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Probability and value

Probability and value

Like you all know, a probability is a chance of something to happen. It is normally measured in percentage or numbers. The percentage range is 0 to 100 and that of a number is between 0 and 1. But, mostly, the percentages are used in calculating the probabilities.

Experienced bettors do talk of value betting every now and then. Some may even take an example of a football match. One might say something like “Hey Barcelona had a value at those given odds”, or, “Stoke City FC had no value at all at the given price.” When either of this two happens it advantages either the bookmaker or the punter accordingly. No value betting means that the bookmaker is getting an advantage from the outcome of those matches. While on the other hand, when there is a value betting it means that the punter benefits more from winning that bet. In any case, bookmaker rarely allows a positive value betting to occur because it will lead them to make huge losses or very negligible profits which are not good for the business at all at all.

Probability is always obtained by considering so many factors which may include: the current form of the two teams, the quality of the players that the two football teams clashing have, their previous head to head encounters, their positions in the league table or latest FIFA rankings (for national football teams across the world), home ground advantages, and the public opinions on the teams playing or about to play. All these are converted to percentages and they range from 0-100. There comes a time when the public opinion matters the most to the bookmakers. In such cases, the bookmakers will find a very large amount of money aligned to one side of the bet and thus make them very vulnerable to losing a huge amount of money. When that happens, they do try to what is called book balancing. This will be clearly explained at some stages to come. So, I would greatly suggest that you keep reading this article so as to learn more about book balance.

The value betting is obtained by multiplying the probability by the decimal odds and then Lessing the results by 100%. The final result should also be in percentage form.
We can take a look at the way this is done using the example below:

A random bookmaker “P” could have offered SLB Benfica of Portugal an odd of 2.01 to win the match against FC Feyenoord of Holland in a UEFA Europa match clash. The latter was given the odds of 1.81 to do the same. Another bookmaker “Q” could have offered the same teams odds of 1.88 and 1.52 respectively. Portugal’s club could stand a 43% chance of winning the match and the Holland’s club scooped the remainder of the percentages. A value betting would have been calculated this way:

Bookmaker P’s value betting:
For SLB Benfica,
(43% * 2.01) – 100% = -13.57% (This is bookmakers percentage profit if this team wins)
For FC Feyenoord,
(57% *1.81) -100%= +3.17% (the bookmaker’s loss if the team wins)
A professional punter who has a clue of what he/she is doing will most likely place a bet on FC Feyenoord as it has a value betting that they want.
Bookmaker Q’s value betting:
For SLB Benfica,
(43* 1.88)-100 = -19.16% (margins are good for bookmaker’s business)
For FC Feyenoord,
(57* 1.52)-100 = -13.36% (outcome favours the bookmaker more than the bettor)

Bookmaker Q would have made profits no matter the winning team. Bookmaker P, on the other hand, would have definitely readjusted the odds by either reducing FC Feyenoord's odds so as to discourage punters for placing bets on that team or by increasing SLB Benfica’s odds to a point whereby it would have attracted many punters. Bookmaker P would not have left the odds the way they were because they would have risked making huge losses. Whatever bookmaker P was doing was called book balancing. That way, it would help them make a fair balance of the pay in and pay out. But mostly pay in. This task is not always easy to achieve but all bookmakers do give it a try to avoid the losses that might cause the business to shut down or that might take them back to square one.

Most if not all bookmakers discourage positive value betting that most punters want; as it may land them in huge losses that they may fail to recover from for a very long period of time.
How the distribution of money would have looked like with the earlier example.

Assuming bookmaker P had received €300 on SLB Benfica to win and another €300 for FC Feyenoord to win. The total accumulated amount would have been €600. Taking the stake to be €100,
And SLB Benfica wins;

Payout = (2.01 * €100) = €201.
Or FC Feyenoord wins.
Pay out = (1.81 *100) = €181.

I may have missed something with the second scenario but I am pretty sure that the payout for this scenario should be more than €300 and that the extra payout is incurred by the bookmaker.

By the way, whatever I am showing you here is what some of the employees in bookmakers are tasked with. They are called the odd compilers and this is what they do every time they are told to work on certain match(s). So, after going through this article, you can consider looking for a job there. Just kidding. But again, I can guarantee you that this article will make you one hell of an odds compiler. After all, you now know what book balancing means and how it can be achieved. You also know so much more that you can apply there. Remember, my friend, this was just a suggestion which I do not think it is bad at all.

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