Definition
Implied probability is the win percentage embedded in a betting price. Convert American odds: for negatives, divide absolute value by (absolute value + 100). For positives, divide 100 by (odds + 100). For decimals, divide 1 by the odds. Books shade both sides above true probability to build in margin. If your estimated true win probability exceeds implied probability, the bet has positive expected value. Implied probability is the baseline all handicapping must beat.
Worked Example
Line: Patriots −180. Implied probability = 180 ÷ (180 + 100) = 64.3%. If your model says Patriots win 68% of the time, the edge = 68% − 64.3% = 3.7%. Opposite side at +155 implies 100 ÷ (155 + 100) = 39.2%. Combined: 64.3% + 39.2% = 103.5% — confirms 3.5% vig margin.
Why It Matters
Every betting decision reduces to one question: does your estimated probability exceed implied probability? If yes, bet. If no, pass. No other metric matters more.