Value Bets

A value bet in its simplest form is just a bet where the probability of an event is more likely to happen than what a bookmaker or another user of a betting exchange is offering.

What is probability?

In mathematics, probability is a number that determines how likely an event is going to happen. It is represented by a number from between 0 and 1 where 0 means that it’s impossible that the event will happen and 1 means that it’s a certainty that the event will happen. The range of numbers between 0 and 1 can, therefore, represent the likelihood or probability of that event happening.

For example, if we toss a coin the probability of the coin landing on heads is 1 in 2 which can also be represented as a probability of 0.5. Meaning at any one time that you toss a coin there is a 0.5 probability or 50% chance of that coin landing on heads.

What is a bookmaker?

A bookmaker (often referred to as a bookie) is an individual or organisation that offers bets so that they should ultimately make a profit. They are often businesses whose goal is to make a profit in order to keep their employees in employment and their investors happy.

A bookmaker generally makes a profit by adding a margin to the probability of an event happening.

So back to the earlier coin toss example…

If you bet £10 on heads and your friend bets £10 on tails the bookie needs to make a profit. If the bookie offers you both 2 to 1 then the bookie will not make a profit. Why?…

You give the bookie £10; Your friend gives the bookie £10 so the bookie now has £20 which he will have to return to either you or your friend depending on who won.

So, what a bookie actually does in practice is to add a margin to the odds so instead of giving you 2.0 times your stake for a win they may offer for example 1.9 times your stake. This way whoever won the coin-tossing example would receive £19 which leaves a £1 profit for the bookie.

Back to value bets

So a value bet is a bet where the bookie or the individual offering a price on an exchange has set a price for an event that will generate a greater return than you would actually expect for the probability of that event winning.