January 12, 2012


ODDS – The Price of Probabilities!

Today we’re going to talk about odds. What are odds?

In basic terms, and from the gambler’s point of view, it is the value that Bookmakers pay out for each euro bet on a determined event.

To be precise, and from the perspective of the Bookmaker, odds are the price offered for a determined event (for example, if a certain team wins, draws or loses), based on this probability and divided by the probability of this not happening.

Let’s look at this in simple terms. On average, Bookmakers are “selling” Porto as champions of the Portuguese League 2011/2012 with odds of 1.50. What does this mean?

TABLE – Football – Portugal – Super League

This means that Bookmakers offer 66.6% probability that Porto will be league champions next season!

In Mathematical terms it is very easy to calculate these percentages: simply divide 1 by the odds and then multiply by 100.

We can see that the odds on Benfica winning the league are 3.00, and so by using the aforementioned equation, we reach the conclusion that Bookmakers are offering 33.3% probability that Benfica will be league champions.

How to recognise “value” odds (a Value bet)?

So what is a value odd? Simply speaking, it is a odd that represents a probability inferior to the odds we credit. Going back to the earlier example, if after studying the league we reach the conclusion that Porto has, for example, 80% probability, then odds of 1.50 are of great value because they should only be 1.25.

One final point – my personal opinion and only repeating what I’ve been saying for a long time, I believe that the higher the odds, the better…

This is highly debatable, because lots of people say that odds of 1.25 are better than any long-term deposit, but I reply that in the long term, in the majority of cases, this isn’t true because for me to make profit in the long run with average odds of 1.25 I can only get 1 bet wrong from each 6 bets I place at odds of 1.25. On the other hand, with odds of 2,10, I can get 1 of each 2 bets I place wrong and still make money.

Normally, the lower the odds the greater the tendency of most gamblers to place increasingly larger sums of money, reaching the point where sometimes gamblers bet everything on odds of 1.01% because only then do they feel they’ll make “visible” profit.

Normally with odds of 1.01 you’ll almost always win, but if you lose once, you lose everything.

I recommend searching for the “Monty Hall Problem” so you learn a bit more about probabilities and statistics.

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