Question 1

What is implied probability?

Accepted Answer

Implied probability is the chance an outcome has according to its price: one divided by the decimal odds. It is the price restated as a percentage, and it still contains the venue's margin.

Question 2

Why do the probabilities in a market add up to more than 100%?

Accepted Answer

The excess is the overround, the venue's theoretical margin on balanced action. Normalising the probabilities so they sum to 100% gives the margin-adjusted reading, which is the figure worth comparing across venues.

Question 3

Which odds format should I work in?

Accepted Answer

Decimal, for analysis. Implied probability is simply one divided by the decimal price, so decimal removes a conversion step. American and fractional notation carry exactly the same information.

Question 4

Does a shorter price mean an outcome is more likely?

Accepted Answer

It means the market prices it as more likely. Price is the market's aggregated estimate, and it can be wrong — but it is an estimate informed by everyone transacting in that market.

What is implied probability?

Why do the probabilities in a market add up to more than 100%?

Which odds format should I work in?

Does a shorter price mean an outcome is more likely?

Related