Profit in Gambling Through Value: Part 1

Understanding the Concept of Value in Sports Betting

Here is the definition of value betting:

Whenever you are receiving better odds than you should, you are receiving value. Whenever you are receiving worse odds than you should, the bookmaker is receiving value.

As simple as this sounds, it is the core of every profitable betting strategy.

This is the first of three guides to value betting which will explore the topic in depth. Topics like expected value, market making and sportsbook margins are covered.

Once you understand how value betting works, your entire approach to profitable opportunities will go through this lens. Throwing money on hunches was never a winning sports betting strategy, and these guides show you exactly why.

Profit in Gambling through Value Betting: The Concept of Expected Value

Consider the following market for the Superbowl – which team will win the coin toss? This is an easy market to assign odds to. There is a clean 50% chance of either team winning. Now consider what odds the sportsbooks might assign, the market would look like this:

Team A Wins Coin Toss:     1.91 (10/11)

Team B Wins Coin Toss:    1.91 (10/11)

In this example, if the bookmaker were to take $1000 on Team A and $1000 on team B, If Team A had won the coin toss, they’d pay out $1910 to those winning bets. This leaves a guaranteed profit of $90, or $45 per $1000 bet – which is 4.5% of the money wagered.

Who is receiving value here? Clearly the sportsbook is.

Now let’s look at the same scenario from the bettor’s point of view. You have just placed a £1000 bet on Team A. If team A wins the coin toss, you win £910. If team B wins the toss, you lose £1000.

So, what is your expected return here?

Here we work it out using the math.

To do this, we multiply the probability of how often we win by the amount we win. Then we do the same with how often we lose by the amount we lose. Then we add the two together.

0.5 * $910 = $455

0.5 * – $1000 = – $500

$455 – $500 = – $45

Here, each time we place the bet, our overall expected outcome is a loss of £45.

So once again, who is receiving value here? The bookmaker is.

Indeed, if two people placed a bet of $1000 on either side, they’d both expect to lose $45, and the bookmaker would win $90, as stated above.

Winning One Bet vs Long Term Expected Value

But you might argue that in this scenario, one bettor would be in profit for $910.

While they will be celebrating in the short term, the math does not lie. Each time the wager is made the bettor is effectively handing over $45 to the sportsbook.

The only winner here over the long run is the sportsbook, anything else is short-term variance.

If the Betting Market is Priced Perfectly: There is no Value Available

So how can you win money in this market? You can’t!

This leads to a crucial point.

If a sportsbook has priced up an event perfectly, it is IMPOSSIBLE to make an expected value profit on it.

In the above example, the book knew the exact odds and can price the market perfectly.

Profit in Gambling through Value: Strategies for Gaining Value

So far, it might seem that sportsbooks hold all the cards and are making an expected profit in every market.

This isn’t true.

In the above example, the odds of either side winning were easy to work out. The same applies to roll of a die, the turn of a card or the spin of a roulette table.

However, consider what happens when the event becomes more complicated? Take a basketball game as an example.

How easy is it for a sportsbook to price up the exact odds on an individual match? It’s close to impossible to do this, all the sportsbooks can do is make the best guess that they can, using as much information as possible to price accurately.

The same theory applies to any market a sportsbook will offer. Once key piece of information is in the form of money bet. Since odds errors are quickly exploited by sharp bettors, these wagers will change prices.

Let’s quickly return to our initial statement:

If a sportsbook has priced up an event perfectly, it is IMPOSSIBLE to make an expected profit on it.

There is a bit of good news for the bettors here. It is almost impossible for a sportsbook to price up an event perfectly.

This is your opportunity to make money.

Winning an individual bet when a market is priced perfectly hands money to the sportsbook in the long run. The real opportunity is finding mispriced markets and extracting value over time by betting when the value is in your favor.

Once you understand this, you are on the path to becoming a profitable sports bettor over the long term.

Profit in Gambling through Value: Summary and Key Lessons from Part 1

You’ve seen how a sportsbook will guarantee an expected value profit on a simple market, and how a punter will effectively lose money over time whether they win or lose in these markets. I’ve also touched on the fact that sportsbooks can’t price up many events perfectly, and the fact that this can give an edge to the punter.

In Part 2 of my value betting series, I cover why at specializing on a given sport, and pricing using probabilities is a long-term winning strategy.