Knowing how to convert betting odds can be very helpful. If you don’t know how to calculate implied probabilities from betting odds you are hurting your chance of making a profit.
Implied probabilities are useful whether you are betting on single games, futures, props or live wagering. To determine if one of these wager types offers value one must understand the implied odds behind the bet. If your assessed probability (how often you think a team will win) in a certain game is higher than the implied probability the wager offers a value betting opportunity.
How do you convert odds into their implied probabilities? It is easy and we are going to teach you.
Most wagers are expressed using money-line odds (-120 or +180) or fractional odds (3/2 or 5/1). Both tell you the same thing, how much money you will get back based on the amount of the wager you place. With football just around the corner, let’s use examples from the upcoming season to learn how to calculate implied odds.
The NFL season kicks off with a Super Bowl rematch between the Denver Broncos and the Carolina Panthers. Using SportsInsights free NFL odds we can see that Cam Newton and company are -120 favorites (bet $120 to win $100) over the Broncos who are +110 underdogs (bet $100 to win $110).
To calculate the implied probability of a minus money-line number (Panthers -120) you use the following formula.
Implied Probability = (-1 * Minus Money-line Odds) / ((-1 * Minus Money-line Odds)+100))
Therefore Carolina’s implied odds are (-1*-120)/((-1*-120)+100)) or 120/220 = 0.545 which converts to 54.5%.
To calculate Denver’s implied probability (or that of a plus money-line number) use this formula.
Implied Probability = 100 / (Plus Money-line Odds +100)
Therefore the Broncos’ implied probability is 100/(110 + 100) or 100/210 = 0.476 which converts to 47.6%.
The implied odds for the first game of the season suggest that Carolina has a 54.5% chance to win on the road in Mile High while Denver has a 47.6% chance to pull the upset as a 2.5 point underdogs. The odds favor the Panthers but here is a reason to like the Broncos in Week 1.
One of the most popular bets in Vegas is NFL futures, specifically odds to win the Super Bowl. Heading into 2016 the New England Patriots are 13/2 favorites to hoist the Lombardi Trophy. Here is how you convert fractional odds to implied probabilities.
Implied Probability = denominator/ (denominator + numerator)
Tom Brady and Bill Belichick’s implied probability of winning the Super Bowl is 2/(2+13) or 2/15 = 0.133 or 13.3%.
So now you know and like G.I Joe says, “knowing is half the battle”. With a better understanding of implied probabilities you should be able to understand what the odds are telling us and where value can be found.