If you’re an avid sports enthusiast or a casual bettor looking to up your game, understanding the concept of “value bets” can be a game-changer. Value betting is a strategic approach that involves identifying opportunities where the odds offered by a bookmaker are in your favour, allowing you to potentially profit over the long run.
In this introductory guide, we’ll explain what value betting is, why it matters, and how you can use simple formulas to identify value bets.
Table of Contents
What Are Value Bets?
At its core, a value bet is a wager placed on an outcome where the probability of that outcome occurring is higher than the odds suggest. In simpler terms, it’s a bet where you believe the bookmaker has underestimated the likelihood of an event happening. When you consistently find and place value bets, you increase your chances of making a profit over time.
Value betting is the cornerstone of successful sports betting because they provide you with an edge over the bookmakers. Here are a few reasons why value betting matters:
- Long-Term Profitability
Value betting isn’t about winning every bet; it’s about making a profit over time. By consistently finding value, you can outperform the odds and grow your bankroll. - Minimizing Unnecessary Risk
Value betting does not eliminate risk entirely, as there will always be an inherent level of risk in sports betting. However, value betting focuses on minimizing unnecessary risk by making calculated decisions based on data. - Capitalizing on Market Inefficiencies
Bookmakers set their odds based on various factors, including public opinion and recent team performance. These odds aren’t always perfectly accurate, leaving room for value bettors to exploit discrepancies.
How to Find Value Bets?
Identifying value bets without relying on sports knowledge and statistical analysis is challenging but not impossible. One way to approach this is by using a sharp bookmaker as a benchmark and looking for discrepancies in odds across different bookmakers. Here’s how:
Choose a Sharp Bookmaker
A sharp bookmaker is one known for having accurate odds and a strong reputation for setting reliable lines. Using a sharp bookmaker as a reference point can help you spot discrepancies in odds from other bookmakers.
Pinnacle is known as one of the sharpest bookmakers in the market, and can be a good option to use as a reference.
Calculate True Probability
To calculate the true probability using odds from a sharp bookmaker, follow these steps:
Calculate Implied Probability
The first step is to calculate the implied probabilities based on the odds provided by the sharp bookmaker. For a specific sports event, calculate the implied probability for each possible outcome using the following formula:
Implied Probability = 1 / Decimal Odds
Example:
In a tennis match, the sharp bookmaker is offering odds on the winner (two outcomes):
- Player A: decimal odds 1.68
- Player B: decimal odds 2.30
- Implied Probability, Player A = 1 / 1.68 = 0.60
- Implied Probability, Player B = 1 / 2.30 = 0.43
Calculate Bookmaker Margin
The bookmaker margin, sometimes called the overround or vigorish, is the predetermined profit that bookmakers include in their odds. To determine the true probability of an outcome, we need to calculate this margin. The margin can differ depending on the bookmaker, specific sporting events, or types of bets.
To calculate the bookmaker margin, you can use the following formula:
Bookmaker Margin = 1 - 1 / (Sum of Implied Probabilities for All Outcomes)
Example:
- Bookmaker Margin = 1 – 1 / (0.60 + 0.43) = 0.03
Calculate True Odds
In the world of sports betting, there’s a well-known phenomenon where people tend to overestimate the underdogs (longshots) and underestimate the favourites. This happens because longshots have higher potential payouts, so many bettors take the risk in hopes of winning big, even though the favourite has a better chance of winning.
The phenomenon, called Favourite-longshot bias, is well-known by all bookmakers. When setting their odds, more margin is added to the underdog and less margin to the favourite. The result is that the favourite odds may become more attractive, offering better payouts than they should.
When calculating true odds, we need to adjust for Favourite-longshot bias using the following formula:
True Odds = (Number of Outcomes x Decimal Odds) / (Number of Outcomes - Bookmaker Margin x Decimal Odds)
Example:
- True Odds, Player A = (2 x 1.68) / (2 – 0.03 x 1.68) = 1.72
- True Odds, Player B = (2 x 2.30) / (2 – 0.03 x 2.30) = 2.38
Calculate True Probability
Based on the calculated true odds corrected for the Favorite-Longshot Bias, true probability is calculated using the formula:
True Probability = 1 / True Odds
Example:
- True probability, Player A = 1 / 1.72 = 0.58
- True probability, Player B = 1 / 2.38 = 0.42
Calculate Expected Value (EV)
To assess whether a bet represents a potential value opportunity, you can calculate the Expected Value (EV) for each outcome by comparing the true probabilities derived from the sharp bookmaker and those offered by other bookmakers.
If the calculated expected value of a bet is above 100, you have a plus EV bet in hand. It is an indication of the expected Return on Investment (ROI) for this bet.
Here’s a simple formula for calculating Expected Value (EV):
Expected Value = True Probability x Decimal Odds x 100
Example:
The calculated true probability of Player B to win is 0.42. Bookmaker X offers odds 2.50 on the outcome.
- Expected Value = 0.42 x 2.50 x 100 = 105
Identify the Plus EV Bets
By calculating the expected value for sport events on your bookmakers, there is a huge potential to discover a lot of so-called plus EV bets. These are bets with a calculated expected value of more than 100, meaning that they will generate a profit long term.
Look for the same event across multiple bookmakers. This could include moneyline odds for a particular team to win, point spreads, or over/under totals. Doing this work manually is of course a time consuming process. This is why use of value betting software is very effective.
Why do Value Bets Occur?
The odds market is constantly moving. Bookmakers adjust their odds according to team news and how much money they get on an outcome. These movements are often based on the Asian market (where the big money is placed). By constantly monitoring the Asian market and comparing the true probabilities with odds on different bookmakers, we find value bets. The bookmakers are simply not quick enough to adjust their odds. This is when you get notified.
