WHAT IS FIXED ODDS?
Fixed odds betting is the term for placing wagers with a bookmaker at agreed odds. Basically you make your selection, such as which horse will win a specific race, and the bookmaker you’re betting with will give you odds for your wager. You pay your stake at this point. If your selection turns out to be correct then you’ll be paid out based on a combination of whatever odds you got and the amount you staked. If your selection is not correct then the bookmaker keeps your original stake. With fixed odds betting you know how much you can win at the time of placing your bet, with one exception. Sometimes you may have to take what is known as the starting price (SP). This means that you’re not getting agreed odds at the time of placing your wager, but rather are taking whatever the odds happen to be when the race starts.
There are three ways that bookmakers can express the odds for a wager– fractional odds, decimal odds, and moneyline odds.
As a general rule, fractional odds are used in the United Kingdom, decimal odds are used in Europe, Canada and Australia, and moneyline odds are used in the United States. However, any bookmaker can use any odds format it chooses to, so it’s a good idea to understand how the different methods for quoting odds work. Fractional odds show you how much profit your wager will return (if it wins) in addition to your original stake. Let’s use 2/1 as a simple example. This is said as “two to one”, as you will make $2 for every $1 staked on a winning wager. So if you staked $10 at 2/1 and your wager won, you would receive a total of $30 back. $20 in winnings (2 multiplied by your $10 stake) and your original $10 stake.
If you’re betting with fractional odds you need to be familiar with the terms “odds on” and “evens”. With an odds on wager, the amount you can win is less than your stake. You get your stake back too so you still make a profit, but your actual profit will be less than your stake. A clear favorite in a horse race could well be odds on, for example 2/5. This would be said as “five to two on”, and means you would win $2 for every $5 staked. So a $50 winning at odds of five to two on would return a total of $70 ($50 stake plus $20 winnings).
Evens is the term used for when the odds are 1/1. A winning wager at these odds will return winnings equal to your stake, plus your original stakes of course. So you would basically double your money. If you stake $20 at evens and won, you get a total of $40 back – your original $20 stakes plus $20 in winnings. Decimal odds are somewhat simpler. They show you how much a winning wager will return in total per unit staked, including your original stake, and are usually quoted to two decimal places. Let’s use another simple example and say you staked $10 at odds of 3.50. If you won, your total return would be $35 (3.50 multiplied by your $10 stake), which is made up of $25 in winnings and your original $10 stake. With decimal odds, 2.00 is the equivalent of evens and anything less than 2.00 is odds on. Moneyline odds are also known as American odds. They can seem a bit complicated but once you understand how they work they’re quite easy to work out. These odds are quoted as either a positive number or a negative number. When the number is positive, that’s how much you can win for every $100 you stake. When the number is negative, that is how much needs to be staked to win $100.
For example, a winning wager of $100 placed at odds of +200 would return a total of $300 (your original stake plus $200 in winnings). A winning wager of $100 placed at odds of -200 would return a total of $150 (your original stake plus $50 in winnings. Negative odds are therefore the same as odds on. Odds of +100 are the same as evens. Something else we should mention is ante-post betting, also known as futures betting. This is a form of fixed odds betting where you place your wagers weeks, or even months, before a race takes place. When placing wagers far in advance of a race there is the added risk that your selection will not actually run, so you typically get better odds for this type of bet to reflect that. To place fixed odds wagers you need to use the services of a bookmaker. There are bookmakers at most racecourses and in many countries you can bet on horse races in a betting shop or over the telephone too. These days, though, the easiest way to place your wagers is online.
What is Fixed Odds?
CALCULATING FIXED ODDS
It is customary with fixed-odds gambling to know the odds at the time of the placement of the wager (the "live price"), but the category also includes wagers whose price is determined only when the race or game starts (the "starting prices"). It is ideal for bookmakers to price/mark up a book such that the net outcome will always be in their favor: the sum of the probabilities quoted for all possible outcomes will be in excess of 100%. The excess over 100% (or overround) represents profit to the bookmaker in the event of a balanced/even book. In the more usual case of an imbalanced book, the bookmaker may have to pay out more winnings than what is staked or may earn more than mathematically expected. An imbalanced book may arise since there is no way for a bookmaker to know the true probabilities for the outcome of competitions left to human effort or to predict the bets that will be attracted from others by fixed odds compiled on the basis personal view and knowledge. With the advent of Internet and bet exchange betting, the possibility of fixed-odds arbitrage actions and Dutch books against bookmakers and exchanges has expanded significantly. Betting exchanges in particular act like a stock exchange, allowing the odds to be set in the course of trading between individual bettors, usually leading to quoted odds that are reasonably close to the "true odds."
In making a bet where the expected value is positive, one is said to be getting "the best of it". For example, if one were to bet $1 at 10 to 1 odds (one could win $10) on the outcome of a coin flip, one would be getting "the best of it" and should always make the bet (assuming a rational and risk-neutral attitude with linear utility curves and have no preferences implying loss aversion or the like). However if someone offered odds of 10 to 1 that a card chosen at random from a regular 52 card deck would be the ace of spades, one would be getting "the worst of it" because the chance is only 1 in 52 that the ace will be chosen.
In an entry for L'Encyclopédie (the Enlightenment-era "French Encyclopedia"), Denis Diderot cites a similar example in which two players, Player A and Player B, wager over a game of dice that involves rolling two six-sided dice. Player A wins if the dice add up to 12, of which there is only one possible case. Player B wins if the dice fall in any other combination, of which there are 35 possibilities.[1] It is mathematically disadvantageous to make a bet if one gets"the worst of it." Accordingly, for the bet to be "fair," the amount each player could potentially lose or gain from the wager should be adjusted, depending on the odds of their success.
When making a bet in which one must put more at risk than one can win, one is laying the odds or laying the bet; rational bettors will do so only if the actual chances of an adverse outcome are low enough that the expected outcome even after deduction of taxes and any transaction costs is favorable to the person laying the bet. For example, if one bets $1000 that it will rain (or not rain) tomorrow and can win only $200 but can lose the entire $1000, one is laying a bet. The phrase "[I would bet] dollars to doughnuts [that a given event will or will not occur]," coined in an era when one dollar could purchase numerous doughnuts, thus indicates one's high subjective confidence, or at least one's desire to be perceived as having that confidence, in the outcome that one predicts
It is possible to be getting "the best of it" or "the worst of it" during lay a bet; laying a bet does not necessarily mean getting "the worst of it". A lay bet is a bet that something will not happen so laying $50 on a horse is betting the horse will not win.