Value betting is one of the most widely used phrases in gambling, but unfortunately it is also one of the most misunderstood phrases as well. Complicating matters further are the multitude of different definitions of what constitutes value, and also the fact that bookmakers offer so many different types of bets on almost every sport imaginable.
Many gambling experts talk about looking for value in a bet, what they are really referring to is situations where your estimated odds are better than the odds offered by a bookmaker. When this happens, it can be said that the punter has a statistical advantage (if their estimated odds hold true), which is what most people refer to as a value bet.
This advantage can even be calculated as an expected return on investment (ROI), but the problem lies in the inaccuracy of the punter’s estimated odds, as it’s highly unlikely that you’re privy to knowledge that the bookmaker didn’t take into consideration when determining their odds. Still, as you may or may not know, a bookmaker’s odds aren’t necessarily what they think will happen, but instead each of the odds is inflated in a way that they think will attract equal bets on all possible outcomes.
Instead of being true market odds, bookmaker’s odds are equal parts marketing tool and a reflection of the betting trends, as the bookmaker constantly adjusts the odds to try to ensure they make a profit. It is more accurate to simply say the odds are the price of a bet, showing you how much you would win on a given stake. This is where value betting can come in, as it allows patient bettors to find a good deal when the bookmaker’s price is lower than the actual expected outcome.
Estimating the Odds
As mentioned earlier, the biggest problem with this type of value measurement is that it requires the punter to accurately estimate their own odds, which in turn requires a thorough understanding of probabilities and statistics. In truth, almost no one can accurately come up with an odds estimate off the top of their head with any regularity, as there’s a good chance that your gut feeling will be wrong much of the time.
This type of betting may work for people who only lay down a small bet now and again, but for serious punters, you need a way to accurately quantify the true mathematical probabilities. For match betting (picking which team will win), this requires some fairly detailed research and statistical analysis of a team’s last games, head-to-head records and other factors. This same type of analysis is also common when betting on horse racing as well.
It becomes a bit easier for bets like Over/Under Goals, as this only involves looking back at the total number of goals scored in both teams last games to estimate the probability of each outcome, while making an accurate prediction on bets with a larger number of outcomes, such as which player will score first, are nearly impossible to predict due to the huge number of variables.
If you’re statistically inclined, you probably already know how to do these calculations and might even enjoy them, but for the rest of us, there are a number of online services, spreadsheets and other tools that can help you more accurately estimate the true odds. These tools are an invaluable help, as sports betting is all about understanding the statistics and probabilities and using them to find the bets where you have the biggest advantage.
Expected Value vs. Advantage
To clear things up, there is only one true calculable “value” as far as gambling is concerned, and that is the expected value of a given bet, i.e., the amount you can expect to win or lose on average. You obviously want to try to find bets with the highest expected value, but again, this doesn’t necessarily mean a bet with low expected value is bad. This is because you can recalculate your advantage using your own odds estimate, which will be explained later on.
There is a simple formula to help calculate expected value, which can be useful if you’re taking a bet on face value (i.e., you think the bookmaker’s odds accurately reflect the true odds):
(Probability of Desired Outcome x Winnings) – (Probability of All Other Outcomes x Initial Stake)
After converting all of the possible odds to implied probabilities, the next step is to determine you potential winnings based on your stake. For decimal odds, simply multiply the stake by the odds, then subtract the stake to determine total winnings. It’s necessary to subtract the stake, as even though the punter gets it back, it doesn’t count as profit. Fractional odds like 2/3 mean you’ll win two units for every three bet, while 3/2 obviously means you’ll win three for every two (or 1.5 to 1).
To show you how this can be applied, we’ll look at a match between Manchester City (4/9; 1.44) and QPR (6/1; 7.00), where the draw is on offer at 10/3 (4.33). A £10 bet on QPR would win £60, and the probability of that is 14.29%, but would this bet pay off on average? Let’s plug these numbers into our formula, using a QPR win as the desired outcome, to see. (Remember we need to convert all of the odds to probabilities, then add the probabilities of the two losing outcomes together)
(.1429 x 60) – ((.6923 + .2308) x 10)
(.1429 x 60) – (0.9231 x 10)
8.574 – 9.231 = -.657
As you can see, our expected value is negative, which basically means that if you were to repeat the same bet over and over, on average you should expect to lose £0.66 for every £10 bet. So this obviously means that this bet has no value, right? Well, not exactly, as remember, the odds are merely the price of a bet, not a true estimate of the mathematical probabilities.
You’re not ever likely to find odds in your favour, as the bookmaker always has the advantage. Still, armed with that knowledge and your own probability estimate (however you arrived at it, as discussed earlier), you can recalculate the expected value using your estimate. The process is basically the same, all you do is substitute your estimated probability for the bookmaker probability, but remember that you’re total winnings will be the same, as they are based on the bookmaker’s odds.
Using our example, let’s say you think QPR has a 17% chance instead of 14.29%. After calculating the numbers based on this estimate, your expected value suddenly rises to a positive value, earning you an average net of £0.97 for every £10 bet.
By calculating the expected value based on your own estimate, you can quickly begin to identify which bets have good value. Of course, the key to all of this is the accuracy of your estimations, as overestimating your advantage is a quick way to go bust. Nonetheless, if you’re able to come up with fairly accurate estimates, you’ll be well on your way to finding good value bets and hopefully winning some serious cash.