Value bets: How does value occur in sports betting?

Information changes creates Value Bets - Betting terminology

Value bet occurs when you've got the upper hand on the bookmakers or the markets.

This article is also available in German and Spanish.

Trademate provides you through its betting software with an edge percentage, which is an estimate on how much you will profit off that bet.

If you place $100 on a 8% edge, you can expect to net profit $100 * 8% = $8. There are mainly two reasons an edgebet occurs - and to understand them, we need to cover how the bookmakers operate.

Bookmakers make money by taking a margin on each event. 

All bookmakers and exchanges have a margin - that's ultimately how they make money.

Their margin may vary from as low as 3% to as high as 20%.

Imagine a pure coin flip where you can bet on heads or tails. The odds should be 2 on each side, which means 50% probability of hitting one of the sides.

For bookmakers to make money, they put their odds at 1.8 on both sides, skimming 10% off whatever the winning bet is.

The sharpest bookmakers are market driven

The best and sharpest bookmakers in the world are purely market driven, which means that when enough money are put on one of the sides, that odds will decrease while the other one increases.

This means the odds are ultimately decided by liquidity in the market. When the amount of money going through is high enough - the odds are as close to perfect as it will be.

By looking at the odds of these high liquidity markets, one can acquire the knowledge of hundreds of thousands of people.

Not many bookmakers can pull this off, because they don't have a large enough customer base makings things too uncertain. The ones that can are mostly placed in Asia.

Information changes the odds and creates profitable opportunities in betting markets. 

Value occurs when any kind of new information that impacts the game is acquired.

A very good example is the FA cup game between Chelsea vs Manchester City on February 21st. A couple of hours before the game, the best odds you could get on Chelsea to win was around 1.75-1.8.

Then, exactly 1 hour before the game the lineups went public - and it turned out that Manchester City brought five teenage full debutants in their lineup.

Difference in odds between soft and sharp bookmaker - How value bets occur in sports betting markets

As seen in the picture, that information triggered a huge change in the market.All the high liquidity markets dropped from 1.75 - 1.8 to 1.35 - 1.45 in less than 10 minutes.

However - a lot of the European bookmakers didn't react nearly quickly enough. Some bookmakers spent more than 30 minutes changing their odds.

That means you could now get Chelsea to win at 1.7 - 1.8 when everyone else agreed they should have no more than 1.35 - 1.45. This turned out as an edge higher than 15%.