Value Betting - Guide for Beginners

Posted at November 30th, 2010 Add your comment

Value betting is fairly new concept based on the assumption some teams are overpriced or underpriced by bookmakers. There’re always plenty of arguing between supporters and opponents of this concept. One side says betting on unfair prices are nothing else than giving your hard earned money directly into bookies’ full pockets. Other group points irrelevance of 0.05-0.10 odds difference and ironically states that human brain is not a Deep Blue computer to make a difference between 65% and 66% (for example) possibility of winning. So, which group is right?

Understanding the concept

To understand the concept of value betting, first you must understand how betting market works in general. Probably the best example for explanation is tossing of a coin. There’re always two possible outcomes - heads and tails. So, probability is 50% for both. With converting that in odds, we get 2.00 (I’ll use decimal format for the odds in text). And that would be a fair odd. If you toss a coin 1000 times, you’ll get 500 times each of two outcomes. Maybe few less or more than that, but your balance would be around zero. Imagine two guys who make an online bet and put $50 dollars on it, both. One of them loses $50, other gets $100? Well, no. In that case bookmaker wouldn’t get anything and their existence is based on profit (huge profit, that’s why their number is countless nowadays). It’s not a steal (not yet, at least), that’s how the whole industry works. So they won’t offer you 2.00, but 1.90 (for example). New situation is, one bettor will lost $50, other will get $95 and bookie will have guaranteed $5 of each bet. Now, let’s imagine 1000 bets. You’ll invest $50.000 and as it’s predictable you’ll win 500 times. But instead $50 (single bet) x 2.00 (fair odd) x 500 (number of winning bets) = $50.000 (zero profit), you’ll get only 50 x 1.90 (market odd) x 500 = $47.500! Bookmaker’s services, remember? What about if some bookie, because the lack of competition, insolently offers you 1.85 for the same bet? Short answer, he’ll get additional $1.250 bonus for the services (50 x 1.85 x 500 = 46.250)! If you don’t care about 0.05 difference (despite it looks so irrelevant), you’ll be making an extra tip to the bookie.

How it really works?

Now, let’s convert this into real betting. What is a basketball spread betting (or Asian handicaps in football) other than giving two outcomes with same possibility? Bookmakers are hiring the best available experts to make basketball offer that rates chances of both teams with 50%. Margin, for example, is -4.5 on team A. They will win with 5 or more, or will not. Our fair odd should be 2.00, in reality they’re 1.85 - 1.95. If you decide to test your luck in betting for one weekend, it’s not a big deal. If you’re in the betting world for few years or more, you would be probably shocked if realize how much money you’ve wasted just because not paying attention on 0.05 difference. Now, you’re starting to scratch your head. On the betting market, 99% of bettors are losing their money and just one percent winning at the long-term. Pay attention where you’re placing your bets. Best possible advice is to make several accounts at different bookmakers and choose the best odd for every event.

Now I come to the point where supporters and opponents of value betting start yelling. How to decide is there any value in some odd and does it worth of a bet?! For this purpose I will include bets with three possible outcomes, a typical 1X2 betting in football games (as at two outcomes, here is also bookies’ provision deducted from 100%). Let me make an example. In season 2009/10, Chelsea were priced 1.20 at home against Everton (that's usual price for Chelsea at home against any team out of top six). 1.20 odd means there’s 83.33% of chance it will be a home win. Chelsea were the strongest team in Premiership, no injuries, no mercy at Stamford Bridge. Everton had long injury.

List and big crisis in results. So, does it worth of a bet? Opponent of value betting would say it’s the easiest and fastest way to make 20% of profit. Safe as in the bank, but you get it for an hour and half! Supporter will ask him: “Would you bet on it if there’s 1.01 odd instead 1.20?! One percent is still good for 90 minutes!” Hmm... If you want to bet on such low odds, you have to be aware of this. Betting on 1.20 means you have to make a streak of 5 consecutive wins to avoid loss. Winning bet of $100 stake on 1.20 brings you $20 of profit. If you lose only one of five, you’ll be in deficit. Now, look at the history of Chelsea - Everton games at Stamford Bridge. Last five ended with two home wins and three draws! Opponent is in trouble and his bank is broke.

Calculating the value

There’re many different ways for calculating the value. One group are experts for math and use complicated methods for calculation the fair odds. Even I made once a formula for calculating Asian handicaps. After about half an hour, I could tell you is it better to take -0.75 or -1.0 handicap, where a better value is and where bookie made a mistake. All my methodology crashed like a house of cards when I realized that 5% difference in my assumption about possibility causes changing the “fair odds” for 0.15! If I say there’s 60% of possibility Liverpool will defeat Villa at home, odd should be 1.67. With 65%, it should be 1.53. So, how the hell I should know is it 60%, or 65%?! Other group of supporters make statistical methods, based on history results. On that way they calculate possibility of future results and finding the value. I haven’t investigated these methods. Football is not the same like before 20 years, why results should be?

My warmly advice to all beginners is pay attention on the price at the same way as you do about the outcome. You’re pretty sure Liverpool will beat Villa? Fine. Now look at the offer. 1.40? Pity. Leave it and don’t think about that game again. Continue with researching and you’ll find another game with acceptable odd. After few years of betting you’ll get a sense for value and fair odds and your hard work will start to pay off.

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