Value bets can be described as those that have the probability of the outcome being greater than the sportsbook’s odds reflect. So it involves you placing wagers that have a better chance of winning than the bookmaker’s odds imply, giving you an edge.
Value Betting in a Coin Toss
When tossing a coin, there can only be two outcomes. It is either going to be heads or tails and the chance of either occurring is 50%, equal to odds of 2.00. When you calculate odds you will use a specific formula: odds = 1/probability in decimals. So, in the case of the coin toss, it looks like 1/0.5 = 2.00.
Now, let us imagine you have been offered odds of 2.10 on heads and 2.00 on tails from two separate sportsbooks. Which one would you pick? Since the actual probability of the two outcomes is the same, it is obvious that you should pick the higher odds!
The 2.10 odds are higher than what the underlying probability suggests. This creates a value bet, and the bigger the difference, the more potential for profit there is.
Detecting Value Bets
Unfortunately, finding value in sports wagers is not quite as easy as detecting it in a coin toss! In sports, it is not possible to know the precise probability for a match.
One of the ways value betting in sports can happen is when new information hits the market. Like, if a line-up changes suddenly or an important player gets hurt. Sharp bookmakers quickly adjust the odds for the game, but this process can take a few minutes or even a couple of hours. And certain sportsbooks also set higher odds for other reasons, including betting bias, where customers overvalue long shots and winning streaks.
Because of this, there will always be inconsistencies in bookmakers’ odds, so there are plenty of value betting situations for you to take advantage of all the time.
How Value Bets Get Calculated
The expected value of the coin toss is 5%. It is calculated as:
(Odds / true odds) -1
(2.10 / 2.0) – 1 = 0.05
As trivial an example as this is, our value takes the juice into account, along with betting bias, and market efficiency. It also assumes that a proven betting strategy is being used, like the Kelly Criterion, and numerous probability sources that have proven to be profitable, in this case, true odds.
Expected Value and Variance
It is important to look at value betting as a long-term scheme to make money, where how many times you are betting plays a very important role. It really is all about volume and will require that you place as many bets as your time and bankroll allow in order to work.
The number of bets necessary to reach statistical significance is a lot higher than what you may imagine. You will need to wager a couple of thousand times before you start gaining knowledge with a high amount of certainty.