How Betting Odds Work: Decimal, Fractional and American Formats Explained
Odds do two things: they reflect the probability that a bookmaker has assigned to an outcome occurring, and they determine the payout that will be handed out to any bettor who correctly picks that outcome. This guide covers all three formats used worldwide, plus implied probability, overround, and the differences between fixed and tote odds.
Complete odds guide
6 minute read
3 odds formats covered
1 What Betting Odds Actually Tell You
Betting odds contain two separate pieces of information: the chance that a specific outcome will occur, and the amount of money that will be paid out to a bettor if that outcome is the one to happen.
The more likely an outcome, the lower the odds and the smaller the payout. A team that is likely to win will have odds of, for instance, 1.25, whereas a team that is more likely to lose will have odds of 4.50. The underdog is offered higher odds because the bookmaker considers that outcome less likely to occur.
All three odds formats used around the world have the same implications for bettors - they all represent the same odds but in a different format. The payout will be the same, despite the differences in how odds are written.
2 Decimal Odds - Australia's Standard Format
Most Australian bookmakers use decimal odds as their default odds format for all available betting markets. Decimal odds represent the total return that a bettor will receive on a $1 wager.
Reading decimal odds
At odds of 2.50, a $1 wager will return $2.50. On a $10 bet: $10 x 2.50 = $25 returned to the bettor, which includes their $10 stake and $15 profit.
Example: $20 x 3.00 = $60 total ($40 profit)
At odds below 2.00, you are staking more than you stand to profit. Odds of 1.50 return $15 on a $10 bet - that is $5 profit. Odds of 1.01 return $101 on a $100 bet - just $1 profit.
Why decimal odds suit Australian punters
One of the benefits of using decimal odds is the ease with which bettors can compare odds from different bookmakers. It is immediately clear that odds of 3.10 are better than odds of 3.00. TAB, Sportsbet, Bet365, and Ladbrokes all use this odds format.
3 Fractional Odds - The UK Format
Fractional odds display the profit relative to the stake on the chosen outcome; the stake is not included in the odds. The initial stake is returned separately on top of the winnings.
Reading fractional odds
Odds of 3/1 mean that the bettor will win $3 for every $1 that they wager on that outcome. A $10 bet at 3/1 will return $40 in total: $30 profit and the original $10 stake.
Odds of 1/2 mean that the bettor will win $1 for every $2 that are staked on their chosen outcome. A $10 bet at 1/2 will return $15 in total: $5 profit and the original $10 stake.
Example: (5/2) x $10 = $25 profit + $10 stake = $35 total
Converting fractional to decimal
To change any fractional odds to decimal odds, divide the numerator by the denominator and add 1 to the result. Odds of 3/2 become (3/2) + 1 = 2.50. Odds of 5/1 become (5/1) + 1 = 6.00.
Fractional odds are primarily used in Australian horse racing markets. Most bookmakers in Australia have moved to decimal odds exclusively. However, knowing how to read fractional odds avoids any potential confusion.
4 American Odds - The Moneyline Format
American odds, also referred to as moneyline odds, use a unit of $100 and feature either a plus (+) or minus (-) sign. The sign indicates whether the outcome is a favourite or an underdog.
Positive odds: underdogs
If the odds feature a plus (+) sign, the number represents the profit earned by a $100 stake. For instance, +200 odds will return $200 profit for a $100 stake; a $10 bet will return $20 in profit.
Negative odds: favourites
If the odds feature a minus (-) sign, the number represents the amount that must be staked to return $100 in profit. For instance, -150 odds will return $100 in profit if $150 is staked on the outcome.
+200 = (200 / 100) + 1 = 3.00
Converting negative odds to decimal: (100 / |Odds|) + 1
-150 = (100 / 150) + 1 = 1.67
American odds can be found on a number of international bookmakers. Moneyline odds are the standard for US sportsbooks, and NBA, MLB, and NFL markets on international platforms often display them alongside decimal equivalents.
Three Odds Formats at a Glance
| Format | Region | Example | $10 Stake | Total Return | Profit |
|---|---|---|---|---|---|
| Decimal | Australia, Europe | 2.50 | $10 | $25.00 | $15.00 |
| Fractional | UK, Ireland | 3/2 | $10 | $25.00 | $15.00 |
| American (underdog) | USA | +150 | $10 | $25.00 | $15.00 |
| American (favourite) | USA | -200 | $10 | $15.00 | $5.00 |
5 Implied Probability - Reading Beyond the Number
Decimal odds can be used to calculate the implied probability that a particular outcome will occur. By converting odds to a percentage, bettors can compare that figure to their own estimate of how likely the outcome is.
Example: (1 / 3.00) x 100 = 33.3%
Common decimal odds and their implied probabilities
Odds of 2.00 indicate a 50% chance of the outcome occurring. Odds of 1.50 indicate a 66.7% chance. Odds of 4.00 indicate a 25% chance. Odds of 1.25 indicate an 80% chance.
The use of implied probabilities allows bettors to compare the bookmaker's assessment of an outcome to their own estimate. If the bookmaker's implied probability for an outcome is lower than your own estimate of the chance of it occurring, the odds represent good value.
6 The Bookmaker's Margin - Why Odds Don't Add to 100%
Within all betting markets, the implied probabilities of each of the outcomes always add up to a percentage in excess of 100%. This represents the overround, or the margin that the bookmaker collects on all bets placed within that market.
A simple example
In a situation where each outcome is equally likely, such as a coin toss, the implied probabilities set at 2.00 for each outcome reflect a 50% chance per outcome. If bookmakers place odds of 1.91 on each outcome, however, the implied probabilities of each outcome occurring are 52.4%, which adds to 104.8%. The 4.8% excess is the profit that the bookmaker will make on all bets placed on either outcome.
The overround can range across different types of markets. Bookmakers use overround margins of 4% to 6% for outcomes in sports such as the NBA, MLB, and the NFL. For markets with more outcomes, such as exotic markets, the overround can be 15% or more.
Example: (1/1.91 x 100) + (1/1.91 x 100) = 52.4% + 52.4% = 104.8% = 4.8% margin
Why this matters for punters
The overround margin is one of the main reasons that bettors eventually lose money over time. Regardless of how many winning outcomes they pick, the odds that bookmakers offer are set below the true fair value. By comparing odds from a variety of bookmakers, bettors can minimise the impact of the overround margin in their results.
Identifying when odds represent genuine value is the next skill to develop - our value betting guide explains how to calculate expected value and spot positive-EV bets.
7 Fixed Odds vs Tote Odds - An Australian Distinction
There are two different odds formats used by punters within Australia: fixed odds and tote odds. Both have their benefits, and bettors should be aware of both of them.
Fixed odds
With fixed odds, the odds are locked in at the time that the bet is placed. If the odds drift for the chosen outcome between when the bet is placed and when the event occurs, the bet will still pay out at the initial odds if the chosen outcome occurs.
Most bookmakers in Australia offer fixed odds on thoroughbred, harness, and greyhound racing events. The odds become available each morning of the racing events and continue to change throughout the racing day as bets are placed on certain horses.
Tote odds
Tote odds are calculated after the race is held. All bets placed on the race are pooled together. The bookmaker takes their commission on the pool, and the remainder is divided among winning tickets.
Tote odds can pay more for longer-priced runners when the winner attracted less backing in the tote pool. They can also pay less if the winning horse received heavy support from tote bettors.
For a full breakdown of Australian racing betting, including how tote vs fixed decisions play out in practice, see our horse racing betting guide.
Frequently Asked Questions
What do odds of 2.00 mean in Australia?
Odds of 2.00 mean that the bettor will receive $2.00 in total for every $1 placed on the outcome. A $50 bet at 2.00 will return $100 to the bettor. Odds of 2.00 also indicate a 50% chance that the outcome will occur.
How do you calculate the payout from decimal odds?
The total return is calculated by multiplying the stake by the decimal odds. Profit is the total return minus the stake. For instance, $25 x 4.00 = $100 in total return; $100 - $25 = $75 profit.
What is implied probability and why does it matter?
Implied probability is the percentage chance that an outcome will occur based on the decimal odds placed on that outcome. The formula is: (1 / decimal odds) x 100. Odds of 4.00 indicate a 25% chance of the outcome occurring. By comparing the implied probability to the chance that a bettor assigns to an outcome, it is possible to identify whether the bookmaker's odds represent fair value.
Why do odds change before an event?
Odds can change when a lot of money is placed on a particular outcome. Bookmakers will shorten the odds on an outcome that has taken a lot of money to encourage bettors to place bets on the other outcomes in a market. Outcomes that are lightly backed will have their odds drift out. Odds can also change based on information that becomes available about the teams or players involved in a sporting event. Odds placed at the start of a sporting event are often more generous than those available closer to the event.
What is the difference between fixed and tote odds?
Fixed odds are set at the time of placing a bet; tote odds are calculated after the race is over. With fixed odds, the return on a winning bet is guaranteed before the race starts. Tote odds may pay more for horses at longer odds that received little backing in the tote pool; however, they may pay less if the winning horse was heavily supported. Most Australian bookmakers also offer best-tote bets, which pay out at the higher of the available pool dividends.
What is overround in sports betting?
The overround, or the margin used by bookmakers, is the amount by which the implied probabilities of all outcomes in a market add up to over 100%. The overround is the same as the vig, juice, or the margin. A lower overround indicates that the bookmaker is offering better value to punters.
Responsible Gambling
Sports betting carries real financial risk. The bookmaker's margin means the odds are systematically against you over time. Only bet with money you can afford to lose, and never chase losses. Set deposit and loss limits before you start and stick to them.
If gambling is affecting your wellbeing or that of someone you know, free and confidential help is available in Australia.