Implied Probability | The Chance Of An Event Occurring

One important limitation of implied probability is that bookmaker odds are not usually based on a perfectly fair market. Instead, bookmakers build a profit margin into their prices, often referred to as the overround.

In a perfectly fair two-outcome market, the implied probabilities would add up to exactly 100%. For example:

• Team A = 50%
• Team B = 50%
• Total = 100%

In reality, bookmakers typically shorten their odds slightly to create a margin. This causes the combined implied probabilities to exceed 100%.

For example:

• Team A = 52%
• Team B = 52%
• Total = 104%

In this example, the additional 4% represents the bookmaker’s margin. The higher the overround, the more difficult it generally becomes for bettors to achieve long-term profitability.

This is one reason why many experienced bettors compare prices across multiple bookmakers, use betting exchanges, or seek out lower-margin sportsbooks. Even small differences in overround can have a significant impact on long-term returns.

When using implied probability, it is therefore important to remember that bookmaker prices do not necessarily reflect the true probability of an event occurring. They reflect the bookmaker’s assessment of that probability plus a built-in margin designed to generate profit.