How do decimal odds work?
Understanding Decimal Odds
Odds can be expressed in a number of different ways in sports betting. At BetDEX we have chosen to represent odds (also referred to as prices) using decimals.
The decimal odds number represents the amount one wins for every $1 wagered. For decimal odds, the number represents the total payout rather than the profit. In other words, your stake is already included in the decimal number (no need to add back your stake), which makes its total payout calculation easier.
The total (potential) return can be calculated as:
where: S is the Stake D is the Decimal Odds Tp is the Total Profit
Backing with Decimal Odds
Let's take a look at an example to understand how backing with decimal odds works:
Backing Nottingham Forest in the example above with $10 would mean
$10 * 12.5 = $125
So, with a stake of $10 and with odds of 12.5, the total return to the user would be $125.
If we look at smaller odds to back Liverpool then we can see the following:
$10 * 1.34 = $13.40
The greater the odds, the higher the potential returns but also, the less likely the bet will be successful.
Laying with Decimal Odds
If the user was to lay Nottingham Forest for a stake of $10 instead of backing them the calculation the same but working out what a lay bet costs is a little different.
As discussed in a previous section when a user lays an outcome they need to post the profits that a backer can win. To calculate this we use the same formula as above and then deduct the backer's stake to work out how much a layer needs to post to make this trade:
$10 * 12.5 = $125
Then, deducting the backer's stake we have:
$125 - $10 = $115
The layer must pay $115 to make this trade. If Nottingham Forest win, the layer loses this amount but if they lose the layer wins $10.
The Relationship between Decimal Odds and Probability
Decimal odds can be easily converted into probabilities by using the following formula
where:
D is the decimal odd P is the probability
If we wanted to convert the decimal odds of Nottingham Forest into a probability we would do the following calculation:
1 / 12.5 = 0.08
To express this as a percentage we can multiply the probability by 100:
0.08 * 100 = 8%
In other words, at the current prices, Nottingham Forest have an 8% chance of beating Liverpool.
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