Explain it to me like I am 5: Implied Odds
Last time we explored the idea of Pot Odds, by drawing parallels to a “risk/reward” approach.
Let’s Shoot some Hoops!
Here is a quick review: For the basketball fans out there, think of Stephen Curry, arguably one of the best 3-point shooters in the history of the game. Even for a player like that, a 3-point shot is not a done deal. In other words every time Curry shoots for 3, he is risking missing the shot and possibly giving up the ball to the other team (risk) in an attempt to score 3 points instead of 2 for his team (reward). By analogy, every time a poker player calls a bet, they risk losing that bet in the hopes of winning the pot (reward).
So far so good, but this is not all! Both the rewards described above are potentially only the tip of the iceberg. In the case of Curry for example, scoring the 3 points may not be his only reward. He may also enjoy the love of the crowd, respect from his teammates, more game-time from his coach and even a better contract down the road! Of course, none of the above is certain, even if he makes the shot. Unlike increasing the score by 3 points which is a guaranteed reward, every other benefit beyond that is what we would call an implied reward and it is to a certain degree speculative.
Back to Poker
By the same token, a poker player may enjoy implied rewards too, since they can win more than just the current pot! Assuming there is more action left, they can also potentially win whatever money an opponent has left in their stack, possibly all of it! This is exactly the idea of Implied Odds in a nutshell.
Pot Odds were the ratio of ONLY the guaranteed reward over the risk
Implied Odds are the ratio of the TOTAL rewards (guaranteed and implied) over the risk
A Simple Example
In a full 9-handed $1/2 table with $200 effective stacks, the ever aggressive Alice raises to $6 from UTG with 5♠5♣. It folds around to Bob in the Big Blind. Bob – who usually likes to call – makes an uncharacteristic raise to $16. The action is back to Alice who now needs to wager at least another $10, if she wants to see the flop. This means that she will be risking $10 to win $23 (Bob’s raise of $16 + Alice’s old $6 + Small Blind’s $1) which equates to 2.3 – 1 in Pot Odds.
Should Alice make the call? Let’s see…
Good News/Bad News
Bad news is Bob almost certainly has the best hand here. According to Alice’s read, Bob likely has some sort of over-pair like AA, KK, QQ or even JJ. Occasionally, Bob may also show up with a hand like AK, but even then, Alice would be just slightly over a 50% favorite to win by the river. All in all, things do not look good for Alice.
Good news is Bob does not like to fold over-pairs, so if Alice spikes a red 5 on the flop, she can win a lot of money from him, possibly his entire stack!
A calculated Risk
Hitting a third 5 is not likely though, so Alice would need to be handsomely rewarded for the rather big risk she’s taking. The current Pot Odds of just over 2-1 are almost certainly not enough of a reward!
Here’s an idea: What if Alice calls with the sole intention to make a three-of-a-kind (set) on the flop? That way, if she misses she will only lose $10. However, if she hits she will likely win far more than just the $23 which is already in the pot! How much more? Well, this is where poker becomes more of an art and less of a science, but since Bob has another $184 in his stack, it is probably safe to assume that – on average – he would be willing to put at least another, say, $100 of that in the middle. This would be Alice’s estimated/implied reward!
Alice’s Implied Odds
Putting it all together:
Alice’s Risk: $10
Alice’s Guaranteed Reward: $23
Alice’s Implied Reward (Estimation): $100
Alice’s Total Rewards: $23 + $100 = $123
…and since $123 is 12.3 times bigger than $10 we conclude that:
Alice’s Implied Odds are around: 12.3 – 1 (rough estimate)
With Implied Odds as great as those, Alice should definitely make the call, especially since she also has position on Bob. Her Odds of flopping a set are not great (only 7.5-1 against) but her reward if she does is far bigger than that!
Pot Odds alone did not seem lucrative enough to Alice, who already put Bob on a very strong hand. Taking account Implied Odds however, she discovered that the price she was getting on her call was actually higher than she initially thought.
Of course, this naturally leads us to the question: What Odds are “good” for us and how can we come to that conclusion? This is a great question and the topic of our next discussion!