Favourite and underdog: what the labels actually encode

The favourite is the side the market makes more likely to win, and it carries the shorter price — negative in American, under 2.00 in decimal, odds-on in fractional. The underdog is the other side, at the longer price. The labels are statements about likelihood as priced, not about quality, form, or which team is better.

The two labels are just the two ends of one number. A price cannot say one side is likely without saying the other is unlikely, so favourite and underdog are created together by a single act of pricing. The size of the gap between the two prices is the market's statement about how lopsided it thinks the contest is.

A market with no favourite exists and is called a pick 'em: both sides are priced the same, and neither label applies. On a spread, the labels attach to the moneyline while the spread itself is designed so that both sides of the number are close to a coin flip.

That is also the expensive part. 'Favourite' gets heard as 'safe' and 'underdog' as 'value', and neither word means either thing. Favourites lose regularly, that is what the price already says, and a long price on something that rarely happens is not an opportunity by virtue of being long.

What to do with it. Whenever you notice yourself preferring a side because of its label, restate the bet as the raw transaction — risk this to win that — and see whether you still want it.