We’ve all placed a bet at bookies – it’s a simple process where you place money on a favorite and wait for the outcome. However, have you ever wondered how odds work? Who makes them? Betting odds tell you how likely something is to happen in a match. Of course, they also tell you how much money you can win. It’s all about probabilities – betting odds show you how likely is the favorite or underdog to win in match betting or in general, how likely is an event to happen.

Think of it as rolling a dice. Since there are 6 possible outcomes in this case, picking one means there’s a 16.7% chance of you hitting the right number. Odds work in a similar fashion, with bookies displaying them in fractional, decimal or American format.

Bookies calculate the probabilities (odds) after a detailed inspection of statistics, form, and history. Of course, they also add their own opinions in the mix and the margin as well. Also known as vig, the margin is calculated into the odds and ensures profit for the bookie while reflecting the real probability of the outcome.

To calculate odds, bookies first form them and then subtract the margin. If the real odds are 2/1, a bookie will subtract their margin to form the odds. In this way, they’re favorable for customers and the bookie as well. You can’t find a bookie without a vig – after all, operators are in it to make a profit.

Of course, probability is only one of the factors bookies take into account when they calculate odds. They actually set odds on how likely punters will wager on each outcome rather than real probabilities. The margins are lowest for H2H (head-to-head) markets and highest on exotic bets.

A widely popular type of odds in Europe, decimal odds are easiest to understand. The potential payout is calculated by a formula: stake x decimal odds. For example, if you bet €100 on odds of 1.50, you can earn €150. The original stake is always included in the potential winnings. The breakeven odds or decimal odds are 2.0.

Fractional odds, also known as UK odds, are popular in Great Britain. Initially, this format was used in horse racing, yet became popular for all sports in the UK later. Although a bit more complicated to understand, they essentially work like decimal odds. The number of the right is the denominator while the one on the left is the numerator. To calculate the potential return, you’ll need to divide your stake to the denominator value. Add the original stake into the mix and you’ll calculate the winnings. For example, a €100 bet on odds of 1/2 means you’ll earn €150 (100/2=50 + 100 = 150).

The most complicated odds to understand, American odds are only popular in the USA. Commonly used on betting lines in American football and spread betting as well, American odds are known as moneyline odds and represented with a + or – before the number. The higher the absolute value of the number, the higher the chances that pick wins. The baseline for American odds is a $100 wager. For underdogs, you have to bet $100 to win the provided odds. For example, betting on a +500 underdog means you need to place a $100 bet to make a profit of 350. Placing the bet on a +350 favorite means you need to make a $350 bet to win a profit of $100.

Also known as live odds, in-play odds are odds for live betting on a potential outcome. They are updated pretty frequently (every ~15 seconds on average) depending on the way the event goes. Live betting is one of the latest and greatest achievements of the betting industry that has revolutionized the way punters bet on matches and events.

There’s no bookie that has consistently great odds. In order to get the best value on your bets, you’ll need to scan the market and compare operators and odds. Find what suits you best and always look for the best deal in order to win solid sums of money.