Implied probability
Updated November 10, 2026
Implied probability is the chance suggested by a contract’s price on a $1 binary (for example, 63¢ → ~63%), before fees and spread. It is a market quote, not a guarantee the event will happen at that rate.
You think a rate cut is 55% likely, but the yes contract trades at 48¢. The market’s implied probability is 48%, 7 points below your view. If your estimate is well calibrated, buying yes at 48¢ has positive expected value (roughly 55% − 48% = +7¢ per $1 contract before fees). If you must pay the ask at 51¢, recalculate: with Lumina's fee and commission, break-even rises to 52.1785% and EV falls to +2.8215¢.
- Your estimate of a rate cut
- 55%
- Implied probability at 48¢
- 48%
- Expected value per $1 contract at the 51¢ ask
- +2.8215¢
- After the 1.1785¢ fee and commission; break-even 52.1785%
- Lost per contract if there's no cut
- −52.1785¢
- Bought at the 51¢ ask, fee and commission included
Implied probability links price language to forecast language. Run the same conversion in the odds ↔ probability calculator.
Sportsbook odds require stripping vig before implied probabilities sum to 100%. Liquid prediction market binaries often sum near 100% across outcomes by construction—approximately, not exactly.
How to calculate implied probability
The conversion depends on how the price is quoted.
| Quote format | Formula | Example |
|---|---|---|
| Prediction market price (on $1) | price ÷ $1 | 38¢ → 38% |
| American odds, positive (+X) | 100 ÷ (X + 100) | +163 → 100 ÷ 263 ≈ 38% |
| American odds, negative (−X) | X ÷ (X + 100) | −150 → 150 ÷ 250 = 60% |
| Decimal odds | 1 ÷ decimal | 2.63 → 1 ÷ 2.63 ≈ 38% |
A prediction market price needs no conversion because the payout is a fixed $1. Sportsbook odds give a raw figure that still includes the book's margin, which no-vig / fair odds removes.
Which price to use
A contract shows a bid, an ask and a last trade, and each gives a slightly different implied probability. The mid, halfway between bid and ask, is the usual reading of the market's estimate. The price you would actually pay is the ask, plus fees.
In the rate-cut example, the contract trades at 48¢. Buying now at the 51¢ ask, with Lumina's $0.01 per-contract exchange fee and 0.35% commission on top (1.1785¢ at that price), puts the effective cost at 52.1785¢. That makes 52.1785% the break-even probability for the trade, about four points above the 48% the screen shows. Statements and confirmations show amounts rounded to the cent. The break-even probability calculator runs it for any price.
Questions with more than two outcomes
When a topic lists several mutually exclusive outcomes, their yes prices should sum near $1. If they sum to more or less, divide each by the total before reading them as probabilities. Illustrative figures: three outcomes at 40¢, 35¢ and 30¢ sum to $1.05. Normalized, they read as about 38.1%, 33.3% and 28.6%.
FAQ
How do you convert a price to implied probability?
On a $1 contract, read the price in cents as a percentage: 63¢ is about 63%. Use the mid for the market's estimate and the ask plus fees for your own break-even.
Is implied probability the real probability?
It is the market's current estimate, read from a quote. Whether prices like it have matched outcomes over time is a separate question, measured through calibration.
How do you calculate implied probability from American odds?
For negative odds, divide the odds by the odds plus 100. For positive odds, divide 100 by the odds plus 100. At −110, that is 110 ÷ 210, or about 52.4%.