What is Value Betting?

Imagine you were to bet on the toss of a coin. Assuming the coin can’t land on its rim,
there is a 50 % chance of heads, and 50 % chance of tails. Now, imagine you were to
bet on the outcome , and had two people offering you the following odds:

Coin flip odds with a positive expected value

Expected Value

Coin flip and probability

This article explains what expected value is. Obviously, you choose the bet with the highest odds, since the probability of each outcome is the same. Now, let’s see what happens if you place a bet on heads at 2.10. Half of the time, you’ll lose your \$10 bet, and half of the time you’ll earn \$11. From
this, we can calculate the expected value of your bet to be \$0.5.

After one toss, you won’t have profits of \$0.5. You will either be \$10 down or \$11 up.

However, if you increase the number of tosses, your average earning per bet will
theoretically converge towards half a dollar per toss. This means that if you toss the coin 1000 times, you should expect earnings of \$500. Whether you end up a bit above or
below \$500 is a matter of luck, but it is skill that landed you there in the first place. You can read more about what happens if you increase your number of bets in this article on the law of large numbers and how it applies to sports betting

Finding Value in the Odds

It doesn’t require much skill to realize that 2.10 is a good odds on the toss of a coin. In
fact, since odds = 1 / probability, fair odds would be 2.00. Because the odds offered is
higher than what the underlying probability suggests, it is a good bet.

So why don’t we do the same in sports? Why don’t we use the probability of each
outcome to calculate the corresponding odds, and in turn distinguish a good bet from