Whenever you try to identify value in the world of sports betting, you are looking at opportunities that revolve around misplaced odds that may not safeguard the bookmaker from the volatility of odds. It’s a simple case of identifying which betting chances are real markers of inspired decision-making, and which are shots in the wind.
Implied probability, as the name suggests, is the percentage-showcased chance of an event occurring. It’s a translation of the odds, meant to identify what they represent in terms of the likelihood of an outcome. When a bookie puts forth its offering of odds, it launches its opinion on the market.
While the standards are usually at the same height, most bookmakers try to tweak the odds in various forms for multiple reasons. There are cases like promotional, boosted odds, home team advantages, or miscalculations. Constant market analysis from BetOnValue showcases that there are always bookies that go against the norm and provide different odds than those around them.
Implied probability is a statistic that you get out of a simple equation that we’ll showcase below. You can use it to see if the sportsbook overextended, if it’s right where your estimation lies, and if there is an opportunity to eventually tune into some particularly beneficial bets!
Explaining Implied Probability: Raw Odds
If you are to enter the arena of sports betting as a beginner, you need to get a hold of a few standardized concepts.
Firstly, you need to remember that the odds that you see at virtually any sportsbook are not the direct equivalent of probability. Yes, bookmakers use calculation models and incredibly intricate software with significance on the scale of the levels of automation that sift through incredibly large datasets. They have very intricate and well-trained models that generate calculations that aim to set the probability of an outcome at a certain percent.
Once they understand the probability of an outcome, they have what they call ‘raw odds.’ These are the actual odds of something happening within a sports event, but they are not the final format. The calculation model may simply lack an understanding of the value of a team's home atmosphere, even if something like that would be a visible element that could be determined from data.
The next step is to actually add their edge. In typical sports betting linguo, the edge is a small, albeit significant enough advantage that provides a theoretical advantage to an outcome, generating more cash within that certain structure.
In the case of sportsbooks, the edge, otherwise known as the juice or the vigorish, is a permanent addition that the bookie adds to every set of odds. It’s a small additional value that comes from the rounding of odds. This means that every time you bet on an outcome and its respective odds, you are paying for modified odds that are not a direct reflection of the raw probability.
As we will see in the examples provided, calculating the implied probability of a set of odds involves determining its actual value. It means that you are about to notice a skewed set of probabilities that you may find either incorrect or just generous.
If the implied probability of the odds is the same as the actual probability of an outcome, you will generate an edge for yourself because the vigorish wouldn’t necessarily be relevant. If you calculate the outcome of an event at 54%, and the odds have the same implied probability, it means that the juice should’ve added a few more percentage points to the odds. Since they do not nudge the odds above your calculated number, you have an edge by negating the house edge.
Case 1: Decimal Odds
The standard type of odds that you see across the world is the set of decimal odds, popular across Europe, Canada, Australia, and many other parts of the world where continental European influence has permeated for geopolitical reasons. While not necessarily a given, we can say that they are the most popular type of odds.
The formula for them is simple: the Probability (P) equals 1/Odds.
If you have 2.65 odds, you would have a 0.37 final result. The 1 from above, which is the certainty (100%), means that 0.37 translates as 37% probability. This would be the underdog team in a 2-outcome event.
If you have 1.47 odds for the favorite, you would have 0.68 as the result, which means that 68% would be the implied probability.
Adding them translates into a total of 105%, in which most of what goes beyond 100% is the house edge. Your edge would come from the fact that one of these two probability sets is actually accurate according to your own calculations, while the other is an overextension.
Case 2: Fractional Odds
We will be a bit more straightforward with the other two odds categories since you’ve already understood why there is a margin that you can exploit when the casino misplaces its odds.
The case of fractional odds, which are the go-to model in the world of British betting culture, showcases a bit more of a complicated formula.
In this case, the Probability is the Denominator/Numerator + Denominator.
For 3/2 odds, the denominator is the number from below/after the slash (2), while the numerator is 3. You would have 2/2+3, which would mean that the result is 0.4. Naturally, the probability is a sharp 40.
On the other hand, a set of odds for 65% implied probability is about 8/15, which showcases the edge being at 5% in terms of probability markers.
Case 3: Moneyline Odds
With moneyline odds, which are the American way, you have two subsets: negative and positive moneylines.
For positive moneylines, the Probability is 100/ML + 100. For negative moneylines, the formula is the same, except the negative moneyline number is converted into a positive one for this particular calculation.
An underdog with +230 odds would be at around 30% probability, while a favorite with a -300 line would be at around 75% win probability. Once again, there is an edge that you will find strongly attached to the favorite.
Conclusion
To conclude, all types of odds have a formula that gives you a clear indication of what the bookmaker has chosen to launch on the market in terms of its offering. It gives you a level of transparency when it comes to where exactly the edge comes from, especially if you’re looking to give yourself the upside.
However, even if you’re looking to go for money-positive outcomes, please understand that you should give yourself the chance to be sustainable and play responsibly!