From the trading desk, "american odds to decimal" traces back to an estimate. Every price a bookmaker offers begins as an estimate of probability and ends as a number with a margin added. The estimate comes from data, models and traders; the margin comes from the business. Knowing how the two are combined explains why prices move, why they differ between books, and why the chances they imply never add up to exactly one.
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Are betting odds accurate? As forecasts, closing prices are well calibrated: outcomes priced at a fifty per cent chance happen close to half the time across many events. As prices, they are deliberately a little short of fair. Betting odds are different in different countries mostly in notation and in margin: decimal, fractional and American formats show the same chance, while books serving smaller markets tend to add a larger cut.
Betting odds are calculated in two steps. A trading team or a model first estimates the chance of each outcome from form, ratings and past results. The book then adds its margin, shrinking each price slightly below fair. How betting odds are determined after that depends on money: when most stakes land on one side, the price on that side shortens and the other lengthens, so the book is never heavily exposed to one result.
Betting odds implied probability is the chance a price suggests, before any judgement about whether it is right. For decimal odds it is one divided by the price. To convert American odds to a percentage, a positive number gives one hundred divided by the number plus one hundred, and a negative number gives the number, without its sign, divided by itself plus one hundred. A price of +150 implies forty per cent, and a price of -200 implies close to sixty seven.
The book shrinks every price slightly below fair, so the return on a winning bet is a little smaller than the true chance deserves.
News such as injuries, lineups or weather moves them, and so does money, with stakes from sharp bettors shifting prices faster than casual ones.
The amount by which implied chances across all outcomes exceed one hundred per cent, often around four or five per cent on a two way market.
Mostly in notation and margin: decimal, fractional and American formats express the same chance, while books serving smaller markets often take a wider cut.
Divide one by the decimal price: odds of 2.00 imply a fifty per cent chance, and odds of 4.00 imply twenty five per cent.
A trading team or a model estimates the chance of each outcome from form, ratings and past results before any margin is added.