Implied Odds

Let’s look at a baseball matchup. The odds, in American format, are: 

       

       Cleveland +180

       Toronto -220

 

Now that we know how to read odds, we know that to pick Toronto, we’d have to risk 220 to win 100. If we picked Cleveland instead, we’d win 180 if we risked 100.

 

But what are we supposed to do with this information? 

 

We look at 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 team’s moneyline odds into the probability of them actually winning, from the perspective of the oddsmaker. The formula is slightly different for favorites and underdogs:

 

         Amount you need to risk to win 100 / (Amount you need to risk to win 100 + 100) = 

 

In the case of Toronto at -220: 

                                                              220 / (220 + 100) = 0.6875

 

                                                   100 / (Amount won when risking 100 + 100) = 

                                                                       Underdogs Percentage

 

In the case of Cleveland at +180:

                                                               100 / (180 + 100) = 0.3571

 

Looking at odds in percentage terms helps to pose the fundamental question being asked by every oddsmaker:

 

“Do you think that Toronto will win at home with Halladay pitching more than 68.75% of the time, or do you think that they will win in the same situation less than 68.75% of the time?”

 

Picking Toronto to win is a declaration that you in fact do believe that they will win in that situation more than 68.75% of the time.

 

Picking Cleveland to win on the other hand is the same as saying that you do not believe that Toronto will win in the same situation more than 68.75% 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.