The term ‘Value’ is used incessantly in the world of betting. Bookmakers, pundits, tipsters and punters all mention it throughout their respective betting operations – but what defines ‘Value’ and why should every serious bettor make spotting value their aim? This article explains what represents good value, and how important the concept is. Read on to find out more…
Calculating Good Value
In order to judge whether the odds being offered by a bookmaker represent good value (in your opinion) it is necessary to think in terms of percentages. The bookmakers have created odds based on the percentage chance of each outcome occurring. A bettor looking to identify value needs to come up with their own percentage, compare it to the odds on offer, and then judge the ‘value’ by comparing the two figures.
Let us look at an example, using the simplest betting event possible – the toss of a coin. It is a simple 50/50 chance (There are no tricks, it never lands on it’s side!). So we think 50% of the time it will land heads, 50% it will land tails – we have put a percentage chance on each outcome. For the purposes of the example, a hypothetical bookmaker offers these odds;
Heads 5/4 (2.25) , Tails 4/6 (1.67).
We need to convert these odds to a percentage to judge the value against our own opinion. To do this, simply divide 100 by the decimal price;
Heads 100/2.25 = 44.44%
Tails 100/1.67 = 59.88%
So the bookmaker has decided that 44% of the time the coin will land heads, and 59% it will land tails. We however, felt that the coin would land heads 50% of the time. Our assessment is that there is a bigger chance of the coin landing heads than the bookmaker has estimated – the perfect example of ‘good value’. We see any odds greater than evens (2.0) as ‘value’.
There is of course, one glaring anomaly in the mathematics above. The bookmaker has percentages which, when combined, total 104.32%. This is deliberate. If you perform the above calculations on any given betting market, you will find the total percentages normally range between 104% to 115%. This figure above 100% represents the ‘over round’ figure – and is where the bookmaker generates their profit (A total figure less than 100% would mean every outcome could be backed, in a way that guaranteed a profit for the punter – not good business for a bookie.)
So in our rather far-fetched scenario, where the bookmaker has misjudged the outcome of a coin toss, we can back ‘Heads’ in full knowledge that we are getting good value on our bet.
The ‘Over-Round’ impact
The over-round however, is what makes finding bets of genuinely good value very difficult. Bookmakers tend not to make too many mistakes, and even when your opinion differs from theirs, the over-round will eliminate any edge you may hope to find. This is because when we put percentages on the potential outcomes, our total will be 100%. Using a real example, we can see this in practise – Ladbrokes have priced up Everton versus Aston Villa as;
Everton 1.91 (100/1.91 = 52.35%)
Aston Villa 3.75 (100/3.75 = 26.67%)
Draw 3.2 (100/3.2 = 31.25%)
We may have calculated the chances as;
Aston Villa 20%
Although we are less keen on Aston Villa’s chances than the bookmakers, and we also see a draw occurring less often, there is still no ‘value’ from our perspective – The odds on an Everton win still do not offer the price we want to justify a bet (We need 1.95 or larger) . This scenario will happen in the majority of events as the over-round is so difficult to overcome – but it does happen, and when you find odds that represent good value, get on!
The barrage of percentages and analysis may seem impossible with the vast array of betting markets available, but once the process has been followed a handful of times, it becomes second nature. It also only becomes necessary to look for value where we are interested, for example, in the match priced up above, we may have wanted to back Everton, but wanted at least Evens (or maybe 1.95) to do so – once we see the odds are not sufficient we can move on to other betting options without worrying about the Villa win or draw.
One last note of caution. If betting on the exchanges (such as Betfair), always reduce the odds you are offered by the commission rate before calculating the percentages. Exchanges generally take roughly 5% commission on any winning bets (Though this figure varies), so this needs to be included in any calculations before value can be judged accurately.