Implied Probability Explained

Every odds price implies a probability. The sportsbook's odds reflect what the market believes will happen—not necessarily what's true. Your job is to find discrepancies between your model's probability and the market's implied probability.

Implied Probability = 1 / Decimal Odds Example: Odds of 2.00 = 1/2.00 = 0.50 or 50% Example: Odds of 1.80 = 1/1.80 = 0.555 or 55.5% Example: Odds of 3.50 = 1/3.50 = 0.285 or 28.5%

Positive odds: Implied Probability = 100 / (Odds + 100) Example: +150 = 100/250 = 0.40 or 40% Negative odds: Implied Probability = |Odds| / (|Odds| + 100) Example: -200 = 200/300 = 0.666 or 66.6%

Sportsbooks build a margin into their odds—this is why the sum of implied probabilities for all outcomes exceeds 100%. This margin is called the "overround" or "vig." Example: - Team A: 2.00 (Implied: 50%) - Draw: 3.50 (Implied: 28.6%) - Team B: 4.00 (Implied: 25%) - Total: 103.6% The 3.6% overround is the sportsbook's built-in edge.

Because of the overround, you must overcome the sportsbook's margin just to break even. If your model says Team A has a 50% chance to win, and odds of 2.00 imply 50%, you're actually at a disadvantage—you need slightly better than 50% true probability to have +EV.

This is the core of value betting: 1. Calculate implied probability from odds 2. Your model calculates true probability 3. If Model Probability > Implied Probability = Potential Value Example: Odds of 2.10 imply 47.6% probability. Your model says Team A has 52% chance. Edge = 52% - 47.6% = +4.4%