Lecture Three: Implied Odds
• What are implied odds?
To make things more complex, expressed pot odds are not the full story. Expressed odds assume that there is no more betting to come, and therefore that the amount you will win is the amount that is currently in the pot. Of course, in real life, often you will be able to win another bet or two from your opponent when you do hit your hand.
Implied odds, then, are odds that take into account future betting. Implied odds are often the real odds you need to calculate when thinking about your hand. Instead of taking the ratio of the pot to the call you have to make, you should instead take the ratio of what the total pot will be to the call you have to make.
Let’s take the example from Lecture Two where you are 4:1 to win the hand and are being given pot odds of 2:1. Now let’s say that, when we hit our hand, we will be able to bet the pot again, and get a call. Our pot-sized bet on the river will therefore be:
$200 in the pot, plus our $100 call = $300.
The total pot we will win is therefore $500 (the $200 currently in the pot, plus the $300 we will win on the river).
So our implied odds are 500:100, or 5:1.
Now we can see that our unprofitable call has turned into a profitable one.
Doing the maths…
We win 1 time x $500 = $500
We lose 4 times x $100 = - $400
Our expectation on the hand has changed from minus $200 to plus $100 over five hands, and our total expected value has changed from minus $40 to plus $20. So, if we know our opponent will call a bet on the river, we can now profitably make the call on the turn.
Instead of just assuming we should fold all the time when given incorrect expressed pot odds to call, we should take our interpretation of the fundamental theorem to mean that we should fold when we are not getting the correct implied pot odds to make the call. We should also remember our opponent’s implied pot odds when we are looking to giving them the incorrect odds to call. Often it will turn out that giving our opponent incorrect odds to draw will not be possible, as it would mean betting very large amounts to win small pots.
The simplest way of reducing our opponent’s implied odds is to be capable of folding more often when they have hit a hand that beats us. That way, we can simply offer our opponent incorrect expressed pot odds to draw to their hand, and know that they are making a mistake by believing they have the implied odds to call and outdraw us.
• Why shouldn’t we try to give our opponent incorrect implied odds to call?
Let’s look at a situation where our opponent is drawing to a flush draw on the turn. Again, the pot will be $100. Now let’s say both us and our opponent have $1,000 stacks. Since I know that my opponent can win a pot-sized bet on the river if he hits his hand, why shouldn’t I just bet, say, $500? In this case, my opponent will be offered incorrect implied odds in the hand. His implied odds work out to be 2.2:1, so he will not be able to make a profit on the hand by calling this bet with a draw. Well, if our hands are face-up, that bet would be fine (probably not optimal, but profitable). Since we know our opponent is drawing to a flush, we can now offer him incorrect implied odds to make this call.
However, in real life, we can’t see our opponent’s cards. Now we are faced with a situation in which some of the time we will be betting against an opponent with a flush draw, but some of the time against an opponent with a made hand, and some of the time his made hands will be better than our hand.
The danger is that when we bet $500 into a $100 pot, my opponent will fold all his weaker hands and all his draws, and call only when he has us beat. The first obvious problem with this is that it runs contrary to the fundamental theorem of poker; we are allowing our opponent to make the correct play and fold when we have him beat. The second problem is connected to this; we will win $100 some of the time, when he folds, but when he calls we will lose $500, or worse, our whole stack on later streets. Even if we never put in any more money when called, our opponent only needs to have a better hand than us more than one time in five for us to be making a loss on the hand.
To be continued…
Week One: Introduction
Week Two: Lecture One: Calculating Equity
Week Three: Lecture Two: Basic Pot Odds
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