How do Money Line Odds Work? Part I

Have you ever wondered how much a bet cost or how much a bet will payout when betting a money line?  Or, how to determine the implied probability of money line odds?  In this two-part post I will attempt to answer both of these questions.  We will need to do a bit of prep work.  Here we go.

Money Line Basics

A money line is the price/payout for betting on one team to win.  Unlike a point spread, which gives the bettor a number or points plus or minus from a tie, the bettor must only select who will win the game or match.  In the case where a draw is possible (e.g. Soccer), there is a money line for a each team to win and the draw.

Money line odds are displayed in two ways, positive and negative.  For example, a positive money line might be+125 for an underdog.  In the same game, the favorite would be -135; the negative money line.  An even money line would be +100 or -100.  Generally, displayed as +100 but some bookmakers use -100.  Both teams won’t be even, as the bookmaker needs to make a profit.  When one team is even, the favorite will be -110, give or take a few points.

In the US, you will normally see the price of a point spread and over/under bet also expressed in money line format.  For example, an NFL game has an over/under line of 37  and the expressed price is -110.  Generally, when a point spread or over/under bet moves to -130 or +120, the bookmaker will adjust the point spread or total points up or down and the associated price for both sides back to -110.

Money Line Cost and Payout

Betting a money line is confusing.  A negative money line (e.g. -125) is even more confusing.  To explain how money lines work, I will use an example from September 12, 2010 Major League Baseball; the New York Yankees (+155) at the Texas Rangers (-165).  In this example, the Yankees are the underdog and the money line for them to win is +155.  The Rangers are the favorite (because Cliff Lee is pitching at home) and the money line for them to win is -165.  For simplicity, we will use $10 betting increments.

Let’s say you think the Yankees will win and want to bet on them.  Your betting unit is $10 and the money line is +155.  This is the simple example.  Your bet will cost $10 and the payout would be $15.50 plus your investment.  That means your total return would be $25.50 and your profit would be $15.50.  In general terms, on a positive money line divide the line by 100 and multiply that number by your bet amount to get the winning bet profit.  Here is the example:

Yankees +155 with a $10 betting unit
+155/100 = 1.55 ==> 1.55 x $10 = $15.50 ==> $15.50 profit + $10 bet = $25.50 total return

Now for the hard part; the negative money line or the favorite.  In this case, the Texas Rangers are the favorite at -165.  If you wanted to win 1 betting unit (i.e. $10), you would simply divide the money line by 100 and multiply that number by $10.  This yields a $16.50 bet cost to win $10.  Here is the example:

Rangers -165 with a $10 betting unit
-165/100 = 1.65 ==> 1.65 x $10 = $16.50 bet ==> $16.50 bet + $10.00 profit = $26.50 total return

[A slight variation on the negative money line.  If you wanted to just bet your $10 betting unit, you would again divide -165 by 100 to get 1.65.  Now divide your $10 bet by 1.65 for $6.06.  That would be your profit]

As you get more familiar with money lines, these calculations will seem simple.  You can likely do these in your head, but I use a spreadsheet (Google spreadsheets) with these formulas populated so I can simply plug-in the money lines and my win probability.  This allows me to focus on handicapping and not waste valuable time on note taking.

This was part I of a two-part series.  In part II, I will explain how to calculate the implied probability from a money line and how to evaluate implied probability against estimate win probability.  I will also include a spreadsheet example. [Feel free to send any questions or clarifications to derekbets@gmail.com]

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