Value betting is the ability to identify an edge against a bookmaker or another user on the exchange. If a bet is priced for less than it’s worth, then it offers value. We explain what value betting is and why it’s fundamental for successful betting.
What does a value bet mean?
Value is a common phrase used in financial investment and has the same meaning in sports betting - if a selection’s probability of occurring is less than it should be, then there is an opportunity for a value bet.
Successful bettors and traders understand the difference between a selection’s chances of happening and how they compare to the odds available. To be a successful bettor you need to identify value bets and bet on them regardless of how likely or unlikely it is to happen.
Placing a bet that offers value is not as simple as looking for odds on favourites. Yes, odds on favourites are more likely to win than not, but that doesn’t mean the odds offer value. Instead, the key to long-term successful betting is understanding the probability of an outcome accurately and identifying where the market is out of line.
Relationship between probability and odds
Probability is the likelihood of an event happening - displayed as a percentage. Betting involves assessing the probability of that event happening - from 0% (impossible) to 100% (certain). Bookmakers and exchange traders then measure that probability and translate it into odds.
Betting value represents itself when the odds available are not a true reflection of the probability of the outcome occurring - learn how to convert odds to their implied probability.
Let’s use a coin toss to explain what betting value is and how to calculate the expected value of a bet.
Let’s assume the coin and the toss are fair. Each outcome (heads or tails) therefore has an equal probability (50%) of occurring - therefore the odds should be 2.0.
This would result in an expected value of 0 for either a Head or Tail - so if you tossed a coin infinitely it would theoretically end up all square.
Let’s say that your friend offers you odds of 2.15 on Heads. We explain in detail how to calculate expected value, but for the purpose of this article the formula is:
(Amount won per bet * probability of winning) – (Amount lost per bet * probability of losing)
If you placed £10 on the coin landing on heads at 2.15, the expected value of the bet is calculated in the following way:
This shows an expected value of 0.75 and is great betting value. Therefore you would expect to make an average profit of 75p for each £10 bet because the odds received are better than the implied odds of the coin toss.
Odds with a bookmaker
If you constantly find value bets, you will be a profitable bettor in the long run. However, bookmakers never intentionally offer value opportunities, as the odds they offer do not represent the true probability of an outcome.
In order to make a book, bookmakers ensure that the advantage is on their side by adding in a betting margin and manipulating the odds to balance their markets - learn how margins affect your chances of winning.
If a real bookmaker was to offer you odds on a coin toss, it would likely be 1.90 on both Heads and Tails - with a margin of 5%.
Calculating the expected value with the same stake but different odds would result in -0.5 - meaning over time you would lose on average 50p for every £10 staked and is, therefore, a bad value bet.
So if bookmaker's odds are unfair, how can bettors ever turn a profit?
Bookmakers are masters of setting accurate odds to create a profit margin on their markets. However, sports are not quantifiable like casinos or coin tosses. Sports have a number of variables that can impact the result, and this is where you can gain an edge and find value bets.
How to identify value bets
Nurturing a sense of betting value isn't easy. Let’s look at how you can improve your likelihood of finding value bets.
Set your own odds
Like financial analysts, value bettors should calculate their own odds for a market using all information available to them. By calculating your own probabilities, you can compare them to the bookmakers or prices on the betting exchange and notice if a selection is undervalued or overvalued.
Think in probabilities, not favourites and underdogs
The aim of value betting as we now know is to assess the likelihood of an event more accurately than bookmakers or other users on an exchange. To do this it is vital you think in probability and not just look to back favourites by assessing each team’s chances of winning rather than simply by who you believe will win.
Favourites do not win all the time. Instead, once you have calculated your own odds, you should aim to identify differences in the implied probabilities for each outcome compared to what is on offer. If it does then you have found betting value, assuming that you can calculate the true probabilities more accurately.
Don’t be concerned about betting on the underdog or an outcome you don't think will be successful if there is betting value in the odds.
Assessing and evaluating
Maths-based modelling is more controlled and rational compared to a gut feeling as it disconnects the emotion from betting decisions. However, once you have calculated your expected value you must assess and evaluate all other information available, such as situational factors which your model hasn’t incorporated before making an informed and balanced decision.
The best place to find value is to specialise on niche markets, where the playing field is more level between bookmakers and bettors on an exchange. Once you understand the market very well, you will be able to identify odds that are skewed from your own, providing you with an opportunity to make value bets.
Apply this to betting
Now you know that odds are just an interpretation of probabilities, finding value should be ever-present in your betting if you are to turn a long term profit.
Understanding these probabilities and calculating them accurately is key to successful betting. Computing the true chances of an outcome more accurately than others will provide you with potentially profitable opportunities through value betting.
Traders should build their own models, generating their own odds for a betting market. When the odds in the model differentiate widely enough compared with a bookmaker or other user on an exchange, this is perceived to be a value bet.