A common term in betting is ‘Value Bets’ and what it is, is basically trusting your own interpretations of say a football match, over that of the bookmakers. Value Bets are when you look at the odds placed on a team by a bookmaker and you think, well that teams has been pretty undervalued by the bookie on their chances of winning.
Basically, Value Bets is a tale of mathematical advantage. You can define a Value Bet as a wager where the probability of the outcome is greater than what the odds being offered by a bookmaker reflect.
Of course, bookmakers have armies of traders pricing up markets, all trying their best not to get things wrong. But things can fall through the cracks and with a bit of mathematical know-how, you can learn how to spot those Value Bets.
As a punter, you have probably seen an underdog in a football match win out at a big price and you have sat there in and had one of two thoughts:
Either A: Whoever would have bet on that?
Or B: That looked a pretty reasonable outcome in hindsight.
The answer to A is probably someone who had been looking at Value Bets on the game and who had done a bit of homework.
How To Calculate Value Bets
A working knowledge of the probability worked into odds is going to be needed for this one. If you need a quick refresher on how to calculate probability from odds then have a read of the next section first.
Convert Odds to Probability
Decimal Odds Conversion to Probability
The formula is 1/(given odds) then multiply by 100
So 1/1.7 = 0.5885 multiplied by 100 * = 58.8%
Fractional Odds Conversion to Percentage
Example 6/4 odds – the first number is numerator, the second number is the denominator
The formula you need for converting Fractional odds is Denominator divided by (Denominator + Numerator) multiplied by 100
So it would be 4 / (6+4) = 0.40
0.20 * 100 = 40%
Back to Calculating Value Bets
So now you know how to convert odds to probability let’s piece it together. We are just going to look at an example of an underdog/favourite situation in a tennis match. We are using a tennis match because it simply has two outcomes instead of three on football matches.
Bookmaker Odds:
Player A 1.67, Player B 2.1
If you convert those odds to probability you will have Player A at 59.8% with Player B at 47.6% of winning according to the bookmaker. To keep things simple, these two players appear to be in similar form for the season and the head to head record between them is even, but this match is being played on a surface that Player B is better on. So just simply by looking at the probability of the odds, you may think Player B has a better chance of winning than the 47.6% chance that the implied odds have them at.
This is where you create your Value Bet. Because let’s say you estimate this is more of a 50/50 situation. A 50% chance is 2.0 odds so in this instance with the bookmaker offering 2.1 on Player B, then in your estimation they are undervaluing his chance by having him at bigger odds than what you would expect to see. It makes the bet more appealing.
You are basically challenging the bookmaker’s expectations of the outcome of the match. Simply by looking at the probability of odds, you can do that.
Where you come in
As you can probably tell, Value Bets is all player-oriented. This is all about you and your knowledge and what you perceive the outcome of the sporting event is going to be. A sage piece of knowledge which may help is that bookmakers won’t always be right with their estimations in odds. That’s not feasible, they get it wrong sometimes.
Where you can come in is by reversing all of this, by playing the bookmaker and estimating your own odds and this is best done before looking at any actual prices. Let’s say there is a football match coming up between Spain and Scotland. You have three outcomes, a win for Spain, a draw or a win for Portugal.
Spain are in hot form, they are a much higher ranked team than Scotland and as they are playing at home, you would estimate there’s a 55% chance that the game will be won by Spain. You could allow 20% for a chance of Scotland digging in for a draw, and maybe only leave a 25% chance of Scotland coming away with a victory.
So now you have studied form and set your own probability on the game. Now you can work out the odds that you would expect to see on the match based on your probabilities. Remember Value Bets are all about your estimations and projections.
You need a simple formula to move probability into odds:
100/probability = fair odds
Fair Odds
Fair odds is basically what ever odds that you come up with based on your probability. That is a fair price which you would expect to see a team at. Now the challenge is finding the odds at a bookmaker which are better than your fair odds. Let’s look at our Spain v Scotland game. A 25% chance of a win for Scotland is 4.0 odds, while the draw is at 5.0 and Spain would have fair odds of 1.82 to get a win based on the chance of winning that you have given them.
Now go and look at an actual bookmaker odds. Is one of them offering, for example, 1.91 odds on Spain to win (52.4% chance) then according to what you are expecting, that would be a value bet. This would work the same on an underdog if you found a bookmaker offering a 20% chance on a win for Scotland at 5.0 odds. You can take what you perceive to be extra value in backing Scotland to take a win, challenging what the bookmakers have produced as chances
The 100 Method
This is something important about Value Bets. Let’s say in the example above you fancied Spain to beat Scotland. That you estimate they have a 55% chance of beating Scotland. Ask yourself this question.
What if the game was repeated 100 times?
It implies that Spain would win 55 of those 100 matches.
You would stake £10 each time.
If Spain won a match at 1.82 you would earn £8.20 off each victory.
£8.20 x 55 wins tallies up to £451 in total profit
However, you lost 45 of your stakes at £10 each
That’s £10 x 45 = £450 of stakes lost
It breaks down as having staked £1000 in total, and having returned £1001
To further stress how this 100 Method can help you figure out value in options, let’s look at a stronger favourite in a football match, which you deem to have a 70% chance of winning and each stake is again £10. A bookmaker offers 1.3 odds on it (a 70% chance fair odds is 1.42 so any bookmaker who was offering more than that would be a Value Bet).
For each win at 1.3, you would get £3 back
70 wins x £3 = £210 profit
However, you have lost 30 stakes at £10 each = £300
In total, you have staked £1000
Returned (including stake) £910
So if this match was played out 100 times at those odds and the percentages were on the nose, then you would be out of pocket £90 which basically translates and poor risk/return. This method just helps you take a look at the bigger picture in terms of the overall value and risk on a wager.
Value Bet Summary
Value Bets are popular but they are all about your estimations. You may have given a team a 70% chance of winning, while the person standing next to you only gives them a 60% chance and the bookmaker could be somewhere in the middle of all that. It is all personal subjective probabilities that you are working off for Value Bets. They will take a bit of work, some calculations, but trusting your own judgement can be a powerful thing.
