How Does Value Betting Work?

From Coin Flips to Sports Betting

If you are thinking that betting on coin flips and sports are not the same thing, you are right.

As opposed to the coin flip, the problem with sports is that you do not know the probability of a win, draw or defeat. So how do we determine it?

How value betting works, from coin flips to sports

The short version is that some bookmakers are really good at determining their odds at
a level that reflects the underlying probability.

This allows them to have a high payout
rate and a small margin

If Bookmakers Are Uncertain in their Odds They Apply A Higher Margin

Most bookmakers, however, are not that good, and when they don’t know whether
their odds are in line with the actual probability, they compensate with high margins.

After all, they are all about making money.

The Best Bookmakers Are Market Driven and Information Changes the Odds

Information changes the odds and creates value in sports betting markets

Sometimes, new information enters the market.

This happens, for example, if an unexpected lineup changes people’s perception of the probability of each outcome as was the case in this FA Cup game between Chelsea and Man City.

If, for instance, one team’s key players are suddenly left out of the team, odds on the opponent will fall.

The best bookmakers are market-driven and their odds will shift automatically.

Others set their odds manually, and might lag behind. If they do, their odds are suddenly higher than the one of the market leaders.

The margin they once had is lost, and the probability have shifted in your favor.

As with the coin flip, if the odds are higher than what is supported by probability, you have a profitable bet.