Calculating Implied Probabilities for Sports Betting Odds: Purpose and Usefulness for Gambling

Would you like to get into some of the most important mathematical processes in sports betting?

If you have this kind of curiosity and want to give it a go, including as part of a foray into football analysis and predictions, implied probabilities are some of the most important calculations that you can make.

In this article, we will prove just that in a prompt setting that will give you a pretty good idea about what to expect from these probabilities.

We will talk about them as a tool to decipher the nature and arc provided by sports betting odds, their effectiveness in determining value on the market, but also how to simply turn odds into a percentage.

Naturally, the result is not the mere probability that a sportsbook attaches to an outcome, which is why this article will require a bit more contextualization for the sake of painting the big picture.

Before we start getting into the subject per se, please note that this article constitutes no attempt at giving betting advice, nor does it try to influence your decision-making.

We simply want this piece of aid to help your attempts at understanding the numbers of sports betting and influence you toward one thing only: responsible gambling!

Implied probabilities as part of the oddsmaking process

To understand what defines the result that you’ll find in any conversion of odds into implied probability, you need to understand what goes into the process of oddsmaking.

We’ll provide you with a succinct explanation that contextualizes it because you’ll realise that you need to do some additional adjustments.

Sports betting odds, especially the first ones that appear in the build-up to an event, are the result of a calculation that accounts for 3 major things: the sports performance aspect, the off-field context, and the house edge.

• The performance aspect, which is the purest of them, relies exclusively on the nature of sports. It takes perceived squad value, recent form (for the team as a collective, but also for its players that share the talisman tax), match-up history, roster health, and other such elements. They become data points that influence a complex calculation.
• The context is mostly an off-field situation, accounting for perceived turmoil or morale (which may be evident, but not in earnest), rivalry, match significance (if the competitors are fighting for something), weather, and game atmosphere (the stadium/arena, fanbase, etc.).
• The vig, also known as the overround or juice, is the house edge, which is an addition to the odds, slightly increasing the price. This is the reason why, as you’ll see, adding up the implied probability percentages for an event will result in over 100%. Since there tend to be standard ranges for vigs, using a devigging tool will help find the real, reasonable value of a price.

This should tell you that the immediate implied probability of most of the odds that you see is not the real one.

You’ll want to use this thing as a matter of standard, which should send you to a process that is all about really deciphering what the sportsbook really thinks about a game, and which odds are the closest set of odds to a fair value.

For American Moneyline Odds

The situation around American moneyline odds is that we must consider the fact that we’re dealing with either positive or negative odds.

If you’re not entirely familiar with these odds, the negative odds (those with a minus before them, naturally) are the representation of the favorite to win, while positive odds are for the underdog.

The formula is the following:

• Implied Probability = 100 / Odds+100 (applies to the underdog).
• For the favorite, it’s IP = ∣Odds∣ / ∣Odds∣ + 100

As such, a favorite with -150 odds would have 60% implied probability of winning, while +120 odds would mean around 45% chances of winning.

The 5% overround from the total probably means that either one team has inflated winning probabilities, or (the likelier scenario), both odds have juiced-up values.

To make full use of this, you’ll probably have a really good strategy by devising these odds, but also seeing what the spread is for a game, which is really popular in the States.

If you feel like the moneyline and the spread are not in tune, one of them is probably not in the best position, and a sharper tweak of your calculations can help you to this effect.

For Continental Decimal Odds

If you are from Europe, Canada, Australia, or most of the world without significant British influences, you’ll see decimal odds as the most popular representation of odds.

It’s no wonder that the implied probability of such odds is popular for association football, for example.

Before we provide you with the formula, we’d like to add the fact that most of these odds have very similar implied probability calculations, and their representation and meaning are also quite the same. However, the tweaking of odds may feel a bit more fine-tuned.

There’s also the fact that odds can include your bet within their value when calculating the possible win.

For decimal odds, you’ll quickly realize that such a set includes the stake, which slightly complicates your final complication when trying to understand the pure profitability of such odds.

You’ll need to use this formula to calculate the implied probabilities of such odds:

Implied Probability = 1 / Decimal Odds

As you can see, this is a very simple formula, which means that

• 2.50 odds represent 40% in implied probability (home team, the 1 in 1x2)
• 4.30 odds equate to circa 23% (a draw, aka the X)
• 2.40 odds are circa 43% (the 2 in 1x2, aka the visitor’s win).

For British Fractional Odds

The fractionals may appear complicated, and there is certainly some understandable concern about the fact that a casual would need to know how to play with numerators and denominators.

It’s not the end of the world, even for someone just trying to decode a simple set of odds.

If you’re trying to think of fractional odds, you should know that the UK and Ireland are using them, which makes them a bit niche outside of the British Isles sphere.

In this case, the Implied Probability = Denominator / Numerator + Denominator

The denominator, as the profitability mark, tends to be the higher number, while the numerator is the stake number, which requires quite a few tweaks for the odds to be relatively simplified.

For example, a simple 5/1 set of odds will equate to almost 17% in implied probability percentages.

This means that a percentage as high as 70% would come with a set of odds 3/7, which means that an overwhelming favorite (or a favorite, at that) tends to have a higher numerator than the denominator.

Conclusion: Use them responsibly!

The ultimate purpose of implied probabilities remains the idea of comparative analysis.

If you see the implied probabilities of devigged odds, you can use them as a term of comparison and change the percentages in such a way that sets up your own odds.

Based on your personal price and ensuing standard, you can look for odds on the market, and choose to bet on the price that fits your price in a better way.

The closer your price (odds recalculated after tweaked implied probabilities) is to the bookmaker’s odds, the better that price will be from a fairness standpoint (per your standards).

As such, you should remember that online gambling’s true calling is to help you have fun.

Even if these calculations allow you to find value, don’t let such a process consume you to the point of obsession. Please gamble responsibly!