The odds of an event are the odds that the event will happen, assuming that all the possibilities are equally likely. When you place a wager (i.e., a bet) on an event, you are setting the odds in your favor. When all the possibilities for an outcome are not equally likely, then the odds would be in favor of the choice with the lesser probability.

## Odds Calculations

When you place a wager on the outcome of an event, you are effectively making a choice between two possibilities. For instance, if you choose “the Cubs will win the World Series,” then you are choosing between the Chicago Cubs and the St. Louis Cardinals. In another example, if you choose “the Red Sox will win the World Series,” then you are effectively making a choice between the Boston Red Sox and the New York Yankees.

Odds are always expressed as a fraction where the denominator is the number of chosen possibilities and the numerator is the chosen possibility. So, for the previous example, you would have (2 x 2)/(2 x 1)=2 as your odds. This means that you would win 2:1 if you bet $10 on the Cubs, and you would win 1:2 if you bet $10 on the Red Sox.

## Types of Odds

There are three types of odds. They are:

- Lagoon odds
- Dutch book odds
- Money line odds

Each type of odds indicates a different way of calculating the winning odds of an event. The first type of odds is called Lagoon odds. This is the most basic form of odds and is the basis for all the other types of odds. Lagoon odds are simply the odds of the event occurring, as stated above. They take into account the amount you are wagering (i.e., the stake) and multiply that by the odds of the event occurring. If you are betting $100 on a horse race with Lagoon odds, then your winning payout would be $100 x 1/16 (hence, the $100 x 16 as the payout formula).

## Lagoon Odds

Lagoon odds are named after the Isle of Man, where they were first used. Since Lagoon odds are the simplest form of odds, they are often used in games of chance. When you are playing a slot machine and the symbols on the reels come to rest after making a horizontal or vertical line of three or more symbols, then you will often see the outcome labeled as “Lagoon Odds.” These are the odds that the machine itself has calculated based on the average bet per line per spin. So, if you bet $2 on a four-reel slot machine with Lagoon odds, then your winning payout would be 4 x 1/16 = $32.

## Dutch Book Odds

Dutch book odds are named after a famous gambler who used to travel with a group of bookmakers. They are used when all the possibilities for an event are not equally likely. To figure out the winning odds of a bet made with Dutch book odds, you would use two different formulas, depending on which choice you made. If you chose the winning outcome, then your payout would be the amount of money you wagered (i.e., the “stack”) multiplied by the odds of that outcome in favor of you. If you chose the losing outcome, then your payout would be the total amount of money you staked (i.e., the “stack”) multiplied by the odds of that outcome in favor of you.

To determine the odds of an event with Dutch book odds, you would use the following formulas:

- If you chose the winning outcome: Your payout is the amount of money you wagered (i.e., the “stack”) x the odds of that outcome in your favor
- If you chose the losing outcome: Your payout is the amount of money you staked (i.e., the “stack”) x the odds of that outcome in your favor

When you use Dutch book odds, you are effectively choosing between two mutually exclusive events. In the example above, you are choosing between the Cubs winning the World Series and the Red Sox winning the World Series. However, you are not choosing between the Chicago Cubs and the Boston Red Sox. Instead, when you use Dutch book odds, you are effectively choosing between the two teams involved in the World Series. As a result, you have to decide whether you are choosing the championship or the outcome of the series. The advantage of using Dutch book odds is that it is often easier to calculate the winning odds of an event. All you need to do is multiply the amount of money you want to wager by the difference in the odds of the two possible outcomes. In the above example, you would multiply $100 by 1/16 because the Red Sox have a 16% chance of winning the World Series while the Cubs have an 84% chance.

## Money Line Odds

Money line odds are used when you want to wager on the outcome of an event that has multiple possible outcomes. To figure out the winning odds of a bet made with money line odds, you would use the following formula:

- Your payout is the amount you wager x the odds of the event in your favor

In a money line bet, the odds of the event occurring are always in your favor. You can still use Dutch book odds or Lagoon odds, but you would need to adjust the amount you are wagering (i.e., the stake). The more you wager, the better your odds; however, the worst your payout if you lose. If you are betting $10 on a horse named Chance, then your winning payout would be 10 x 1/2 = $5. If Chance wins, then your payout would be the total amount of money you wagered (i.e., the “stack”) x 1/2.

Remember: The more you wager, the better your odds but the worse your payout if you lose. This is why most sportsbooks will not accept wagers below a certain amount. For instance, to place a bet of $10, you have to have a registered account at the bookie’s website. The advantage of using money line odds is that it is often easier to calculate the winning odds of an event. You would simply add up all the odds of all the possible outcomes, divide that number by 2 (because you are effectively doubling your chances of winning), and then multiply this by your stake. In the above example, this would be the following:

- Chicago Cubs: 16/1=16×1/2=$16
- Boston Red Sox: 2/1=2×1/2=$4
- (TOTAL): $20

The Final Takeaway

In life, we often have to make decisions based on probabilities. When you make a wager on the outcome of an event, then you are effectively setting the odds in your favor so that you have a better chance of winning. Since there are so many situations where you might have to make a wager, it is important to be familiar with all the different types of odds.