So just what is value betting?
We all know the term. But do we really know what it means.
Value is a common phrase used in financial investment. Very often over-used, and just as often under-explained (or understood).
In its simplest form a value bet is where a selection’s probability of occurring (a horse winning a race, a team winning a football match, a golfer winning a tournament) is bigger than the odds on offer would suggest.
This is an opportunity for a value bet.
So the key to success, when value betting, is to determine what are the actual odds of something happening (horse/football team/golfer winning etc). Because without knowing this, you have nothing to compare with the betting market… and so judge whether a bet is value or not.
Successful bettors and traders understand the difference between a selection’s chances of happening and how they compare to the odds available.
To be a successful bettor you need to identify value bets and bet on them regardless of how likely or unlikely it is to happen.
In other words, if there’s value (or an “edge”) you place a bet. Simple as that.
Whether the bet is 2/1 or 200/1. Value is value.
The mistake many punters make is that they see big odds as automatically equalling big value, and short odds representing poor value.
But without knowing the likelihood of something happening, you cannot determine this fact.
In this way, a bet at 2/1 can potentially offer far more value than a bet at 200/1.
And if it’s poor value (in other words, under-priced) if you were to back this bet hundreds, if not thousands, of times, then you would lose money in the long run.
Yes, short-priced favourites are more likely to win than not, but this doesn’t mean the odds offer value. Instead, the key to long-term successful betting is understanding the probability of an outcome accurately and identifying where the market is out of line.
A lot of punters confuse price with value, and strike rate with profit, when they don’t always have a direct corelation.
The relationship between probability and odds
Probability is the likelihood of an event happening – displayed as a percentage. Betting involves assessing the probability of that event happening – from 0% (impossible) to 100% (certain).
And once you know the probability of something happening, then you can determine the odds. This is how a bookmaker will operate in compiling a market.
Betting value represents itself when the odds available are not a true reflection of the probability of the outcome occurring.
So let’s use the industry standard when it comes to illustrating value… the coin toss.
Let’s assume the coin and the toss are fair. Not a given (read this here) but for these purposes let’s go with the generally held belief that heads and tails are just as likely to happen when you flip a coin.
Each outcome (heads or tails) therefore has an equal probability (50%) of occurring.
This means the true odds are 100 ÷ 50 = 2
And 2 (or 2.0) in decimal odds = Evens
Meaning a 100% accurate book/market would price up both “heads” and “tails” at Even money.
And if you tossed a coin indefinitely, backing heads (or tails) every time, then you would end up breaking even. Why? Because in this example, the odds exactly mirror the probability.
Someone offers you odds of 11/10 for heads and 10/11 tails.
If you placed £10 on the coin landing on heads at 11/10 (or 2.1 in decimal), the expected value of the bet is calculated in the following way:
(11 x 0.5) – (10 x 0.5) = 0.5
To explain the formula, the sum is actually this…
(Amount won per bet x probability of winning) – (Amount lost per bet x probability of losing)
This shows an expected value of 0.5.
Therefore you would expect to make an average profit of 50p for each £10 you bet, because the odds received are better than the implied odds of the coin toss.
In summary, the odds you’re being offered on heads are bigger than the actual probability of it being heads… and that, my friend, is value.
But there’s a problem…
And that is, not all betting markets deal with probabilities ruled by the law of physics (or averages).
So while a coin toss is a statistically 50/50 call, and it’s easy to explain why… because there’s only ever two equally possible outcomes…
Creating an accurate betting market is therefore possible…
But how do you scientifically deduce the probability of a horse winning a race, or a football team winning a match. When a huge amount of variables might come into play (variables which do not apply with a coin toss).
In terms of a horserace – the draw, the ground, the trip, the weight, the jockey’s riding, a jumping mistake, a tactical error, a blocked run. How do you quantify all these factors (for every horse in the race) and work out a true probability of any one horse winning?
Same with a football game – the starting XI, substitutions, injuries, referee decisions, VAR, deflections, fouls, sendings off, individual mistakes. Again, a whole range of factors which go to affect the result of a match.
How do you draw together all these disparate elements, and combine them all to produce a set of accurate odds about the ultimate outcome?
Chasing down value bets therefore becomes a battle between you and the bookmaker… who can most accurately assess all the factors and come up with a price that is most in line with the probability of something happening.
The bookie’s edge
If you constantly find value bets, you will be a profitable bettor in the long run. However, bookmakers never intentionally offer value opportunities, as the odds they offer do not represent the true probability of an outcome.
In order to make a book, bookmakers ensure that the advantage is on their side by adding in a betting margin and manipulating the odds to balance their markets. This is known as the over-round.
And so if a real bookmaker was to offer you odds on a coin toss, it would likely be 10/11 (1.91) on both heads and tails – thus giving them a margin of 5%.
Calculating the expected value with the same stake but different odds would result in -0.5 – meaning over time you would lose on average 50p for every £10 staked and is, therefore, a bad value bet.
Same goes for a roulette wheel. Another illustration of where you should see “perfect value” in that, for example, you’re offered even money for Black or Red.
There’s also the green zero (or double zero in the US) and it’s this seemingly innocuous number on the wheel that gives the house its edge… and makes all roulette bets, technically, poor value.
Why? Because the odds on offer are less than the probability of something happening… this is what the presence of the zero creates.
Your bet on Red isn’t 18/36 = 50/50, and so a true even money bet.
It’s actually 18/37 (or 18/38 if there’s a double zero). So paying you out at even money is always going to slew the odds in favour of the house.
So if bookmaker’s odds are unfair, how can you win?
For the very reason given above.
Thankfully, not everything is a coin toss or the spin of a roulette wheel.
Sports are not quantifiable in the same way. Sports have a number of variables that can impact the result, and this is where you (the punter) can gain an edge and find value bets.
How to identify value bets
Nurturing a sense of betting value isn’t easy. Let’s look at how you can improve your likelihood of finding value bets.
(i) Set your own odds / create a “tissue”
Like financial analysts, value bettors should calculate their own odds for a market using all information available to them. By calculating your own probabilities, you can compare them to the bookmakers or prices on the betting exchange and notice if a selection is undervalued or overvalued.
Unlike a bookmaker, a betting exchange allows to set your own back or lay odds regardless of what is already offered, which is perfect for value betting.
(ii) Think in probabilities, not favourites and underdogs
The aim of value betting as we now know is to assess the likelihood of an event more accurately than bookmakers or other users on an exchange. To do this it is vital you think in probability and not just look to back favourites by assessing each team’s chances of winning rather than simply by who you believe will win.
Favourites do not win all the time. Instead, once you have calculated your own odds, you should aim to identify differences in the implied probabilities for each outcome compared to what is on offer. If it does then you have found betting value, assuming that you can calculate the true probabilities more accurately.
Don’t be concerned about betting on the underdog or an outcome you don’t think will be successful if there is betting value in the odds.
(iii) Assessing and evaluating
Maths-based modelling is more controlled and rational compared to a gut feeling as it disconnects the emotion from betting decisions. However, once you have calculated your expected value you must assess and evaluate all other information available, such as situational factors which your model hasn’t incorporated before making an informed and balanced decision.
The best place to find value is to specialise on niche markets, where the playing field is more level between bookmakers and bettors on an exchange. Once you understand the market very well, you will be able to identify odds that are skewed from your own, providing you with an opportunity to make value bets.
Apply this to betting
Now you know that odds are just an interpretation of probabilities, finding value should be ever-present in your betting if you are to turn a long term profit.
Understanding these probabilities and calculating them accurately is key to successful betting. Computing the true chances of an outcome more accurately than others will provide you with potentially profitable opportunities through value betting.
Clued-up backers should build their own models, generating their own odds for a betting market… and when the odds in their model differentiate widely enough compared with a bookmaker or other user on an exchange, this is perceived to be a value bet.
OPINION: When it comes to locating value, and so giving yourself the best chance of beating the bookies, you have two choices. Put in the legwork yourself… the hours of time and effort in order to master whichever sport, or market, you wish to bet on. Or simply piggy-back on someone who has already invested that time, who has already perfected the art of pricing up a horserace, football match, or golf tournament. Which is exactly what I do here!