Value Betting:What is it and how does it work?
Value betting and expected value explained
What is Value?
An old saying goes, “Price is what you pay, value is what you get.” This concept of ‘value’ is a key player in our daily decisions, be it at supermarkets, gas stations, or clothing stores. Take renowned investor Warren Buffett, a self-proclaimed ‘Value Investor.’ He seeks underpriced stocks, a strategy mirrored by ‘Value Bettors’ in sports betting who look for underpriced odds in the betting market. They aim to ‘buy’ odds that are undervalued on bookmakers and betting exchanges, much like Buffett’s approach in the stock market.
Value in Sports Betting: What is it?
Value betting in sports is about finding opportunities where the odds set by a sportsbook don’t accurately reflect the true probability of a specific outcome. This allows bettors to capitalize on favorable discrepancies. Simply put, value betting happens when a bet has a positive expected value (+EV). This means the potential profit outweighs the perceived risk.
Example in American Football
Imagine there’s an NFL game between Team A and Team B. The sportsbook sets the odds as follows:
- Team A to win: +150 (implied probability of 40%)
- Team B to win: -120 (implied probability of 54.5%)
After analysis and research, you believe that Team A has a higher chance of winning than the sportsbook suggests, say 45%.
To determine if there’s value in betting on Team A, you use the expected value formula:
EV = (Probability of Winning * Potential Profit) - (Probability of Losing * Potential Loss)
In this case:EV = (0.45 x $150) - (0.55 x $100)EV = $67.5 - $55EV = $12.50
A positive EV
of $12.5 indicates that, over the long term, this bet is
expected to be profitable. Consistently making bets with
positive expected value increases the likelihood of overall
profit.
Positive Expected Value: What is it and why is it important?
The Expected Value (EV) in sports betting allows bettors to evaluate the potential profitability of their wagers. It compares their anticipated outcome probabilities with the odds set by sportsbooks. Essentially, it quantifies the average gain (or loss) per bet over time.
In sports betting, +EV opportunities are those where the implied probability derived from the sportsbook’s odds is lower than the bettor’s calculated probability of the event occurring. Conversely, -EV arises when the implied probability is higher than the bettor’s assessment.
As a reminder, the EV formula is:
EV = (Probability of Winning * Potential Profit) - (Probability of Losing * Potential Loss)
This formula helps determine if a bet is advantageous (+EV) or not (-EV). While a +EV bet doesn’t guarantee success in every instance, consistently choosing such bets boosts the chances of long-term profitability.
Expected value in sports betting acts as a guide, leading bettors towards value-driven decisions. By thoroughly researching the probability of winning, potential payouts, and the likelihood of losing, bettors can make more informed and sustainable choices, aligning with the principles of EV for a successful betting strategy.
Interested in learning more? Renowned author Joseph Buchdahl explains how you can make money value betting using his Wisdom of The Crowd Strategy.