Implied probability

Take a decimal price and divide 1 by it. In this worked example, 1.72 becomes about 58.1% and 2.15 becomes about 46.5%. Those numbers are not prices from this preview.

The raw percentages in that example add to more than 100%. That extra is the vig, covered in the next note. Strip it out and you get a fair split that adds to 100%. People sometimes stop at the raw number and treat it like a forecast. The fair number is still just the price with the margin removed.

Shorter decimals mean a higher implied probability. 1.45 is a shorter price than 2.75, so the first side is the favorite in the example. Favorite is a description of the price, not a reason to back that side.

For informational and entertainment purposes only. Not betting or financial advice.