Betting Odds – How They’re Created and How Sports Betting Odds Are Calculated

Betting odds reflect the probability of a particular sporting event occurring. The lower the odds, the more likely the bookmaker considers the outcome to be – and the lower the payout in case of a win.

Odds Formats at a Glance

Depending on the region, odds are displayed differently. In German-speaking countries, the decimal odds format is common, in the United Kingdom fractional odds, and in North America American odds:

All three examples describe exactly the same odds – a 50% probability with an even-money payout (stake back plus winnings equal to the stake). We’ll stick with the decimal odds format common in Germany going forward.

Decimal odds always start above 1.0. If the odds were exactly 1.0, there would be no business model left for the bookmaker – in case of a win, you’d simply get your stake back with no profit at all, while still carrying the full risk of loss. That’s why reputable bookmakers practically never display odds of exactly 1.0.

From Probability to Odds

Betting beginners often think more in terms of probabilities than odds – for example: “I’m 70% sure that Team A will win.” The matching odds can easily be calculated:

Note: In practice, with an actual probability of 70%, you’ll hardly ever get odds of 1.43 or higher. The reason: bookmakers are service providers and have to make a living from a kind of commission, which they retain via the payout ratio (this indicates how much of the total winnings the respective bookmaker pays back out for a betting market). With a very high payout ratio of around 97–99%, you occasionally get close to the fair odds, but generally the bookmaker’s markup is somewhat higher. This is referred to as a “balanced book”.

How Are Odds Created?

Quite a lot happens between the opening of a betting market (the first listing of a matchup) and actual kickoff. The following factors influence how odds are formed:

• Supply and demand: As in any market, customer betting behavior also moves the odds – especially visible on betting exchanges like Smarkets, where users offer odds directly against each other (back/lay) until a stable price settles.
• Statistical data: Current form, league standing, home/away record, and head-to-head matchups feed directly into the calculation.
• Injuries and suspensions: If a key player is ruled out, the odds on their team winning rise in the short term at practically all bookmakers.
• External conditions: Pitch condition, venue, referee, and weather conditions can significantly influence individual side markets (e.g. number of goals).

Large bookmakers often don’t have time to price every market themselves via supply and demand. That’s why many smaller providers take their cue from so-called reference odds set by larger market leaders such as Pinnacle or the Asian bookmaker SBOBet, who are known for especially sharply calculated odds.

Who Has the Best Odds?

That always depends on the particular betting event and betting option – no bookmaker can always hold the best odds for every betting option. A good indicator is the payout ratio mentioned earlier: the closer it is to 100%, the more the bookmaker pays back out in winnings. Values between 95 and 99% are considered very attractive. Since the payout ratios and conditions of individual providers change constantly, it’s worth checking our current bookmaker comparison before every bet – there you can see up to date which provider leads on which betting market.

Extraordinary Betting Odds: Two Historic Records

How realistic extraordinarily high odds can be is best illustrated by two of the biggest sporting sensations of recent decades:

For a €1 stake on Leicester City, you’d have received €5,001 back at the end of the 2016 season. Greece’s surprise triumph at Euro 2004 in Portugal was, with odds of around 150/1, also a sensation, but compared to Leicester it was “only” a big underdog win.

Political Betting and Odds

Even outside of sport, bookmakers rely heavily on poll figures when setting odds – with mixed success. Both the Brexit referendum and the Austrian presidential election ended differently in 2016 than the odds from most bookmakers had suggested beforehand. The reason: for political events, bookmakers can hardly rely on historical results or statistics and must largely rely on current polls – which are themselves nothing more than estimated probabilities and can be just as wrong as any other forecast.

Conclusion

At its core, a betting odds figure is nothing more than a probability estimate expressed as a number, minus the bookmaker’s profit margin. Anyone who understands how odds are created and what causes them to shift in the short term will find it easier to spot attractive bets – and will also know why it’s almost always worth checking several providers.