One of the most interesting things about betting is that nobody knows the true probability of the outcome of an event (other than a coin toss). Bookmakers set odds based on their assumptions and the state of the market. A bet offers value when the probability of the outcome is higher than the probability implied by the bookmaker’s odds. A bettor, to find value needs to determine the probability of an event occurring. In simple terms, if a bettor is able to correctly identify events where the probability of the event occurring is higher than that implied by the bookmaker’s odds then they will win in the long run.
Example of a value bet
Let’s use the example of a fair coin toss. We know that the chance of a head is 50%. This implies fair odds of 2.00.
Once the bookmaker adds their margin the odds could be around 1.83 implying a 54,6% chance of the toss resulting in heads.
We know that this bet offers poor value, we are receiving odds on a 50% likelihood as if there was a 54.6% chance of heads.
Now imagine there is some uncertainty as to the percentage chance of heads. We know that the chance of heads is 50% but the market is uncertain. The bookmaker is now offering odds of 2.2 on heads!
This offers the opportunity to take a bet with 50% odds as if the event had less chance of occurring. This is a value bet.
When value betting it is important to bet for the long-term. There’s no possibility to win a big amount of money in a single bet. Even with the clear edge on the coin toss at 2.2 odds there is still a 50% chance of losing. This is when a solid money management becomes important since bankrolls can be decimated by betting too much.