In this section, we will take a look at an interesting strategy known as value betting. It’s more complicated than surebetting and has more risk associated with it, but it also offers certain advantages.
Just like surebetting, value betting gives the player an advantage over the bookmaker and can be used to generate stable winnings.
Let’s take a look at the bookmaking “kitchen”.
Imagine a coin, a usual coin with two sides: heads and tails. Assume that somebody bets that they can guess the top side of the flipped coin. It’s obvious that the probability of the coin landing on either of its sides is 50/50. So it will be fair to sets odds to 2 for heads and tails. That means that if two players make a bet and put a dollar on different outcomes, the winner will get 2 dollars and the loser will get nothing.
However, bookmakers never do that. In the best case scenario, a bookmaker will use equal odds for heads and tails, e.g 1.9 on heads and 1.9 on tails.
If our players place their bets via a bookmaker and also bet 1 dollar each, the winner will only get $1.90, since $0.10 will be paid towards the bookmaker’s commission. This is called a margin. And that’s how bookmakers make their living.
So in the ideal world and in a situation where a bookmaker will pay all the bet money as a prize, event odds should correlate in a certain way:
1/K1 + 1/K2 + … + 1/Kn = 1
Here K1, K2, … Kn are the odds for each of n opposite event outcomes – for instance, bets 1, X, 2. Each odd must equal to 1 divided by the probability of a corresponding outcome.
However, if we take a real line from any bookmaker and calculate the sum of probabilities, we won’t get 1. Let’s use Bwin’s odds for a Chelsea – Manchester United match as an example.
1/1.95 + 1/3.3 + 1/3.75 = 1.0825 ( > 1 !!! )
(1.0825 - 1) * 100% = 8.25% margin
Therefore, bookmakers always set their odds in a way that gives them an obvious advantage over players. They lower the odds by factoring in their revenue. Chances are on the bookmaker’s side, and the overwhelming majority (98%) of all random betters lose all of their money in the long run.
As you can see from the margin description, each bookmaker tries to guess the probability of this or that outcome and set low odds for it. It happens, however, that bookmakers make mistakes and set high odds instead.
Going back to our coin flip example, let’s assume that a bookmaker decided that heads would be more likely to show and set odds of 2.1 on heads and 1.75 on tails. Clearly, he’s wrong. If a player knows that the probability of both outcomes is exactly 50%, he will be much better off betting on heads.
If the player places 100 bets like this one, betting a dollar each time, he will win with a 50% probability. Therefore, the player will win 100 х 50% х 2.1 = 105 dollars. If there are enough valuebets, the player will have a 5% profit. Since the law of probability is on the player’s side in this case, his bank will grow in the long run.
To illustrate this idea, let’s use another example, this time with a dice. It’s apparent that the probability of any number being cast is 1 out of 6. Let two players use the following rules: the first one comes up with a number and casts the dice. If he wins, he gets 5 dollars from the other one. If he loses, he gives the other one a dollar.
It’s clear that the first player won’t have anything (except for a hole in the pocket) very shortly.
Let’s change the rules: if the first player guesses the number, he gets 7 dollars. If he doesn’t, he’ll give one dollar. Now, the first player will bankrupt the second one in no time.
A valuebet is a bet that makes the following inequality true:
K * P > 1
where K is an odd and P is the real probability of this outcome.
To be able to find valuebets, you first need to be able to assess the real probability of event outcomes. After that, once you know the true probabilities, you need to find the odds that make the inequality K * P > 1 true.
It’s very hard to determine the true probability of outcomes in events such as a soccer match. Bookmakers hire entire departments of professional analysts to predict match outcomes.
There are two main methods of predicting outcomes:
The first method is widely used by bookmakers. They try to use all the data they have to assess the chance for a certain team to win. There are professional betters who also know the teams very well and can predict outcomes just as accurately as the bookmakers. The analytical method, however, requires extensive knowledge of the subject matter and can hardly be automated.
The second method is based on statistics. If you have the odds from a large number of bookmakers, you can calculate the bookmaker’s margin for each odd. You can then use the margin to try to determine how the bookmaker assessed the probability. Finally, you calculate the average value – and that will be the most accurate prediction, since it’s based on the work of many analysts! This method may seem to be less accurate to some people, but it can be easily automated.
Our service uses the statistical approach for finding valuebets.
A bookmaker’s surebet always has one interesting property. If you assume that all bets of a certain surebet are bets placed by a single bookmaker and calculate the margin, you will get a negative number.
Let’s check one of the surebets.
1/2.3 + 1/3.3 + 1/3.97 = 0.9897 ( < 1 )
Equal margin: (0.9897 - 1) * 100% = -1.03%
This means that at least one of the bets in the surebet is overestimated. That is, among all bets of any surebet with a positive profit, there is at least one or more valuebets. Basically, this overestimated bet has most likely created the surebet and all other surebets are only used for backing up this one.
This way, if you have a list of found surebets for the same event, you can try to determine which one of them caused the surebets to appear together. For instance, if all surebets for the same event contain a bet for the victory of the same team placed by the same bookmaker, it’s apparent that it’s the one that is overestimated.
Unlike surebets, valuebets have advantages and disadvantages:
