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Thursday, March 26, 2009

Explaining the odds

Previously I talked about the bets I had placed.  Today, I will explain the odds which determine the return from each bet.

For the purpose of this experiment I will be using decimal odds, rather than the fractional odds most people are perhaps more familiar with.

Fractional Odds
For anyone who has seen horse racing on TV or been in a betting shop this is how you will most likely be familiar with odds being displayed.  Lets look at a few of examples.

2/1 – This means that for each £1 you bet, the bookmaker will give you £2 if you win plus your £1 stake. So a win here would give you £3 total return.

5/4 – For each £4 you bet, the bookmaker will give you £5 plus your stake.  A £1 bet @ 5/4 would give a total return of £2.25.

1/5 – For each £5 you bet, the book maker will give you £1 plus your stake. A £1 bet @ 1/5 would give a total return of £1.20.

Evens is the same a odds of 1/1

So what ever your odds you can calculate your total return in the following way:

Total Return = (Stake x Odds)+Stake
N.B. Odds it top number divided by bottom number, e.g. 2/1 = 2 divided by 1

Decimal Odds
This is the way odds are more commonly displayed with online bookmakers so is the method I will be using for this experiment.  It is probably easier to understand too.

Quite simply, you calculate your return by multiplying the odds by the stake.  This gives you the total return including the stake.  In decimal odds, 2 is the same as evens.  Here are the few examples.

4.2 – For a £1 bet at these odds your total return would be £4.20.

1.05 - (This was the odds for the settled bet in the last post). A £1 bet would return £1.05.

Finally, it is also worth remembering that your stake is at risk for every bet you make.  So if you stake £1 in a bet, you risking losing that £1.

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