You see it constantly at the ESPN bottom line – “Team X has a 73% of winning”.
This is an example of implied probability. In the simplest terms, implied probability is the conversion of betting odds into a percentage. The percentage gives you the likelihood of an outcome happening. This is very intriguing when looking at sporting events, but it can also improve your handicapping and betting skills.
How do you calculate implied probability?
As mentioned above, implied probability is essentially converting the betting odds into a percentage. Since we’re looking for the probability of a team winning or losing, we will focus on the moneyline odds.
Let’s use this week’s Battle of Pennsylvania as our example. As you can see below, currently the Philadelphia Eagles are huge favorites over the Pittsburgh Steelers with their moneyline odds of -460 to win the game. The Steelers odds to win are at +370.
When calculating implied probability, there are two separate formulas used – one for the favorite and one for the underdog. The formulas are below. Let M = moneyline odds.
FAVORITE: M / (100 + M) * 100
UNDERDOG: 100 / (M + 100) * 100
Here’s how our scenario would look:
Eagles: 460 / (100 + 460) * 100 = 82.14% chance of winning
Steelers: 100 / (370 + 100) * 100 = 21.27% chance of winning
Looking quickly at the numbers, you will notice that the chance of winning for each team lines up with Philly being a huge favorite. However, one detail is that if we add up the 82.14 and 21.27, it equals 103.41. Shouldn’t it be 100%? The amount above 100% is the juice or vig that the sportsbook is charging on the bet.
In order to get the true odds, you would need to remove the vig from the implied probability. Once removed, the two percentages will equal 100%. Using the results from our earlier calculation, it would read as:
Team A Implied Probability / (Team A Implied Prob + Team B Implied Prob)
Eagles: 82.14 / (82.14 + 21.27) = 79.43
Steelers: 21.27 / (21.27 + 82.14) = 20.57
The true odds for Philly to win Sunday’s game are 79.43% with the Steelers having a 20.57% chance to pull the upset.
How to use implied probability with sports betting?
Understanding the implied probability of a matchup can help you find valuable plays where a bookmaker may have overpriced or underpriced a team. If your handicap shows the Steelers having better than a 21% chance of winning the game outright then a moneyline bet on the Steelers may be worth it.
It can also provide a clearer understanding of sportsbooks odds. The more you calculate implied probability, the easier it will be to assess the likelihood of a team winning or losing. When you see -200, you’ll know that team has roughly a 66.7% chance of winning the game.
Implied probability formulas can be used in the future market as well. Since there are so many outcomes and betting possibilities for a future bet, finding undervalued bets is pretty common. Using the implied probability calculation can help find those long-shot winners.