The term betting odds in gambling can be misleading. This is because odds in this context do not represent the actual odds that an event will occur but instead represent the amount of money that a bookmaker will pay out if you win. Because the bookmaker must reserve some room for profit, he makes sure that the betting odds are never the exact equivalent of the true odds of you winning. Instead, the bookmaker adjusts the numbers so the payout given to any winner is less than the real probability of the win. This profit margin that the bookmaker leaves for the house is expressed as a percentage and is called the over-round.
Determine the probability that the event will occur. This is usually expressed as a fraction and represents the likelihood of the event relative to all the other possibilities. For example, the probability of it being Monday today is 1/7 since there are seven different days in the week.
Convert the probability into a percent. To do this, divide the numerator of the probability by the denominator of the probability and multiply by 100. For example, if the probability of it being Monday is 1/7 then you would divide 1 by 7 to get 0.14. You would then multiply 0.14 by 100 to get 14 percent.
Determine the over-round. The over-round is the percentage of profit that the bookmaker reserves for himself and varies depending on the bookmaker and the type of betting being done.
Combine the probability of the event occurring with the over-round percentage. For example, if there is a 14 percent chance that it is Monday and the bookmaker works with an over-round of 6 percent, then you would combine 14 and 6 to get 20 percent. This means that if you place a bet on it being Monday the bookmaker will treat your 14 percent chance of winning as though it were a 20 percent chance of winning. We will call this percentage the betting percentage.
Convert the betting percentage into the betting probability. To do this, take the betting percentage and place it over 100. For example if the betting percentage is 20 percent, then the betting probability would be 20/100 which can be reduced to 1/5.
Convert the betting probability into the betting odds. The formula for this is: P / (1-P) where P= the betting probability. For example, if the betting probability is 1/5 then we would substitute 1/5 into the formula wherever "P" is located. This would give us the equation: 1/5 / (1-1/5) = 1/5 / 4/5 = 1/4. The solution of the equation is the betting odds. In a gambling situation this would most likely be expressed as "1:4 on" or "4:1 against," meaning that for every $1 that is bet the payout is $4.