Implied probability, explained

Every price is a probability in disguise. Converting prices into probabilities is what lets you compare a sportsbook moneyline, a Kalshi contract and a model output on the same scale.

From a contract price

Divide the price in cents by 100. A YES contract at 58¢ implies 58%. A NO contract at 58¢ implies 58% that the answer is no, so 42% that it is yes.

From American odds

• Negative odds (favorite): probability = |odds| / (|odds| + 100). −150 implies 150 / 250 = 60%.
• Positive odds (underdog): probability = 100 / (odds + 100). +180 implies 100 / 280 = 35.7%.

Removing the vig

Add both sides of a sportsbook market and you will get more than 100% — that overage is the book's margin. Divide each side by the total to get the no-vig probability. If the two sides imply 60% and 45% (105% total), the fair numbers are 57.1% and 42.9%. Compare no-vig numbers only; comparing raw prices makes every market look worse than it is.

Why it matters

An edge only exists when a model probability beats the price after costs. A 2-point gap on a contract with a wide spread is noise; the same gap on a liquid market can be real. QB1 applies a minimum actionable edge for exactly this reason and returns PASS when the gap is too small to matter.