Definition
American odds display payouts relative to $100. Negative numbers show how much you must risk to win $100. Positive numbers show how much you win on a $100 bet. A −150 favorite requires $150 risked to net $100 profit. A +130 underdog returns $130 profit on a $100 stake. Total return always equals profit plus original stake returned. Both sides of a standard market include vig, so the combined implied probabilities exceed 100%.
Worked Example
Chiefs −165 vs Bills +145. Bet $165 on Chiefs: win $100, collect $265 total. Bet $100 on Bills: win $145, collect $245 total. Chiefs implied probability: 165 ÷ (165 + 100) = 62.3%. Bills implied probability: 100 ÷ (145 + 100) = 40.8%. Combined: 103.1% — the 3.1% overage is the book's margin.
Why It Matters
Converting odds to implied probability instantly reveals whether a price is fair. Any market where your estimated true probability exceeds the implied probability is a positive-EV bet.