If you are at a horse racing event like the Cheltenham Festival in the UK or the Kentucky Derby in US, you will see a big electronic panel in front of you known as the Tote Board. Here you can find information on horse racing events. It also shows the odds for the different horses in a given race. But what do these numbers mean? How to read them properly?
Let’s assume 3 main cases. Let’s imagine we can read the following values corresponding to 3 different horses:
- 5/1 (five-to-one)
- 1/1 (one-to-one)
- 1/5 (one-to-five)
The first case means that for every dollar you bet, you get a profit of $5 and the total payoff is $6 when the horse wins. It also means that the likelihood of that specific horse winning the race is less than 50%, we can call this scenario ‘Odds Against‘.
The second scenario happens when the likelihood of the horse winning the race is exactly 50%, so you will gain $1 for every $1 bet that is you will receive back your stack doubled. This is called ‘Even Money‘ or ‘Evens‘.
The last case scenario happens when the likelihood of the horse winning the race is more than 50%. In this case you will receive a profit of just a fraction of your initial bet, $1 when you bet $5. This is known as ‘Odds On‘, to indicate the fact that odds are reversed, and even if the implied risk might be less, you have to risk more money for a smaller return.
It’s worth a notice that your actual payoff may differ a bit from the integer numbers given above as the odds are often rounded off, usually to the nearest dime. You can also find more complex fractions on the board e.g. 7/3 or 12/5 but for simplicity you can think at these as 2.3/1 and 2.4/1 respectively.
But who gives this likelihood, or better, this perceived likelihood? How are these odds actually calculated?
Let’s assume that the Total Pool for a race is $1,000, and that the Total Amount bet on a single horse is $350. Let’s fix the Take for the race to 15% (this is a fixed amount – different for each state – between 14% and 20%, which is deducted from the total pool to cover taxes, track’s profit and various inherent costs and expenses).
So the odds for this horse will be: $1,000 – $150 [15% of $1,000] = $850 – $350 = $500 / $350 = 1.43, rounded off to 1.4 to obtain the actual odds of 1.4/1, normally written as 7/5 for a payoff of $12 for any $5 wager.
We can see how the odds, and then the likelihood of the horse winning the race, are finally given by the amount of bets of the punters. It is the reason why I’d call this likelihood as perceived by the punters.
This methodology does not differ too much from how the odds are calculated and expressed within other betting fields. If for example you prefer to watch X Factor talent show on television instead of a horse race, you can try x factor betting and place your bet on a performer just like you were betting on your preferred horse. X Factor final always promises a wide range of emotions, and a bet can intensify these, increasing your immersion in the show. One thing is true though, probably performers are not foddered 🙂