1. Understanding betting odds as a function of probability
Understanding the relationship between probability and the odds of an event happening is key to making smart bets. The odds of an event happening are how much you have to bet in order to win $1.00, so if you bet $1.00 on an event with odds of 2 to 1, you get $2.00 back for every $1.00 you bet. The likelihood of an event is the same as the odds: How likely is it that the event will happen? The reason it’s important is that odds must be compared with other odds in order to calculate the relative probability that an event will happen. These other odds will, of course, all be relevant when choosing a time to bet, so it’s good to know how to order winning odds.
In any event, what we’re really asking here is: What are the odds that an event will happen given that I have no other options? This means you can either bet a given amount and lose or bet other amounts and only win a fraction (say, 1/10). There are two different types of bets:
Bets Itself – Hence a bet with a specific amount of money on an event you cannot predict with certainty. This is good for when you’re throwing a dart and hoping it will work out. But if the odds are on your side, you should probably be more confident in your bet than betting itself. Usually, this should be at least 10% larger than the amount you bet.
Prediction Versus Odds – Betting something and then having it happen is called prediction. But even if it happens to be right and you pocket the winnings, you’re still losing money. A better bet is to beat the odds and then get paid a fixed amount when your prediction comes true. What’s the difference? Well, you only have to guess correctly about one out of ten times to be making money. For example, if your time frame is 1 year and the odds are 2 to 1 that it will happen, your chance of success is only 70%.
2. Understanding betting odds as a function of risk
To understand odds, you have to begin with a basic understanding of probability. In the simplest sense, probability is a way of describing the frequency of a particular outcome. If I am playing black against white, the likelihood that I win the game is either 50% or 0.5. When I am playing football, the likelihood that we score twice is either 50% or 0.5. The higher the frequency of an event, the higher its probability. And the lower the frequency of the event, the lower its probability.
Betting odds are a ratio of two variables: the first is how much money you are paying to win (i.e. the implied risk), and the second is the chance of winning the game. As an example, say the implied risk for gambling is 2% of your bet or $2,000. The chance you’ll win the game is 50% ($50,000/2 = 50%).
= ($50,000/2) x (50% / 2)
When you bet $50,000 on a horse, you are betting that the horse will win $50,000. Since you know that in 50 years, the horse will win 20 times, the implied risk is 20% ($50,000/2 = 20%). This means that a $100 wagered bet will earn you $20,000 over the long term. Since you know the chance of the horse winning is 20% (50/2), you can subtract the 20% to calculate your odds, which are associated with the intrinsic likelihood.
3. Thinking about what you know and using that to make your bets
When you’re making a bet, you’re putting your money where your mouth is, so to speak. But if you don’t know what you’re talking about, you’re putting your money where your mouth isn’t. That’s not a good bet. Ever wondered what betting odds are? Here’s a quick rundown: If there is a 50 percent chance of X happening, there’s a 50 percent chance of Y happening.
Betting odds are based on probability. So, while you can guarantee that two things will happen next year, it’s still up in the air as to which one they will be. Odds do factor in previous results, but their main focus is on the future.
Every now and then we like to bet on something that will never come to pass, regardless of how good our chances are. We like the fantasy of winning a World Cup or a Super Bowl. What we fail to consider is that the odds are against us.
Whatever you think is and isn’t a win, in the end, is still a loss. It’s a mathematical certainty that nothing will ever come to pass, regardless of how many bets we place.
For this reason, when making a bet, you should always add one more hundred to your odds. Say that you place a $100 bet on a horse to win the Kentucky Derby at 6-1 odds. At the time of the race, that would be a $200 gain. However, if you knew that 8-1 odds would decide the horse to win, you’d have simply made a $400 profit.
Last but not the least, never bet on something that you can’t afford to lose. For example, if your goal for the day is to win a bet with a friend at the casino, and you bet $100 that you win, even if you lose, you have still accomplished something. You’ve made money.
Betting odds are all about risk, probability, and how much you want to win or lose on a bet. In general, the higher the risk, the higher the reward. That means there’s a good chance you’ll win more money betting on long-term trends as opposed to betting on short-term market fluctuations. Betting is part of many sports and events, both as an estimate of a team or player’s performance and gambling. Some schedules define the payout for such bets and there’s no standard for the odds offered for each such bet. And because things don’t always work out, betting on what could have happened doesn’t hurt! If the season is over, then it is a good time to consider revisions and changes. Maybe the betting slate isn’t as spelt out as ours and everything is negotiable. So please don’t be deterred from your own “bets” by those who say, “The odds are too far out.”