We’re pretty sure you’d bet on heads. It’s the obvious choice. You’ve got a 50% chance of winning either way, but the potential payout is significantly higher for heads. Who wouldn’t want to win RM30 instead of just RM15?
A wager on heads here offers positive value. How do we know this? Because the chances of it winning are greater than the implied probability of the odds.
At this point we should explain how to calculate implied probability. This is actually very simple, especially when working with odds in the decimal format. All you need to do is apply the following formula.
1 / Odds
This will always give you a number between 0 and 1, which is technically the “correct” way to express probability. However, it’s much easier to work with probability as a percentage. That’s why we usually apply the following formula instead.
(1 / Odds) x 100
This formula will give you the implied probability of odds as a percentage. As you can see, it’s pretty simple. If you’re working with odds in a format other than decimal, you might like to use our odds converter tool. This will do the necessary calculations for you automatically.
Let’s apply this formula to the odds for heads in the above example.
(1 / 3.00) x 100 = 33.33%
This tells us that the implied probability of the odds for heads is 33.33%, and we already established that the actual probability of a wager on heads winning is 50%. Since 50% is greater than 33.33%, we know that a wager on heads at 3.00 offers positive value.
Let’s apply the same formula to the odds for tails.
(1 / 1.5) x 100 = 66.67%
The actual probability of a wager on tails winning is also 50%, which is LESS than the implied probability of the associated odds. Therefore, a wager on tails at 1.5 offers negative value.
Now that you know how to determine whether a wager has positive value or negative value, there’s another key point we need to make.