Odds in betting are the probability or likelihood of an event to occur. In betting, bookmakers try to set the odds by deciding the true possibility of an event to occur. 

Setting betting odds is among the complicated procedures where bookmakers look at a range of factors from statistics, historical data and player availability. Researching through all of this enables them to determine the odds for an event. 

How do betting odds work?

Betting odds, used by bookmakers, are the likelihood of an event to occur. They are represented as fractions (2/1) or in decimals (2.0). Odds are also represented with a plus or minus sign in front of the integer value. 

The representation enables punters in understanding the true possibility of an event.  

How do bookmakers set odds?

Bookmakers set odds based on the possibility of an event and their profit. 

For example, consider a cricket match between India and Australia where the possibility of India winning the match is 70% and Australia winning the match is 30%. If the margin of profit of the sportsbook is 5%, then the implied odds for India will be 75% and for Australia will be 35%. 

How do bookmakers calculate odds?

Bookmakers make use of odd compilers and analytics that help them calculate the odds. However, with time, the process of calculating odds has evolved. In modern-day, betting odds are formulated with the help of analysis and database based on a team’s past results, and comparison with the opponents. 

Once the numbers are set, they are run through various mathematical models where the real-time market odds are finally established. 

Why do betting odds change? 

Betting odds keep changing due to irregularities in the patterns of betting. Since there is no fixed pattern of betting amongst punters, bookmakers need to keep adjusting the odds depending on the change.

Odds for an event also keep on changing based on a number of other factors like changes in a team’s combination, injuries and the weather forecast. 

Conversely, betting odds also change from time to time based on the amount of money moving around in the market. This is primarily the way bookmakers earn money. For example, if an underdog team is gaining a lot of interest amongst the punters, the bookmakers reduce the odds and protect their margin.

How do bookmakers earn money? 

Bookmakers earn money by first setting the right bet prices and then balancing the estimated bet. Thus, they set the odds in such a way that they gain profits from the placed bets. 

Vigorish or vig is the fee charged by the bookmaker while accepting bets from the punters. In this way, bookmakers try and balance the bets to make profits from the end result. 

For example, consider a football match between Switzerland and France. The match odds for England to win are 1.6, 3 for a draw and 4 for Switzerland to win. 

Therefore, the implied probability of odds will be as follows, 

England win 1/1.6 = 63%

Switzerland win 1/4 = 25% 

Draw 1/3 = 33%

Here the sum of all the probabilities is 121%, meaning for every INR 100 that the bookmaker receives from the bets, he earns a commission of INR 21.