What are Implied Odds?
Implied Odds are a percentage representation of the prices set by an oddsmaker representing the perceived likelihood of a team winning.
Let’s look at a tennis matchup. The odds, in Decimal format, are:
Nadal – 1.66
Djokovic – 2.20
The prices tell us who the underdog and who the is the favourite, as well as how much we would have to bet to win a certain amount. Prices are more than that though. Prices can be converted into something called implied odds, which is one of the most important concepts to understand on your way to becoming an intelligent picking machine.
When oddsmakers set the odds, what they are really doing is assigning a probability to each team’s chances of winning, expressed in percentage terms. Looking at odds in terms of these percentages can sometimes help make sense of what the best decision is.
Let’s convert each player’s moneyline odds into the probability of them actually winning, from the perspective of the oddsmaker. The formula to convert decimal odds to implied probabilities is simply 1 divided by the decimal price.
So the implied probability for Nadal is:
1/1.66 = .602
1/2.20 = .454
Multiply each by 100 to turn it into a percentage and we get:
Nadal – 60.2%
Djokovic – 45.4%
Looking at odds in percentage terms helps to pose the fundamental question being asked by every oddsmaker:
“Do you think that Nadal will win against Djokovic in the same situation more than 60.2% of the time, or do you think that he will win in the same situation less than 60.2% of the time?”
Picking Nadal to win is a declaration that you in fact do believe that he will win in that situation more than 60.2% of the time.
Picking Djokovic to win on the other hand is the same as saying that you do not believe that Nadal will win in the same situation more than 60.2% of the time.
Every time you make a pick, take the time to calculate the implied odds and ask yourself that fundamental question of whether you think the team is better or worse than the odds imply.