Fixed-odds gambling
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Fixed-odds gambling is a form of gambling against odds offered by a bookmaker, an individual, or on a bet exchange.
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Calculating fixed odds
It is customary with fixed-odds gambling to know the expected odds at the time of the placement of the wager (the "live price"), however this category also accommodates wagers whose price is determined only after the race or game has taken place (the "starting price"). It is ideal for a bookmaker to price up a book such that the net outcome will always be in his favour, i.e. the sum of all possible outcomes will be in excess of 100%. The amount of the sums wagered in excess of 100% represent profit to the bookmaker in the event of a balanced book. This excess is known commonly as an overround. In the case of an imbalanced book, the bookmaker will have to pay out more winnings than what is staked, or he will earn more than mathematically expected. This may happen since there is no way for a bookmaker to know the true probabilities for the outcome of competitions left to human effort, and the fixed odds therefore being compiled on the basis of his 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."
Types of odds offered
There are three widely-used means of quoting odds:
Fractional odds
Favoured by bookmakers in the United Kingdom, fractional odds quote the net total that will be paid out to the bettor, should he win, relative to his stake. Odds of 4/1 (read "four-to-one" or "four-to-one against") would imply that the bettor stands to make a $400 profit on a $100 stake. If the odds are 1/4 (read "four-to-one on"), the bettor will make $25 on a $100 stake. Odds of 1/1 are often called evens.
Fractional odds are also known as British odds, UK odds or in that country, traditional odds.
Decimal odds
Favoured in continential Europe and Canada, decimal odds differ from fractional odds in that they quote the amount that will be paid out to the bettor, multiplied by and including his stake. Therefore, the decimal odds of an outcome are equivalent to the decimal value of the fractional odds, plus one, and even odds would be quoted as 2. The 4/1 fractional odds discussed above would be quoted as 5, while the 1/4 odds would be quoted as 1.25. This is considered to be ideal for parlay betting, because the odds to be paid out are simply the product of the odds for each outcome wagered on. Decimal odds are also favoured by betting exchanges because they are the easiest to work with for trading.
Decimal odds are also known as European odds, or continental odds in the UK.
Moneyline odds
Moneyline odds are favoured by American bookmakers. If the figure quoted is negative, then the moneyline odds are quoting how much money must be wagered to win $100 - this is done if the odds are better than even. If the figure quoted is positive, the odds are quoting how much money will be won on a $100 wager - this is done if the odds are worse than even. Even odds can either be quoted as $100 or -$100. Fractional odds of 4/1 would be quoted as (+)$400, while fractional odds of 1/4 would be quoted as -$400.
Moneyline odds are often referred to as American odds.