it" and should always make the bet (assuming a rational and risk-neutral attitude with linear
utility curves and have no preferences implying
loss aversion or the like). However, if someone offered odds of 10 to 1 that a card chosen at random from a regular 52 card deck would be the ace of spades, one would be getting "the worst of it" because the chance is only 1 in 52 that the ace will be chosen.
In an entry for ''
L'Encyclopédie'' (the Enlightenment-era "French Encyclopedia"),
Denis Diderot
Denis Diderot (; ; 5 October 171331 July 1784) was a French philosopher, art critic, and writer, best known for serving as co-founder, chief editor, and contributor to the '' Encyclopédie'' along with Jean le Rond d'Alembert. He was a promi ...
cites a similar example in which two players, Player A and Player B, wager over a game of dice that involves rolling two six-sided dice. Player A wins if the dice add up to 12, of which there is only one possible case. Player B wins if the dice fall in any other combination, of which there are 35 possibilities. It is mathematically disadvantageous to make a bet if one gets"the worst of it." Accordingly, for the bet to be "fair," the amount each player could potentially lose or gain from the wager should be adjusted, depending on the odds of their success.
Laying odds
When making a bet in which one must put more at risk than one can win, one is ''
laying the odds''. Rational bettors will do so only if the actual chances of an adverse outcome are low enough that the expected outcome even after deduction of taxes and any
transaction costs
In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companies, and unlike pro ...
is favorable to the person placing the bet. For example, if one bets $1,000 that it will rain tomorrow and can win only $200 but can lose the entire $1,000, one is laying odds that will rain tomorrow. Laying odds is reflected in the
colloquial
Colloquialism (), also called colloquial language, everyday language or general parlance, is the linguistic style used for casual (informal) communication. It is the most common functional style of speech, the idiom normally employed in conve ...
expression "
would dollars to doughnuts" — with which the speaker is expressing a willingness to risk losing something of value in exchange for something worthless, because winning that bet is a certainty.
Lay betting
"Lay betting" is a bet that something will ''not happen'', so "laying $50 on a horse" is betting the horse will ''not'' win. Bookmakers sell bets based on the odds of a specific outcome, but lay betting allows the bettor (in some English-speaking countries, the "punter") to reverse roles with the bookmaker, using odds to sell the opposite outcome to the bookmaker. In this context, "lay" is used in the sense of "layman", i.e., a bet sold by someone who does not sell bets professionally.
Types of odds offered
There are three widely used means of quoting odds:
Fractional odds
Favoured by
bookmaker
A bookmaker, bookie, or turf accountant is an organization or a person that accepts and pays off bets on sporting and other events at agreed-upon odds.
History
The first bookmaker, Ogden, stood at Newmarket in 1795.
Range of events
Bookm ...
s in the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and ...
and
Ireland
Ireland ( ; ga, Éire ; Ulster-Scots: ) is an island in the North Atlantic Ocean, in north-western Europe. It is separated from Great Britain to its east by the North Channel, the Irish Sea, and St George's Channel. Ireland is the s ...
and common in
horse racing
Horse racing is an equestrian performance sport, typically involving two or more horses ridden by jockeys (or sometimes driven without riders) over a set distance for competition. It is one of the most ancient of all sports, as its basic pr ...
, fractional odds quote the net total that will be paid out to the winning bettor relative to the stake. The term "fractional odds" is something of a misnomer, especially when visually reinforced by using a slash (as opposed to, ''e.g.'', a colon or the word "to" or "on") to separate a potential gain from the amount that a bettor must wager in order to receive it upon a win, because the "fraction" in question represents not the odds of winning or even the reciprocal of the odds of winning but rather the fraction (for any odds longer than "even money" or chances of winning less than 50%, an
improper fraction
A fraction (from la, fractus, "broken") represents a part of a whole or, more generally, any number of equal parts. When spoken in everyday English, a fraction describes how many parts of a certain size there are, for example, one-half, eight ...
) of the amount at stake that the upside outcome represents. This fraction may be derived by subtracting 1 from the reciprocal of the chances of winning; for any odds longer than "even money," this fraction will be an
improper one.
[
] Odds of 4:1 ("four-to-one" or less commonly "four-to-one ''against''") would imply that the bettor stands to make a £400 profit on a £100 stake. If the odds are 1:4 (read "one-to-four", or alternatively "four-to-one ''on''" or "four-to-one ''in favor''"), the bettor stands to make £25 on a £100 stake. In either case, ''against'' or ''on'', should he win, the bettor always receives his original stake back, so if the odds are 4:1 the bettor receives a total of £500 (£400 plus the original £100). Odds of 1/1 are known as ''evens'' or ''even money''.
Not all fractional odds are traditionally read using the
lowest common denominator
In mathematics, the lowest common denominator or least common denominator (abbreviated LCD) is the lowest common multiple of the denominators of a set of fractions. It simplifies adding, subtracting, and comparing fractions.
Description
The low ...
. Perhaps most unusual is that odds of 10:3 are read as "one-hundred-to-thirty".
Fractional odds are also known as ''British odds,'' ''UK odds,''
or, in that country, ''traditional odds.''
Decimal odds
Favoured in
Continental Europe
Continental Europe or mainland Europe is the contiguous continent of Europe, excluding its surrounding islands. It can also be referred to ambiguously as the European continent, – which can conversely mean the whole of Europe – and, by ...
,
Australia
Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
,
New Zealand
New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...
and
Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
, decimal odds differ from fractional odds by taking into account that the bettor must first part with their stake to make a bet; the figure quoted, therefore, is the winning amount that would be paid out to the bettor.
Therefore, the decimal odds of an outcome are equivalent to one plus the decimal value of the fractional odds; in the absence of built-in house advantage to cover overhead, profit margins, or (for an illegal enterprise) compensation for the fact that both chances of prosecution and penalties in the event of conviction tend to be higher for bookmakers than for clients, the decimal odds associated with a given outcome would be the decimal expression of the reciprocal of what the offering party assesses to be the outcome's chance of occurring.
Thus, even odds 1/1 are quoted in decimal odds as 2. The 4/1 fractional odds discussed above are quoted as 5, while the 1/4 odds are quoted as 1.25. It is considered to be ideal for
parlay betting because the odds to be paid out are simply the product of the odds for each outcome wagered on.
Decimal odds are also known as ''European odds'', ''digital odds'' or ''continental odds'' and tend to be favoured by
betting exchanges
Gambling (also known as betting or gaming) is the wagering of something of value ("the stakes") on a random event with the intent of winning something else of value, where instances of strategy are discounted. Gambling thus requires three eleme ...
because they are the easiest to work with for trading, in this case the purchase and sale of upside and downside risk.
Moneyline odds
Moneyline odds are favoured by
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
bookmakers and as such are sometimes called ''American Odds''.
There are two possibilities: the figure quote can be either positive or negative. Moneyline refers to odds on the straight-up outcome of a game with no consideration to a
point spread
Spread betting is any of various types of wagering on the outcome of an event where the pay-off is based on the accuracy of the wager, rather than a simple "win or lose" outcome, such as fixed-odds (or money-line) betting or parimutuel betting.
...
.
;Positive figures
:If the figure quoted is positive, the odds are quoting how much money will be won on a $100 wager (done if the odds are better than even). Fractional odds of 4/1 would be quoted as +400 while fractional odds of 1/4 cannot be quoted as a positive figure.
;Negative figures
:If the figure quoted is negative, the moneyline odds are quoting how much money must be wagered to win $100 (this is done if the odds are worse than even). Fractional odds of 1/4 would be quoted as −400 while fractional odds of 4/1 cannot be quoted as a negative figure.
;Even odds
:Even odds are quoted as +100 or −100. Some but not all bookmakers display the positive symbol.
Odds conversion
To convert fractional odds to decimal, take the fractional number, convert it to decimal by doing the division, and then add 1. For example, the 4-to-1 fractional odds shown above is the same as 5 in decimal odds, while 1-to-4 would be quoted as 1.25.
The method for converting moneyline to decimal odds depends on whether the moneyline value is positive or negative. If the moneyline is positive, it is divided by 100 and add 1. Thus, +400 moneyline is the same as 5.0 in decimal odds. If the moneyline is negative, 100 is divided by the absolute moneyline amount (the minus signed is removed), and then 1 is added. For example, −400 moneyline is 100/400 + 1, or 1.25, in decimal odds.
See also
*
Parimutuel betting
Parimutuel betting or pool betting is a betting system in which all bets of a particular type are placed together in a pool; taxes and the "house-take" or "vigorish" are deducted, and payoff odds are calculated by sharing the pool among all winnin ...
*
Full cover bet A full cover bet is any bet which consists of all available multiple bets over a given number of selections.
Examples of full cover bets:
* '' Trixie'' - three selections
* ''Yankee'' - four selections
* '' Canadian or Super Yankee'' - five selecti ...
*
Even money
Even money is a wagering Proposition bet, proposition with even odds - the bettor stands to lose or win the same amount of money. Beyond gambling, ''even money'' can mean an event whose occurrence is about as likely to occur as not. Even money is ...
*
Asian handicap
*
Betting strategy
A betting strategy (also known as betting system) is a structured approach to gambling, in the attempt to produce a profit. To be successful, the system must change the house edge into a player advantage — which is impossible for pure games of pr ...
*
Statistical association football predictions
*
Gambler's fallacy
*
Fixed odds betting terminal
A fixed odds betting terminal (FOBT, sometimes pronounced "fob-tee") is a type of electronic slot machine normally found in betting shops in the United Kingdom and introduced in 1999. The terminals allow players to bet on the outcome of various ...
*
Sports betting
Sports betting is the activity of predicting sports results and placing a wager on the outcome. The frequency of sports bet upon varies by culture, with the vast majority of bets being placed on association football, American football, basket ...
References
{{Reflist
Sports betting
Wagering
Gambling terminology