Key Facts
- Value betting is an attempt to take advantage of lines or odds that don’t match the true probability.
- With value betting, the expected value of your strategy is positive, meaning you should earn money over the long run.
- Incorrect public perception is one excellent way to find a value bet.
There are a number of different betting strategies that gamblers use when betting on sports, but one of the most successful approaches relies on the concept of value.
The value of a bet takes into account the odds or line at a given bookmaker and the actual probability of the bet paying off. When these two concepts don’t line up, there is an opportunity for a savvy gambler to profit. A bet has value when the odds you are getting exceed the “true” odds that the bet should have.
Value betting is a strategy that relies on finding and taking advantage of those types of bets.
What Is Value Betting?
With value betting, you are looking for market inefficiencies in the odds offered by the top offshore sportsbooks. You want to find a team (or individual athlete) who is over or underpriced, based on the odds being quoted. To do this, you need to compare the true probability of a bet being successful to the probability implied by the current odds.
For Example
This involves some math. Let’s say the Mets are playing and have a +190 moneyline. This translates to 2.9 to 1 numerical odds against the Mets winning (which you get by adding 100 and dividing the total by 100.
So: 190+100=290, 290 divided by 100 is 2.9
You can then calculate the implied probability of a Mets win by dividing 100 by the numerical odds. So 100/2.9=34.48%.
There are also online calculators that will convert moneylines and numerical odds into implied probabilities for you.
The lower an event’s probability, the higher the payout.
True Probability
Let’s say the true probability of the Mets winning is 45%, then betting on the Mets is a value bet, because the true probability exceeds the odds. In other words, the payout on the Mets is higher than it should be.
Here’s the catch: You need to use your own methodology to figure out the “true probability”. It could be your own data analysis, an average of other bookmakers’ odds on the same game or a computer model or some other tool.
Expected Value
Going even deeper into the math, each bet has an expected value. It’s how much you can expect to gain or lose on every dollar you bet.
To calculate expected value, you use the following formula:
(True probability – implied probability) / implied probability
In our example of the Mets game, the true probability was 45% and the implied probability was 34.48%. Plugging those into the formula gives us
(45% – 34.48%) / 34.48%
Which is 10.52%/34.48% which equals .305
What does that mean? It means for every dollar you bet on the Mets, you can expect to win 30 cents.
Take a second to think about that. The “true” probability is less than 50%, meaning that the Mets are more likely than not to lose this game, and if that happens, you would lose your money. But, because the odds have the Mets so overpriced, the 45% of the time you win your bet earns you enough to cancel out the 55% of the time you would lose. So in the long run, you can expect to make 30 cents on every dollar you bet. You have essentially given yourself the house edge.
What’s the Catch?
The catch is that this method is only as good as your ability to accurately calculate the true probability. You must be smarter than the bookmaker, in essence, in order to use this method and profit.
There are some ways you can find bets that are more likely to have value. Teams that have a large following typically have a lot of betting action on their games. Many times, it’s fans of the team placing bets or haters, hedging their rooting interest: “Well, if the hated Cowboys win, at least I’ll make some money.” This means that the odds on these teams’ games are often skewed by the large volume of bets from unskilled gamblers.
Teams like the Cowboys, Packers, Lakers, Celtics, Yankees and Duke basketball are good examples of games that might have a significant difference between the probability implied by the odds and the actual probability.
Regression to the mean is another way to find mismatched odds. A team coming off of a particularly impressive win often has more people betting for them in the following game. A team coming off a blowout loss often has more people betting against them. The recency bias can cause the odds to get out of touch with the true probability.
For instance, the Dolphins recently scored an unheard of 70 points against Denver. They then lost their next game, while Denver won their game the following week.
Finding value is the difference between making money at gambling over the long term and chasing your tail. It requires patience and analysis, but it can pay off.
