What is value betting – A simple understanding
Value betting is considered by many punters as the only way to succeed in betting in the long run. Those who can identify where the value is in a betting event are gaining an edge against the bookmaker or the other punters.
In a few words, what is value betting? It is a betting method where bettors place a bet when a bookmaker offers much greater odds than the real probability of an outcome. It’s not trading, it’s not arbing and it’s not match betting. You’re just placing straight-up back or lay bets.
In terms of just placing bets, someone would say that this is pure gambling. But given the methodology that is used for finding these bets value betting should be considered more as a long term investment.
To understand value betting you will have to understand the process of betting. Bookmaker odds are just probabilities. Now if this probability reflected through the odds is lesser than the real probability, then we have a value betting situation.
Why value bets occur?
Value bets can be found due to some of the following reasons:
- Although bookmakers are very efficient in setting their odds sometimes they are making mistakes offering value betting situations.
- In many cases, they are slow in adjusting their odds when important team news arise.
- Bookmakers need to have balanced books in order to earn money without worrying about the outcome of a game. If they take a big bet on one outcome they raise the odds in the opposite outcome to attract bets. That may leave them exposed to value betting situations for a short period of time.
- The rivalry between bookmakers is big nowadays as literally, everyone can start an online bookmaker. In order to compete with the others, they are reducing their juice making them prone to value betting situations.
Value betting example
When a coin is tossed there are only two possible outcomes, head or tail. And for both outcomes, the probability of landing is equal, 50% for each side. If you simply divide 100% by 50%, then 100/50 equates to 2. The decimal price for the odds in both cases is 2.
Let’s say that one bookmaker is offering an odd 1.90 and the other 2.10. By making the following calculations we can calculate the value that we are having by taking those odds.
- When having the 1.90 odds the value is calculated like this: (50% x 1.90) – 100% makes -5%.
- When having the 2.10 odds the value is calculated like this: (50% x 2.10) – 100% makes 5%.
Clearly, the second bookmaker has made a mistake when setting their odds giving as a value of 5%. If we constantly find such price discrepancies we are going to be winners in the long run. You may lose 10 or 20 times in a row, but it doesn’t matter as long as you have the maths on your side. Eventually, the winners are going to take care of the losers.
What is difficult for punters to understand is that we are not seeking for winners but value odds. In our example, we don’t care if the result is going to be heads or tail as long as we are backing with odds above 2.00. Everything lower than 2.00 and we are losing money in the long run.
What is the expected value (EV)?
The expected value is the amount a bettor expects to win on average in the long run when he bets on a sports match. The expected value can be positive and negative.
For example, for a bet of $100, the expected value can be $10. Meaning that the bettor expects to win $10 on average by making this $100 bet. Finding bets with a positive expected value can turn out profitable in the long run. If the expected value of a $100 bet is -10$, the bettor expects to lose $10 on average if he would make this bet. Bets with a negative expected value should be avoided because you expect to lose money on these bets in the long run.
How do you calculate the expected value of sports betting?
To calculate the expected value you need to know the implied probability of the odds that the bookmaker offers. The formula for calculating this is the following:
Probability = 1/odds
So decimal odds of 2.50 mean that the probability of this outcome is 1/2.5 or 40%.
For example, the sportsbook pays out 1,5 times your bet if the Chicago Bulls win from Miami Heat. So if you bet $100 with 2.50 odds and the Chicago Bulls win you receive $150 and when the Chicago Bulls lose you lose $100. The sportsbook actually expects the Chicago Bulls to only have a 1 / (payout rate of 1,5 + 1) x 100% = 40% chance to beat the Miami Heat.
Based on his extensive research (history, statistics, momentum, etc.) the bettor expects the Chicago Bulls to have a chance of 50% to win from Miami Heat and the correct odds should be 2.00
Now that we have all the necessary info, we can calculate the expected value. We expect to win 50% of the time $150 and lose 50% of the time $100.
The expected value for a bet is calculated through the following formula:
EV = (chance to win x payout when winning – chance to lose X total amount of the bet) / 100
So in our example EV = (50 x 150 – 50 x 100) / 100 = (7500 – 5000) / 100 = $25.
So the bettor expects to win $25 on average when he bets $100 on the Chicago Bulls against the Miami Heat.
It is easy to understand that if someone is able to find such price discrepancies is going to be profitable in the long run. But, how easy is it to find these value bets?
Finding value bets in real life
Looking at the hard reality, you would not get such situations very often in real life. Also, it is very difficult to identify them as many factors (injuries, weather, transfers etc.) are affecting the odds before the start of an event.
By their very nature, value bets are time and price-sensitive so you have to be quick to take advantage of them. Bookmakers have invested tons of money in order to spot their mistakes. Otherwise, they would be out of business in no time.
The best way to find value bets is to compare the odds that you are getting with those that are available in the sharp bookies. The general rule is that sharp bookies like Pinnacle have the most sophisticated odds and if you end up getting better odds then your expected value or EV is positive and you are going to win in the long run.
Since it’s very difficult to find your edge in sports betting markets as you constantly have to trawl within the bookmaker sites and compare odds with the sharps and making calculation to find the expected value each time, you can rely on other third-party services that can provide these bets to you. These can be either tipsters, like my service, or value betting services like Trademate or Rebelbetting. I have written a separate article about the best value betting finders.
Advantages and Disadvantages of Value Betting
Compared to the other betting techniques, mainly arbitrage betting, value betting has some benefits and drawbacks.
The main advantages are:
- The longevity of your betting accounts. Value bets are on odds that are not as obvious errors as the arbs thus minimizing the risk of the bookie noticing your betting behavior and ban your account. Also, the betting bonuses are limited so you can not place many matched bets on each account. Overall value betting is a more sustainable investment. For more info on that topic, you can visit my article on how to avoid bookie limitations.
- The earning potential is bigger compared to arbitrage. On arbitrage, you are expected to make around 1-3% on every bet. On value betting, this can be higher.
- No extra risks involved. On arbitrage betting, there is always the risk of the one leg of the bet being canceled thus leaving you exposed for a potential bog loss. On value betting, you are placing straight bets so you do not have that risk. You can read more here about the risks involved in arbitrage betting.
On the other hand, the disadvantages are:
- Not guaranteed profits. On arbitrage betting or matched betting the profits are pretty much known before each event. This is not the case here, since your bets are not covered. And that leads us to the next problem.
- Variance. Betting is unpredictable so you may end up ending losing 20 or more bets in a row even if you have made the correct decision on your bets. So you have to place a considerable amount of bets in order to reduce the effects of variance.
- Requires discipline. The high variance involved in value betting means that you may end up losing for several days, weeks, or even months in a row. So in order to practice value betting, you have to develop a proper betting mindset.
Conclusion – Is value betting the only way to succeed in betting?
There are many ways to exploit bookmakers (arbitrage betting for example) but they all rely on the same principle of value betting. Finding odds where the true chance of winning is greater than that estimated by the bookmaker.
Now, you can start spending tons of hours and money to try finding value bets with doubtful results or you can piggyback my selections and start earning money right now! All you have to do is to subscribe to my profile at Tipstrr or bettin.gs and start getting my selections!