Fair Value: Rory McIlroy

Rory at the Arnold Palmer Invitational

With five tournaments under his belt for the 2020 season, Rory McIlroy has yet to finish outside the top five. It has been quite a run for Rory, who will look to keep the momentum going Thursday at the Arnold Palmer Invitational in Orlando. After finishing tied for sixth at the tournament last year, McIlroy enters as the clear favorite to take home the trophy. Let’s take a look at his betting odds:

Source: Draftkings Sportsbook

Using these odds, we can determine Rory’s fair value price, and for simplicity’s sake, we’ll ignore the implied vig. First, we convert each of the odds above into probabilities, and then multiply those probabilities by the Jock MKT final ranking payouts listed below to get to our fair value for Rory.

If you don’t know how to convert odds to percent probabilities, we’ll walk through one quick example: +500 is another way of saying 5 to 1, which means if this tournament was played 6 times, Rory would win once and not win the other 5 times. Therefore the probability of him winning is 1/6 or 16.7%. His odds of finishing in the top 5 are 1.25 to 1, or 44.4%. Because we’ve already accounted for him finishing 1st, we subtract 16.7% from 44.4%, and his odds of finishing between 2nd and 5th is 27.8%. Repeating this process through the remainder of the rankings, we get the following:

Source: Draftkings Sportsbook

Next we add in the average Jock MKT payouts for each tier to the table above, multiply each by the odds in the table above, and sum those products to come up with our fair value.

Source: Draftkings Sportsbook

Averaging out the payouts for each tier, and using the calculated probability that Rory finishes in each of these slots, we come up with a fair value of $25.81, which corresponds to about a 7th place finish.

How does that match up with your prediction? Who else do you think is undervalued? IPO opens Wednesday at 9am ET, put your money where your mouth is!

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