Internet betting basics

Forms of betting

The most popular form of betting is fixed odds betting, where the return is fixed at the odds at which the bet is accepted. Other forms of betting are:

Totalisator or Tote, where all the bets are pooled and the pool is shared out among those who win, less a deduction.

Index or spread betting, which is a form derived from financial markets, where bets are placed on a "spread" of numbers related to a particular event. Returns are calculated in proportion to how right or wrong the punter is, and consequently can lead to huge winnings or losses.

The bet

A bet is an agreement between two parties that the one who has made an incorrect prediction about an uncertain outcome will forfeit something stipulated to the other. In online betting, a bet is a pledge of money that a certain outcome will occur.

The bookmaker

Punters can place their fixed odds bets with a bookmaker or on a betting exchange.

The bookmaker is an individual or company that makes a business from taking bets. In betting with a bookmaker the punter is said to place a bet and the bookmaker is said to take a bet.

On a betting exchange, punters bet against other punters. Punters can choose to act like bookmakers, offering odds on events for others to bet on, or to place bets on events where others have offered the odds.

The odds

Odds are numbers used to calculate how much a punter can win at a given stake for a particular outcome on any given event. It is a common belief that odds offered on any particolar outcome represent the true probability or likelihood of that outcome occurring, but it is a misapprehension.

Punters should consider first that bookmakers employ odds compilers which operate indipendently of each other, therefore odds sets can vary dramatically. Second, as bookmakers need to make a profit, they set an overround, dropping the estimated probabilities for all the different outcomes to pay out in winnings less than what they retain in stakes. At this point the odds are the bookmaker's view of the chance of a selection to win, adjusted to include its profit.

Once odds are offered to the market, bookies take into account the amount of money staked on each outcome. The odds are then changed in response to where the money is going (how people are betting). In a situation where a lot of people bet on a particular team, and the bookies stand to lose a lot of money if it wins, the bookmakers will lower the odds on that team to discourage people from backing it. At the same time, they will raise the odds on the other team to motivate punters to put money on it. Consequently, the odds have ceased to represent the bookmaker's view of the chance of a selection to win, and have become a reflection of the market (what people are betting on).

Odds formats

The odds can be rendered in one of three ways, but with online bookmakers, punters have the possibility to choose the format they like.

Decimal format (European style), the most common one. It shows how much money will be returned from a stake of 1 unit.

Example:

stake 100€ at 1.80

payout 100*1.80=180€

Fraction format (UK style), popular with UK bookmakers. It shows how much profit will be given to a stake of 1 unit. It is very easy to convert UK odds to decimal odds. All you have to do is add 1 to the UK odds and you will get the decimal version of the odds. That is also how you will calculate payout.

Example:

stake 100€ at 4/5

payout 100€*(1+4/5)=180€

American format (US style), odds are either negative or positive.

The negative odds show how much money to stake to win 100 unit. To calculate the payout you need to use the following formula: Stake*(1+100/US odds).

Example:

stake 100€ at -125

payout 100€*(1+100/125)=180€

The positive odds show how much profit will be given to a stake of 100 unit. If your stake is 100€, then it is easy to calculate the winnings. If a team is priced at +500, you will get 500€ from a stake of 100€. To calculate the payout with a different stake you need to use the following formula: Stake*(1+US odds/100).

Example:

stake 50€ at +250

payout 50€*(1+250/100)=175€

Occasionally for a horse race you might see the words SP, instead of numbers representing odds. SP stands for Starting Price and is an exception to the general rule of fixed odds. Starting Price is calculated after the start of the race and is an average price determined by racecourse officials using the prices shown by on-course bookmakers. When you back a horse using a starting price, the bookmaker cannot tell you what the exact odds are going to be and you are agreeing to whatever the odds will be at the start of the race.