# Sports Betting: From Real Probabilities to Implied Probabilities - A Case Study - The Sports Mirror - Sports News, Transfers, Scores

The quintessential nature of successful sports betting is counterintuitive to guesswork and analytical in its approach.

In other words, you stand very little chance of winning any bets if you guess who will win. Successful wagering requires the rigorous study of the teams or individuals that are playing each other in the match. And, it includes the conversion of betting odds into implied probabilities.

Sportsbooks use real probabilities to calculate betting odds. They also add a bookmaker’s edge of these odds. Therefore, the published betting odds are the real probabilities plus the bookmaker’s edge.

Calculating real probabilities versus implied probabilities

Wikipedia.com highlights the fact that a “bookmaker strives to accept bets on the outcome of an event in the right proportions in order to make a profit regardless of which outcome prevails.”

And, this is achieved by adjusting the true odds downwards. In other words, the sportsbook, like the sports betting agency that developed the 888sport mobile app, will pay out winnings based on its calculated odds and not the true or real odds.

Let’s describe this concept by considering the following case study:

There can only ever be one of three outcomes to a European football match, win, lose, or draw. These outcomes are capable of being expanded to the following, home win, away win, or draw. And only one team will win or lose. The only equal outcome is the draw.

Consequently, let’s look at an example of this:

Home: Even.

In other words, there is a 1-1 (1/2), or 50% chance of each team winning at home. An even probability indicates this.

Draw: 2-1

Away: 5-1

The implied probability calculation is as follows:

The implied probability of an outcome is stake / total payout.

Home win = 1/2 = 50%

Draw = 1/3 = 33.34%

Away: 1/6 = 16.66%

These percentages add up to 100%, which is considered a fair or balanced book.

In order to make a profit, the sportsbook must reduce these odds in a ratio of 3:2:1.

Therefore, after the application of this ratio, the odds are as follows:

Home: 4-6 = 3/5 or 60%

Draw: 6-4 = 2/5 or 40%

Away: 4-1 = 1/5 or 20%

These percentages now add up to 120%

Therefore, in this scenario, the bookmaker’s edge or overround = 20%. In other words, it is the bookmaker’s expected profit, and in an ideal world, it is the sportsbook’s profit.

Therefore, the total pay-out calculations are as follows:

A home win bet of £60 at 4-6 wins £100.

A draw bet of £40 at 6-4 wins £100.

An away bet of £20 at 4-1 wins £100.

The sportsbook receives £120 and only pays out £100. Therefore, the extra £20 is the overround, and it represents a 16 2/3% profit on turnover.

Final thoughts The calculations in this case study are merely a simplified example. In reality, sportsbooks use much more complex formulae and algorithms to calculate the betting odds it offers in relation to the real probabilities.