How to Read Betting Odds

There are three main types of betting odds: American, Decimal, and Fractional. American odds tend to be US-centric, kind of like the Imperial System. Decimal odds are the common denomination in Europe and the rest of the betting world. 

Fractional odds tend to be used for racing, particularly horse or greyhound racing. Even in the US, fractional odds are still used at racetracks and racebooks. 

How Bookies Make Money

Bookmakers make money by setting odds that give them a built-in advantage, ensuring profitability regardless of the outcome of a sporting event. This advantage is crucial for maintaining a sustainable business in the world of sports betting. 

What is Vigorish?

Vigorish, often called “vig” or “juice,” is the fee bookmakers charge for accepting a bet. It’s essentially the bookmaker’s cut or commission, designed to guarantee a profit over the long run. The vig is embedded in the odds and that is why the payout for a winning bet is slightly less than what it would be if the odds were truly even.

For example, in a standard point spread bet, both sides might be listed at -110 odds. This means you have to bet $110 to win $100. The extra $10 represents the vigorish, ensuring that the bookmaker profits as long as the betting action is balanced. Even if the action isn’t perfectly balanced, the vigorish helps cushion any potential losses for the bookmaker.

We’ll talk more about calculating the vig later in the article, and we’ll show you how you can use the vig percentage to make smarter wagers. 

How to Convert Betting Odds to Probability

Learning how to read odds is only the beginning of the funnel. As you become more advanced, you’ll need to learn how to calculate probability using the betting odds provided by sportsbooks. 

But first, let’s discuss the difference between actual probability and implied probability. 

Calculating Implied Probability

There are a few different formulas you can use to calculate the implied probability of a wager. Here’s a look:

Applying Implied Probability to Find the Vigorish

Let’s assume we have a two-outcome event, such as a football game, with the following American odds:

• Team A: -150
• Team B: +200

First, we convert these odds into implied probabilities:

• Implied Probability for Team A (odds of -150):
  • Probability (A)= 150 / (150 +100) X 100 = 0.60 or 60%
• Implied Probability for Team B (odds of +200):
  • Probability (B)=100 / (200+100) X 100 = 0.3333 or 33.33%

Now, sum the implied probabilities of all possible outcomes:

• Total Implied Probability =Probability (A) + Probability (B) =0.60+0.3333 =0.9333 or 93.33%

To find the vig:

• Vig=Total Implied Probability−1.00 =0.9333−1.00=−0.0667 ≈6.67%

So, in this example, the bookmaker’s vig is approximately 6.67%.

Knowing the percentage of vigorish on a wager can help you decide whether it’s worth your while or not. Some hard-core sports bettors won’t bet on a wager with 10% vig or higher. The higher the vig, the more money the bookie is making off your wager. 

How to Put Implied Probability and Vig Into Practice

Once you’ve calculated the implied probability and vig for a few wagers, it becomes like second nature. You’ll start to memorize the stats for each line, and eventually, you’ll be able to look at a moneyline and immediately know whether it’s a high-vig wager or not. 

One of the best ways you can use implied probability is with futures wagers, like props on which team will win the F1 Constructor’s Championship. 

Using implied probability, we know that BetUS thinks:

• Red Bull has a 45% chance of winning
• McLaren has a 63% chance of winning
• Mercedes and Ferrari both have a 2.94% chance of winning. 

It’s clear to us then that McLaren is the favorite for this event, but not by much. Red Bull’s 45% chance of winning might indicate underdog value here. 

Using implied probability in this way can help you identify which players/teams are heavily favored, and which might be close runners up. 

Advanced Betting Odds Concepts

Once you have developed your skills at determining probability and calculating vig, you should have a good grasp of how sports betting works. However, you can always take your skills a bit further. Here are a few advanced betting concepts that can take your skills to the next level:

Use Overround to Identify Inflated Prices

Where vigorish represents the expected profit margin for the sportsbook, assuming that bettors are placing smart, researched wagers. 

The overround is “the cumulative implied probability across all prices or odds of every available proposition within a market.” But what does this mean?

People often confuse vig and overround for the same thing, when in fact, they are two different pieces of information that are derived from one another. You can calculate the overround by using this formula:

• Formula: Overround = Vigorish / (1 – Vigorish) X 100

Let’s take the example we used above to determine the overround on the odds for Team A (-150) and Team B (+200). We determined that the vigorish was 6.67%. 

• Example: 0.0667 / (1 – 0.0667) X 100 = 7.14%

As you can see, the overround is higher than the vig, indicating that the bookmaker has cooked a higher margin into the odds than they expect to get out of it. Think of the overround as a kind of double-layer insurance for the bookie. 

How can you use the overround to find better wagers? Here are some core takeaways:

• A high overround indicates that the odds might not be as competitive. Compare with the overround on the same lines at other sportsbooks. 
• Vig is the “tax” you pay to wager and is unavoidable. You should aim to find a low vig and a low overround. 

Understanding Market Efficiency Theory

The Market Efficiency Theory in the context of sports betting refers to the idea that the odds offered by bookmakers accurately reflect the true probabilities of the outcomes of a given event. This theory is grounded in the broader concept of efficient markets, which posits that all available information is already reflected in the prices (or odds) offered, making it difficult to consistently achieve returns above the market average.

For a moment, let’s consider that MET is a reality. If that were the case and the market was fully efficient, no bettor could consistently gain an advantage by using information that is already widely known and reflected in the odds. 

Any edge a bettor might find is likely to be small and quickly corrected by the market. For example, if a bookmaker posts odds that don’t fully account for a key player’s injury, sharp bettors might exploit this, but the market will quickly adjust the odds as information spreads. 

If the market were truly efficient, there would be no incentive to wager on sports. Only niche sports with limited coverage might offer some value, and that’s not fun for anyone. 

Thankfully, we live in a world where Market Efficiency Theory is not a reality. But, by considering MET as a real threat, we come to understand the value of implied probability over true probability. Recency bias, bettor and public opinions, and human error are all market inefficiencies you as a bettor should watch out for. 

One of the best examples of market inefficiency is live betting. Let’s say you’re in the stands watching the Pittsburgh Pirates play the Yankees, and you have your mobile sportsbook on your phone. 

If you’re watching the game events as they unfold, you have a slight advantage over the sportsbook if you’re betting live. Their betting odds and algorithms are based on statistics uploaded to databases. You can expect a delay between the events in the game and the updated odds. While the delay is slight (usually between 30-60 seconds), it’s just one example of market inefficiency. 

Hedging, Middling, and Arbitrage

Hedging, middling, and arbitrage are advanced betting strategies that experienced sports bettors use to manage risk, lock in profits, or take advantage of discrepancies in the betting market. Here’s a detailed explanation of each:

Make Better Wagers When You Have Better Data

Once you work with implied probability, the vig, and overround enough, handling that information becomes like second nature. 

But, if you want to get closer to betting with actual probability than simply relying on the data that sportsbooks provide, you need to get better information. 

One of the best ways to do that is to rely on a handicapper. They provide a series of picks, each with a prescribed value and potential return rate. These picks have been meticulously crafted using game, team, and player statistics, and have been compared to sports betting site odds for accuracy. 

As a beginner or intermediate bettor, our handicappers can help you boost your bankroll with some targeted winning wagers. As an advanced punter, you can see what lines we’re betting along and make inferences on other games/markets. To find out more about our handicapping services, sign up for a free account today.