It's Day 1 of a Coin-Flipping Tournament. You place a bet of Rs. 10 on Heads. Your opponent tells you that he will give you Rs. 15 if you win. And you lose your initial bet of 10 bucks if it falls Tails. Should you accept that bet?
Yes - the odds of you winning the coin flip are 1:1. So 50% of the time you'll win Rs. 15 and 50% of the time you'll lose Rs. 10.
Your net expected value = (50%*15) - (50%*10) = 2.5
So, on an average you can expect to win Rs. 2.5 in this situation.
Another way to look at it is by calculating your bet odds and comparing it with the odds of winning.
Calculating Bet Odds: Risk/ (Risk + Reward)
Thus in this case it was 10/(10+15) or 1/2.5 or 40%
This is a profitable spot because the odds of you winning (50%) are greater than the odds you are getting on your bet (40%).
Similar concepts are used in poker in certain spots. For example, say on the turn you have a flush draw, and your opponent bets. So do you call or fold?
The first step is to NOT auto-call because OMG-I-Haz-Flush-Draw
The second step is to calculate the odds of your making a flush - A
The third step is to calculate the pot odds you are getting - B
Check if A>B . If no, fold.
Even though, this is a gross simplification of a fairly common poker spot. But, we hope you get the gist. This was an introduction to what poker maths looks like, and we've just touched the tip of the iceberg. Luckily, smarter people on the internet have already made useful explanations on poker maths. Here are the links:
Or if you prefer a video, here is one on Basic Poker Maths
Let us know in the comments below if you have any questions or concerns.