What is a “[FP] Betting Company”?
A licensed & legally operating “Betting Company”, referred to in popular culture as bookmaker, sportsbook or bookie, is an company that takes bets on sporting events, horse racing, political elections, world events and entertainment industry award ceremonies at agreed upon odds with their customers.
“[FP]” means “For Profit” indicating the ‘Betting Company” is a private business in a governmentally regulated marketplace competing to profit. There are many companies and individuals around the world that offer betting services to the public for profit that are not licensed in the jurisdictions they operate; BetBreakingNews.com does not track and cover these sources due to the difficulty verifying data.
How do “[FP] Betting Companies” work?
How Betting Companies Format and Present Betting Options
The variations in how bets are offered by betting companies are influenced greatly by the cultures and regions in which their target customers are located throughout the world. The primary betting structures and styles offered globally are as follows…
- Decimal Odds – are most frequently displayed by betting companies catering to European Markets. An easy way to understand how decimal odds work is to convert to decimal what you think the chances are of an event resulting in a specific outcome i.e. there is a 20% chance of your forecasted result occurring for an event; thus 100/20 = 5. If your bet wins you will receive 5 currency units for every 1 risked. So, risk 10 and winning gets you 50.
- Fractional Odds – are historically the preferred way for odds to be offered in United Kingdom betting markets. Once again, based on a 20% chance of a forecasted result happening this translates to 4/1 fractional odds. This means for every 1 time you win you will lose 4 times.
- US Odds – also known as American Odds, are the most popular way for bets to be displayed in the United States. A simple way to start understanding US Odds is to know that a + sign in front of odds means you would win 100 if you risked the number displayed. If there is a – sign in front of the number this means you need to risk this number to win 100. When a bet displays decimal odds of 5, or fractional odds of 4/1, the US Odds would be +400. If you are betting at decimal odds of 1.5, or fractional odds of ½, then the US odds would be -200.
How Betting Companies Make Money
They charge customers a commission for booking (taking) the bet and this is called the vigorish (vig) or juice. The theoretical hold percentage (gross income) on all wagers booked (volume) is 4.55% and is arrived at in the following manner…
- The betting company adjusts odds on events to attempt attraction and capture of even monies (volume, not number of bets) from bettors on both sides of a bet/contest. A perfect balance is always pursued and rarely achieved.
- Each bettor, on both sides of the contest, risks 110 to win 100. The betting company collects 220 & reserves this amount until the contest is finalized.
- Upon finalization of the event wagered, the winner receives his 100 risked, 100 won and the 10 is refunded that was posted in case of lose. In contrast, the loser receives 0 (nothing) resulting in the betting company earning gross revenue of 10 on this bet.
- The above calculation is how the betting company earns a gross revenue of 4.55% in vig or juice and not 10% as many believe. Yes, the loser pays 10% but winners pay zero. (Calculation: 10 ÷ 220 = 4.55 %.)
What is a “[PM] Prediction Market”?
A legally operating “Prediction Market” allow customers to make predictions with the intention of receiving real-money profits for accurate results. The Prediction Markets that receive a “PM” designation from BBN are either operating under the auspices of an accredited learning institution or via a governmental regulatory agency. Prediction Markets are generally focused on real-world events in the arenas of world news, financial markets, politics and entertainment. Market prices are interpreted as predictions on the probability of event outcomes or expected values.
“[PM]” stands for “Prediction Market” and indicates participants are competing to win & receive real money. It doesn’t guarantee the organization that owns, operates or manages the Prediction Market is attempting to make real money profits from operating the market. All legitimate organizations operating Prediction Markets do so for self-serving reasons; a majority are learning institutions seeking valuable insight into the probability of outcomes for future events and others to make profits from customer service fees as well as interest accrued from the customers’ segregated monies on deposit.
How do “[PM] Prediction Markets” work?
How Prediction Markets Format and Present Betting Options
The primary variations of how real-money prediction markets present options for their participants to make money are as follows…
Yes or No… this structure frames options into two possible outcomes for to each of these events – yes, the event will happen as described, or no, it will not happen. One example is a major financial market will either close on or above a set number or it won’t. Another example is a political race in which a specific candidate will be elected or the candidate will not.
Price Equals Chance Percentage – in other words…”the price is the prediction” an example, being a price of 60 cents means there is a 60% chance of the event happening. Using this scenario, a prediction market participant buys a stock that pays 1 dollar if a political candidate wins an election and zero dollars if the candidate loses. If this participant buys 5 of the above candidate options for a total of 3 dollars at a cost of 60 cents per option, the participant will receive 5 dollars on a win paying out a profit of 2 dollars and if the candidate loses the participant will receive zero.
Short Selling – selling shares that you don’t own by borrowing stocks to sell today. This is known as short selling. This process is handled by the prediction market’s software systems making it easy for the participants to focus on opportunities not the transaction. An opportunity is identifying options (stocks) that a participant believes are overpriced. To take advantage of this, the participant borrows stock, sells it at the current price and pays for the borrowed stocks at a lower price in the future.
How Prediction Markets Make Money
Not all organizations managing real money prediction markets for profit seeking participants are trying to produce financial gains. Some are learning institutions, corporate consulting firms and multinational companies attempting to derive valuable insight into what future outcomes might be for important world events drawing from the collective wisdom of mass populations.
- Organizations operating with the intent to make financial profits do so via customer service fees and interest accrued from the customers’ segregated monies on deposit.
- Organizations operating with the intent to garner important data rather than financial gains survive via subsidies or sponsorship from learning institutions, governmental agencies or corporations.
Betting Odds can converted into simple percentages that reveal a betting company’s true position regarding event outcomes. The mathematical equations used for these conversions are known as “Implied Probability”. The examples below demonstrate how this is achieved with three different types of betting odds…
Decimal Odds – Implied Probability Conversion Equation
1.33 (decimal odds) = 75% (implied probability)
- 1 divided by 1.33 = 0.75187
- Multiply 0.75187 by 100 = 75.187%
Result: A betting company displaying decimal odds of 1.33 for an event outcome implies the betting company believes there is a 75% chance, in approximation, of that outcome occurring.
Fractional Odds – Implied Probability Conversion Equation
1/3 (fractional odds) = 75% (implied probability)
- 1 plus 3 = 4
- 3 divided by 4 = 0.75
- Multiply 0.75 by 100 = 75%
Result: A betting company displaying fractional odds of 1/3 for an event outcome implies the betting company believes there is a 75% chance, in approximation, of that outcome occurring.
US Odds – Implied Probability Conversion Equation
-303 (US Odds) = 75% (implied probability)
- 303 plus 100 = 403
- 303 divided by 403 = 0.75186
- Multiply 0.75186 by 100 = 75.186%
Result: A betting company displaying US odds of -303 for an event outcome implies the betting company believes there is a 75% chance, in approximation, of that outcome occurring.