Implied probability is a key concept in sports betting, representing the likelihood of an event occurring as indicated by the odds set by a sportsbook. This calculation helps bettors understand how bookmakers interpret the chances of a particular outcome and allows them to make more informed betting decisions. Before diving into implied probability, it’s essential to have a solid grasp of the basics of betting odds. If you’re new to this, consider reading our Understanding sports betting odds article. In this piece, we will explain what implied probability is, how it differs from actual probability, and how to calculate it using different types of odds.
What is Implied Probability?
Implied probability is essentially a translation of betting odds into a percentage that represents how likely an event is to occur. For example, if you see that a team has odds of 2.00 (or +100 in American odds), the bookmaker is suggesting there’s a 50% chance that team will win. If you’re unsure about how to interpret different odds formats, an odds converter can be very helpful. But why is this important? Well, knowing this percentage can help you spot value bets—situations where you think an outcome is more likely than the odds suggest, potentially giving you an edge over the bookmaker.
Why Understanding Implied Probability Matters
Think of it this way: if you’re buying something at a store, you want to know if you’re getting a good deal. Implied probability helps you do the same with betting. It lets you see if the odds are in your favor. For instance, if a bookmaker gives your favorite hockey team a 40% chance of winning, but after your research, you think the team has a 60% chance, then you’ve found what’s called a “value bet”—an opportunity where the implied probability is lower than your own estimate
How to Calculate Implied Probability
The math for calculating implied probability might look intimidating at first, but once you get the hang of it, it becomes second nature. If you prefer to avoid manual calculations, you can use a betting odds calculator to quickly work out different types of odds. The exact formula changes depending on the type of odds you’re working with.
1. Decimal Odds
This one’s the easiest. Here’s the formula:
Implied Probability = (1 / Decimal Odds) * 100
Example: Suppose the odds are 2.50. The implied probability would be:
(1 / 2.50) * 100 = 40%
In this case, the bookmaker thinks there’s a 40% chance of the outcome happening.
2. Fractional Odds
The formula for fractional odds might seem more complex, but it’s still manageable:
IP = (Denominator / (Denominator + Numerator)) * 100
Example: For odds of 5/2, the calculation would be:
(2 / (5 + 2)) * 100 = 28.57%
So, there’s about a 28.57% chance of the event occurring, according to the odds.
3. American Odds
American odds require a bit of adjustment depending on whether the odds are positive or negative:
- Positive Odds (+200):
IP = (100 / (Odds + 100)) * 100
Example: (100 / (200 + 100)) * 100 = 33.33%
- Negative Odds
IP = (Absolute Value of Odds / (Absolute Value of Odds + 100)) * 100
Example: (150 / (150 + 100)) * 100 = 60%
These formulas allow you to decode the odds and understand what the bookmaker is suggesting about the likelihood of an event happening. This is especially useful when you want to determine if a bet offers value.
