What is Implied Probability?
When you look at odds on DraftKings or FanDuel, you aren't just seeing a payout multiplier; you are seeing the sportsbook's assessment of the exact probability that an event will occur. Implied probability is the conversion of these betting odds into a percentage.
The Math Behind the Odds
For American odds, the formula changes depending on whether the odds are positive (underdog) or negative (favorite). For negative odds (e.g., -150), the formula is Odds / (Odds + 100). So, 150 / 250 = 60%. The sportsbook believes there is a 60% chance that team will win. For positive odds (e.g., +120), the formula is 100 / (Odds + 100). So, 100 / 220 = 45.4%.
Finding the Edge (+EV)
Once you know the implied probability, you can compare it to your own prediction models. If your physics-based simulation or statistical model determines a team has a 65% chance of winning, but the sportsbook's implied probability is only 60%, you have found 'Positive Expected Value' (+EV). Consistently betting on +EV lines is the only mathematical way to beat the books long-term.