Tote (Parimutuel) vs. Fixed Odds Betting

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There are two frameworks by which bookmakers can set odds. The Tote (Parimutuel betting) is commonly used for horse racing, while fixed odds betting is commonly used for sports.

Parimutuel betting

Parimutuel betting is a system in which all bets of a particular type are placed together in a pool. The “house-take” is removed, and the payoff odds are calculated by sharing the pool amongst all winning bets. In Australia it is known as the Tote after the totalisator which calculates and displays bets already placed. With the Tote the bookmaker displays the approximate odds that they believe you will receive. This approximation is based on the quantities of bets received to that point. These odds will change, however, depending on how much additional money is placed on each outcome. For this reason you don’t know the actual odds you will get until bets are no longer accepted and the event has commenced.1

Below is an example using an event with four possible outcomes and a house-take of 10%. You can think of this example as a race between four horses.

Outcome Amount Wagered Odds Calculation Tote Odds
A $30 $222 * (1 – 10%) / $30 6.66
B $70 $222 * (1 – 10%) / $70 2.85
C $12 $222 * (1 – 10%) / $12 16.65
D $110 $222 * (1 – 10%) / $110 1.82


From a bookmaker perspective, parimutuel betting is low-risk, because they know the exact margin they will receive in advance. The bookmaker’s takings are independent of the event outcome. In the example above, the bookmaker’s profit will be approximately $22.20 (depending on the rounding), which is 10% of the total wagers placed.

Fixed odds betting

In contrast, fixed odds betting is a form of wagering where the punter knows the exact odds he/she will receive when they place a bet. Unlike parimutuel betting, not all punters who bet on the same outcome will receive the same odds. This is because the odds can shift over time based on the quantities wagered on each outcome. The bookmaker will actively price and adjust the odds such that it will make a profit regardless of the outcome. This is achieved by calibrating the odds so that the sum of their implied probabilities (discussed in the next section) exceeds 100%. In a two-outcome bet, if punters bet heavily on outcome A the bookmaker will reduce the odds on outcome A and increase the odds on outcome B, while keeping the margin relatively stable. This shift in odds will induce more betting on outcome B, which will enable the bookmaker to balance the book. Note that the bookmaker doesn’t necessarily need punters to place equal wagers on each outcome, it actually needs punters to place wagers in inverse proportion to the odds on offer.

Below is an example of a betting agency’s book that is out of balance. The market hasn’t been open for long, so every punter thus far has received the odds shown below. The Net Profit column provides the bookmaker profit for each possible winner.

Outcome Odds Amount Wagered Profit calculation Net Profit
A 6.7 $30.00 $222 – (6.7 * $30)  $21.00
B 2.65 $70.00 $222 – (2.65 * $70)  $36.50
C 14.5 $12.00 $222 – (14.5 * $12) $48.00
D 2.2 $110.00 $222 – (2.2 * $110) -$20.00
Totals: $222


If outcome D is the winning bet then the bookmaker would make a $20 loss on the event. This imbalance will force the bookmaker to change the odds to induce more punters to back A, B and C relative to D. This can achieved by lowering the odds on outcome D and increasing the odds on outcomes A, B and C. Someone who backs outcome D early will get higher odds than someone who backs D after the odds adjustment. The odds will continue to shift as the bookmaker attempts to maintain a balanced book.

Fixed odds betting is more risky for the bookmaker than the Tote, because the profit margin is not guaranteed and the bookmaker’s profit will not be the same for every outcome.

Despite the fact that bookmakers independently tweak their odds the maintain a balanced book, odds across bookmakers are usually very similar. This is because arbitrage opportunities can arise if bookmaker odds move to be in stark contrast with one another. Arbitrageurs will jump in to make a guaranteed profit, and in the process will move the bookmaker odds back in-line with one another, thus closing the arbitrage opportunity. Arbitrage betting is discussed in Section 8 of this guide.

Notes and Sources

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