Understanding Estimated Value in Sports Betting: A Comprehensive Introduction
As the world of sports betting continues to evolve, one concept has become increasingly critical for bettors aiming to maximize their profits: Estimated Value (EV). Understanding EV can transform the way you approach betting, allowing you to make more informed decisions and improve your overall success rate. In this blog post, we will delve into the concept of Estimated Value, how it applies to various football leagues, and practical examples to illustrate its significance.
What is Estimated Value (EV)?
At its core, Estimated Value is a metric that helps bettors assess whether the odds being offered on a wager accurately reflect the true probability of an outcome occurring. In simpler terms, it measures the potential profitability of a bet based on the perceived likelihood of an event happening versus the odds provided by bookmakers.
The Formula for EV
The formula for calculating Estimated Value is as follows:
EV=(Probability of Winning × Amount Won per Bet) − (Probability of Losing × Amount Lost per Bet)
Breaking it down:
- Probability of Winning: This is your estimated probability of the bet winning, expressed as a decimal.
- Amount Won per Bet: This is the potential profit if the bet wins.
- Probability of Losing: This is your estimated probability of the bet losing, also expressed as a decimal.
- Amount Lost per Bet: This is the stake placed on the bet.
If the EV is positive, the bet is considered a high-value wager. If negative, it’s likely a poor investment.
Why is EV Important?
Understanding EV is essential for several reasons:
- Informed Decision Making: Bettors can make more intelligent choices based on statistical analysis rather than gut feelings.
- Long-term Profitability: By consistently betting on outcomes with positive EV, bettors can achieve long-term profits rather than relying on short-term wins.
- Identifying Value Bets: EV helps bettors identify when the odds are in their favor, allowing them to capitalize on mistakes made by bookmakers.
So how does EV compare against Odds?
Before we delve deeper, let’s get comfortable with American odds. These odds are the default format used by US sportsbooks, and what we use by default here at Bookie BI. (Quick side note: We do have odds-switching in our technical roadmap, giving our Users the ability to select their preferred odds.) Otherwise, American odds are quite straightforward and revolve around winning or risking $100. Here’s how they work:
- Favorites: Represented with a minus (-) sign. For example, -135 means you must risk $135 to win $100. The higher the absolute value, the better the chance the bet will win.
- Underdogs: Indicated with a plus (+) sign. For instance, +350 means you risk only $100 but stand to win $350. The larger the number, the bigger the underdog.
EV In Action
Example 1: Positive EV
Let’s consider a hypothetical match between Liverpool and Brighton. Suppose the bookmakers offer odds of +100 for a Liverpool win, and you estimate that Liverpool actually has a 60% chance of winning the match.
The bookie’s odds indicate a 0.50 Implied Probability (50% likely to win).
Your estimation indicates a 0.60 True Probability, (60% likely to win).
This delta represents the estimated value for the wager: You think the outcome is more likely than what you’re buying, which could indicate a good wager to bet!
True Probability of Winning: 0.60
Amount Won per Bet: $100.00
Probability of Losing: 0.40
Amount Lost per Bet: $100.00
Referring back to our EV Formula:
EV=(Probability of Winning × Amount Won per Bet) − (Probability of Losing × Amount Lost per Bet)
EV = (0.60 × $100) − (0.40 × $100) = 20% EV
Let’s say this match happens ten times, and we were right in our 60% chance for a Liverpool win.
| Match 1 | Liverpool Win | +$100.00 |
| Match 2 | Draw | -$100.00 |
| Match 3 | Liverpool Win | +$100.00 |
| Match 4 | Liverpool Win | +$100.00 |
| Match 5 | Brighton Win | -$100.00 |
| Match 6 | Draw | -$100.00 |
| Match 7 | Liverpool Win | +$100.00 |
| Match 8 | Liverpool Win | +$100.00 |
| Match 9 | Liverpool Win | +$100.00 |
| Match 10 | Brighton Win | -$100.00 |
| Total | +$200.00 |
Of course, this analysis is dependent on two key factors:
- Repeated Attempts (Monte Carlo Simulation): If you were to randomly pick a marble from a jar with three colors (indicating three outcomes: Liverpool win, Brighton win, and Draw), you might happen upon any of the three that one time. But as you repeat the process, the results will trend toward the most frequently occurring color.
- True Probability Accuracy (Poisson Distributions): If your estimated True Probability tends to be correct, you’re likely to win out over the long-term. If it tends to be incorrect, then your EV math will fail and you’re likely to lose long-term.
Example 2: Negative EV
We just looked at an example where we came out ahead. Now let’s look at an example of a misstep common to folks new to the hobby: The sure thing.
This time we’ll consider a hypothetical match between Bundesliga powerhouse Bayern Munich and newly-promoted FC St. Pauli. Suppose the bookmakers offer odds of -900 for a Bayern win, and you estimate that they actually have an 80% chance of winning the match. Only 80% because, hey, upsets happen, right?
The bookie’s odds indicate a 0.90 Implied Probability (90% likely to win).
Your estimation indicates a 0.80 True Probability, (80% likely to win).
In this case, the negative delta represents a negative EV for the wager: You think the outcome is less likely than what you’re buying. Even in the case of an absurdly high 80% win rate, let’s see how this plays out over those same ten matches.
True Probability of Winning: 0.80
Amount Won per Bet: $11.11
Probability of Losing: 0.20
Amount Lost per Bet: $100.00
Referring back to our EV Formula:
EV=(Probability of Winning × Amount Won per Bet) − (Probability of Losing × Amount Lost per Bet)
EV = (0.80 × $11.11) − (0.20 × $100) = -11.11% EV
When this match happens ten times, and we were once again right in our 80% chance for a Bayern win, what do we see?
| Match 1 | Bayern Win | +$11.11 |
| Match 2 | Draw | -$100.00 |
| Match 3 | Bayern Win | +$11.11 |
| Match 4 | Bayern Win | +$11.11 |
| Match 5 | Brighton Win | -$100.00 |
| Match 6 | Bayern Win | +$11.11 |
| Match 7 | Bayern Win | +$11.11 |
| Match 8 | Bayern Win | +$11.11 |
| Match 9 | Bayern Win | +$11.11 |
| Match 10 | Bayern Win | +$11.11 |
| Total | -$111.12 |
What does all this mean? It means that in addition to being right, you must also be prudent. Just because a wager is 80% likely to hit doesn’t make it a good wager to take. Losses add up over time just as quickly as wins do – even faster if you start chasing them and betting emotionally.
Successful sports bettors know to play what the market gives them – they don’t chase sure things.
Conclusion
Sports betting, and EV in particular, isn’t about an instant win. It’s about stacking up those small probabilities, your edge, over time, and building profits over the long term.
This is where Bookie BI’s analytics and recommendations can help! Our database, analytics, and statistical analyses help you with the leg-work on the back-end, so you can focus on the matches, wagers, and bragging-rights on the front-end! So sign-up, give us a try, and start compounding those EV wins today!
