If you're just starting out in sports betting, you may from time to time hear more experienced punters refer to ' the value'. It's common to hear a veteran sports bettor says things like “I think the Hawks are a bit of value at those odds” or “There's no value with Manly at that price.”
But what are they referring to exactly?
Where's The Value?
Key to successful betting is in finding value situations to exploit. A value situation is where the odds on offer from a bookmaker reflect a probability that is less than the actual probability of that outcome occurring.
To illustrate let's consider the example of a coin toss.
When tossing a coin, there are two possible outcomes - the coin either lands on heads or it lands on tails. (Yes, ok, it could land on its side. But the likelihood of that is infinitesimally small. So let's ignore it shall we?).
The probability (or chance) of the coin landing on either heads of tails is even - 50% each side.
Using this probability to calculate the odds, would give us decimal odds of 2.00 for heads and 2.00 for tails. e.g 100% / 50% = 2.00.
So let's then say we have two bookmakers.
Bookmaker A is offering odds of 1.90 on heads while Bookmaker B is offering odds of 2.10.
Let's now say we want to bet on the coin landing heads, which of these bookmakers is offering value, Bookmaker A or Bookmaker B?
Calculating The Value
We can calculate the value this way:
(Probability of the outcome multiplied by the decimal odds) minus 100%.
So let's look at Bookmaker A.
Bookmaker A is offering us odds of 1.90.
We calculate the value:
(50% multiplied by 1.90) minus 100% = - 5%
At -5%, Bookmaker A is offering us less than true value. This is not a bet we would want to take. It is not a value situation.
So let's look at Bookmaker B.
Bookmaker B is offering us 2.10.
Let's calculate the value:
(50% multiplied by 2.10) minus 100% = 5%
Bookmaker B is offering us 5% value to bet on heads in a coin toss. We will take this situation every day thank you very much. It is indeed a tremendous value opportunity.
The Bookmaker's Advantage
Here's the bad news.
No bookmaker is going to offer you a value situation such as our coin toss example. If they did, they would go out of business very very quickly.
In fact bookmakers never intend to offer value situations at all. They always intend to offer odds that are less than true value.
For example, a real life bookmaker would offer odds on a coin toss in the range of 1.90 for heads and 1.90 for tails.
Well let's say they receive $100 worth of bets on heads and $100 worth of bets on tails, accepting a total of $200 worth of bets in all. Now let's say that heads wins. The bookmaker pays out the odds of 1.90 for the $100 worth of bets on heads, essentially paying out $190.
But they accepted $200 worth of bets, I hear you say.
Yes. And they keep that $10 for themselves. This is popularly known as the commission, but also commonly referred to as the Juice or the Vig. This is essentially how a bookmaker makes their money, by not offering full value odds. We will discuss this concept in more detail in a later chapter.
A Real Life Bookmaker
For now, let's look at a more realistic example of calculating value then.
Let's say that Manchester United are playing with odds of 2.50 to win.
The odds of 2.50 on offer imply a probability of Manchester United winning at 40%. Now let's say we have done our homework and have calculated our own probability of Manchester United winning at 50%.
We calculate the value:
(50% multiplied by 2.50) minus 100% = 25%.
Nice work. If our estimated probability of a Manchester United win is accurate, we have identified a very handsome value situation. On the other hand, if our assessed probability was less than the bookmaker odds implied probability of 40%, the odds of 2.50 would not represent value.
How Do We Find Value Situations?
So if bookmakers aren’t looking to offer true value odds, then how do we find value situations? Ahh yes, the eternal question. This our friend is the task at hand for anyone willing to take on the bookmakers and become a successful long term sports bettor.
For now it is important that we understand the simple concept of betting value. That is, if we assess the probability of an outcome as more likely to occur than the probability implied by the bookmaker's odds, it is a value bet.
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